The budget dance between County Mayor Lee Harris and the Shelby County Commission is like the first slow dance at your middle school Spring Fling. Everyone looks nice. Both sides are polite. But there is a palpable sense of trepidation and distrust.
The slow dance ended on Wednesday following the $1.6 billion budget proposal presented by Mayor Harris, and now the girls are gathering on one side of the gym, and the boys are huddling on the other to plan their next moves. For the taxpayer, we are left wondering whether the next dance will be to a fast song or another slow one. The fast song is a lot less awkward and requires far less commitment. A slow song gets up close and personal and could end badly.
Under Tennessee law, an increase in property values through the property assessment cannot create a windfall for local government. In other words, if the tax rate remains flat, but local government receives more revenue because the value of homes and businesses goes up, then the tax rate must be lowered to a level that would produce the same amount of revenue as the previous year. That happened in Shelby County, so the tax rate is lowered to $2.66 from $2.69, and Mayor Harris proposed a budget based on the new rate.
But there is a catch.
Once the rate is lowered to $2.66, but prior to adoption of the final budget, which must be approved before July 1st, the Commission could vote to increase the property tax rate back to $2.69 or any other amount. Doing so would require a two-thirds vote of the Commission or 9 votes, which is a high burden, but not out of the question, considering most of the members are term-limited and would not face another election.
Included among the reasons commissioners might propose increasing the tax rate are looming big-ticket projects like a new Regional One hospital, construction of a new jail, deferred maintenance for Memphis Shelby County Schools, and the ever-increasing demand by nonprofits for funding through the body’s grant program. Making an unpopular decision like a property tax increase would be a blessing for the eight new commissioners, most of whom will probably run again. They can blame the old commission and still reap the benefits of a bigger budget for popular programs and projects.
A move to increase the tax rate, however, could do more harm than good. The rise in costs of food and gas, coupled with increased housing costs, may put too much pressure on lower-middle and middle-income constituents, while failing to produce recognizable benefits. The cost of a $.03 increase would cost the owner of a $200,000 house an additional $60 per year—not a lot of money, but the optics are bad.
Regardless of how this budget dance ends, it is likely to be filled with emotion, a fair amount of silliness, and a feeling in the moment that it was a consequential life event. Down the road, the new commission will realize it will be faced with decisions far more weighty and wishing it had taken a few dance lessons.