By Leonard Abbatiello
Nov. 19, 2015
In a previous article, I pointed out how Oak Ridge has changed. To summarize, we have changed drastically since the mid-1970s, becoming Tennessee average in median income, graduation rates, ethnic and age distributions. We are also heavily in debt, as we continue to spend beyond our means for all of our high quality services.
About 50 percent of our housing is over 70 years old and in various conditions located on lots that are often unsuitable for today’s desired off-street parking. Currently, over 12 percent of all homes are vacant, and those on the market are selling at 75 percent of their initial asking price. All aging residential housing is collectively dropping in both value and desirability. Our low-income population has increased to the point that they are the majority of our residents, and they cannot financially support our high-end services. Today, we are building only 10s of new homes annually, and a large percentage of the Manhattan Era housing remains vacant. Department of Energy radioactive and hazardous waste storage taints the community image as an attractive place to live.
We have evolved to this condition from a city that was given to us citizens debt free in the 1960s and rocketed to be the highest property taxed Tennessee city by 1973. Since then, it has endured a long list of both failed and evaporated DOE promised self-sufficiency projects. Today, DOE self-sufficiency efforts are no longer offered by DOE. Things even got worse following the 1985 fragmentation of all DOE single contractor federal operations, which then made effective local financial discussions impossible.
But there is still real hope! All we need to do is to demonstrate a little leadership, make our choice, and make a concerted effort to either reduce expenditures or increase revenues significantly. There are three known ways that can accomplish the goal without raising city property taxes. I will shortly list and discuss each of these choices, their status, and revenue potential. These are not new ideas, but they have been off limits for over 15 years and all have been politically untouchable because of fear of disturbing the status quo and personal gains for a few individuals. Simply stated, it was more acceptable to do nothing and just increase property taxes as Oak Ridge became less attractive and DOE workers began to live elsewhere.
There are three major ways to solve the Oak Ridge financial problem. Since 2004, all of these ideas have been politically removed from the table for discussion. I believe it is time to openly discuss them, make a choice, and work until we accomplish Councils’ choice.
These are:
- Negotiate a fair DOE PILT (payment in lieu of taxes) arrangement.
- Transfer responsibilities for police and/or the school system, or both to the county.
- Modify state law to eliminate double property taxation in all Tennessee cities.
Let’s discuss each:
DOE PILT status
Since about two-thirds of the Oak Ridge Reservation is still federal property, exempt from normal property taxation, DOE makes a payment in lieu of taxes, or PILT, annually to the City of Oak Ridge. This payment is based on the woodlands value and acreage as specified in the AECA of 1955. Additionally, Oak Ridge endures the stigma of being a radioactive and toxic waste dumping ground for DOE operations. Today this PILT yields about $1.7 million dollars, which is far below the approximately $20-24 million any normal city would receive from any such major industrial operation.
In 2000, the City Council began a serious effort to initiate negotiations for a new, fair-for-all-parties PILT agreement. These efforts yielded a Baker Donelson study that indicated that most Oak Ridge self-sufficiency efforts had failed miserably, and that the City of Oak Ridge should consider “every means available,” including legal suits, to bring DOE to the table and re-negotiate an improved COR/DOE PILT agreement with additional revenue.
In July 2004, the City of Oak Ridge had a letter signed by Senator Lamar Alexander and Senator Bill Frist sent to the Secretary of Energy, Mr. Spencer Abraham, requesting a city-DOE meeting on the failed self-sufficiency/PILT issue. The letter was not even answered by DOE and the city has done nothing to even find out why! A copy of this letter is attached. DOE needs to be paying its fair share of the cost of the City of Oak Ridge operations, or to complete effective, revenue-producing self-sufficiency projects. The city lawyer has a box containing the background, the study, and recommendations. DOE cannot be expected, without pressure, to voluntarily increase the Oak Ridge PILT payments or to consider our waste storage concerns.
Transfer policing responsibilities and/or school system operation to the county
Many people consider this idea unthinkable! But it is precisely what Knoxville, Nashville, Chattanooga, and Memphis have done to reduce or eliminate operational costs. Farragut was created without accepting these heavy burdens. If Oak Ridge wants to compete, it should consider such actions itself as major cost reductions are possible.
Cities have no standing under the federal, state, county governmental structure. Cities are simply allowed to exist and tax residents as an overlay. They do not displace any county, legal, taxation, or management requirements. City residents and city businesses must pay for both taxes.
The Oak Ridge City Charter contains provisions for accomplishing the transfer of both responsibilities to the county.
Transferring to the county some or all these costly responsibilities is the proven way of making major city expenditure reductions in Tennessee’s large cities.
Eliminate city double property taxation
Tennessee law just allows cities to exist and double tax our property. The action of most large cities has been to establish county-sized city perimeters and become metropolitan governments, which then provide all service functions under a single property tax structure. There is no double taxation in these metropolitan areas. Smaller cities cannot utilize the metropolitan government option. These smaller cities must either transfer service responsibilities to the county, or endure double property taxation.
I believe that Oak Ridge could provide the leadership to unify all 293 Tennessee cities to change Tennessee law, thus eliminating all double taxation of cities. Clearly, it would be a difficult uphill battle as the legislative bodies of Tennessee are county-based; most counties would lose both revenue and control. These are two things county politicos don’t want to lose, and therefore it is very difficult to pass such a law in a county-controlled Tennessee legislature.
See the Alexander and Frist letter here: Frist Alexander Letter to DOE July 04.
The potential for Oak Ridge is enormous! But only If DOE begins to pay its fair share of operations and consider us as a partner! It might be possible to even greatly reduce or nearly eliminate property taxes. Additionally, if major cost reductions were implemented, property taxes could be completely eliminated and Oak Ridges’ financial future assured! If we properly priced and marketed our existing land, coupled with better-than-competitive taxation costs, we could attract new major industrial businesses and our housing growth would blossom!
My wish is that Council will make the hard decisions to both engage DOE and reduce expenditures. The realistic way to accomplish this is to: 1) force DOE to reopen PILT and waste management decisions under the provisions of the AECA 1955 Act, employing every means available; and 2) significantly reduce both services and expenditures by transferring costly operations which are rightfully a county responsibility. You can either pursue your decision unilaterality, or with other governments, but you must make a decision if anything is to change!
You, our seven City Council members, are the only individuals who can direct any effort to improve the financial future of Oak Ridge and our relationship with DOE. You have the opportunity to define a bright competitive future, or do nothing. The four of you can really make a difference! What is your choice?
I will follow this article with a second one that describes how we may be able to accomplish our goal by teaming with the two other Energy Cities, utilizing our joint influence on both DOE and Congress, to create a win-win-win outcome for all!
Leonard Abbatiello is a former Oak Ridge City Council member.
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