Council to consider budget with two-cent tax rate increase

The Oak Ridge City Council is pictured above in December 2016. (Photo courtesy City of Oak Ridge)

The Oak Ridge City Council on Monday will consider a budget with a proposed two-cent increase in the property tax rate and what would generally be a 2 percent pay increase for employees.

If approved by Council, the tax rate change would be the first increase in years. Oak Ridge Today reported that the budget approved last year was the 10th one in a row without a tax rate increase.

The two-cent increase in the property tax rate, which would raise it to $2.54 per $100 of assessed value, would help fund the bond repayments for the new Oak Ridge Senior Center, Scarboro Park renovation, and Oak Ridge Preschool, and also provide the city some “breathing room,” Oak Ridge City Manager Mark Watson said. The Senior Center, Scarboro Park, and Preschool projects are expected to cost about $13 million total.

Municipal officials said there has been a $750,000 shortfall in the current fiscal year, which ends June 30, in revenues from Roane County. That shortfall is attributed to some sales tax exemptions, and it is believed to mostly be from Oak Ridge National Laboratory, the major taxpayer in the Roane County portion of the city. The shortfall affected Oak Ridge this year and has been resolved this year, but the city had to use reserves, which affected money that could be used for capital projects in the next fiscal year, fiscal year 2019, which starts July 1, Watson said.

The sales taxes from ORNL will stabilize in the coming fiscal year while the city will still seek reliable sales tax dollars, Watson said in a budget presentation to the City Council in a special meeting on Tuesday, May 29.

While there has been a shortfall in Roane County, sales taxes in the Anderson County portion of Oak Ridge are up about 13 percent. That’s attributed mostly to new retail stores at Main Street Oak Ridge, which is the project to redevelop the former Oak Ridge Mall, and the Uranium Processing Facility, a construction project at Y-12 National Security Complex that is expected to be completed by 2025 for no more than $6.5 billion.

Sales taxes in Anderson County and Oak Ridge are expected to continue to increase, according to Watson’s presentation last week.

Besides the Roane County shortfall, Oak Ridge is also experiencing its third-year decline in the Hall Income Tax, a change implemented by Tennessee officials in Nashville.

In his presentation, Watson said City Council continues to express a desire for more money for street and waterline repairs, a request that seems in line with what at least some residents would like to see.

In other notes, Watson said the city has received a number of grants that require a cash match, which is reducing discretionary spending on basics. The city recommends completing current grant-funded projects before applying for additional grants, Watson said.

“Routine management and maintenance have been limited due to grant commitments,” Watson said.

Current projects that are under way and require some administrative commitment, but haven’t necessarily received grant funding, are the Friendship Bell, Gateway Project, Blankenship Field, CSX Rails to Trails, electrical improvements at the Melton Hill Lake rowing venue, the water treatment plant replacement project, Senior Center, Preschool and Scarboro Park renovation, software implementation, and the Pennsylvania Avenue junction roundabout.

The water treatment plant replacement project could cost an estimated $44 million, with the budget possibly amended in the next fiscal year. An additional $200,000 will be added to street paving and the maintenance budget to target arterial streets that have acceptable utility infrastructure underneath, Watson’s presentation said. Also, the city and Oak Ridge Schools have conducted a roof assessment that outlines significant needs for roof replacements,

The proposed major budget funds in fiscal year 2019 are:

School Fund—$63,268,196 (in recent years, the schools have generally received just under 30 percent of their funding from the city, with other sources including county, state, and federal governments)
Electric Fund—$54,018,525
Capital Projects—$25,134,204
General Fund—$24,177,407
Waterworks Fund—$19,685,000
Other minor funds—$10,278,360
Debt Service Fund—$9,279,000

The budget for all funds totals $205,840,692.

The proposed budget includes an expected revenue increase in sales taxes of $648,295.

Internally, the budget is expected to be roughly flat in municipal departments. The two main growth areas are personnel costs and computer installations, Watson said.

Besides the general 2 percent pay increase for city employees, there is a continuation of an adjustment, the second of three, to get the Oak Ridge Fire Department to market median, according to Watson’s presentation.

He said the state of Tennessee continues to restrict spending flexibility and is philosophically removing funding sources, making Oak Ridge a community based on sales and property taxes.

It’s not the first time that a dramatic drop has been reported in sales taxes collections in the western portion of the city, which is in Roane County, primarily at Oak Ridge National Laboratory. In 2015, Watson said there had been a $700,000 drop in the municipal budget that fiscal year. City officials had to dramatically lower costs and expenses to balance those out, he said at the time, and the budget proposed by the city staff that year included a one-cent increase to help maintain city services and allow for a 2 percent pay raise for city employees.

With the help of some last-minute changes that year, Oak Ridge officials were able to balance the budget in a way that didn’t require a local increase in the property tax rate while still proposing the 2 percent pay raises for municipal workers and Oak Ridge Schools teachers and staff.

In the budget now proposed for the next fiscal year, each penny on the property tax rate is expected to generate about another $80,000 in revenue, so a two-cent rate increase would generate around $160,000 or a little more per year.

You can see the proposed budget for fiscal year 2019 here.

The Oak Ridge City Council meeting is scheduled to start at 7 p.m. Monday, June 4, in the Municipal Building Courtroom at 200 South Tulane Avenue. You can see the agenda here.

More information will be added as it becomes available.

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