Property tax rate hike required by state law

Wednesday, June 27, 2012

By Clint Confehr

Senior Staff Writer

Marshall County's property tax rate should increase 13 cents to $3.22 from $3.09 because of the property reappraisal taking effect this year, according to the Tennessee Board of Equalization.

County commissioners on the Budget Committee faced that fact of life on Thursday evening as they received a report from County Budget Director Freda Terry who was relaying information from Assessor of Property Linda Haislip and the state.

Every five years, county assessors review property values. Normally, values go up so the state equalization board calculates a lower tax rate that's to generate the same revenue for local governments. Reappraisal also affects cities and towns.

However, the housing bubble burst and resulting recession have lowered property values.

To keep property owners' tax bills at the same dollar amount, the rate must go up. Individual properties will see changes. But in the aggregate, when property values are collected together, and the resulting tax base is worth less, the tax rate must go up to provide the same revenue.

The result of state equalization calculations is a state certified property tax rate. Like most long division calculations, it ends in a fraction. Technically, Marshall County's certified rate is three dollars, 22 cents and about three quarters of a penny. More exactly, it's $3.2278.

"We can't round up," the budget director said on what the certified rate is $3.22.

She cited state law and turned commissioners' discussion to another fact in the dismal science of economics.

The other fact is the taxpayers' delinquency rate of non-payment. This revenue part of the budget building process requires commissioners to select an amount that they think will not be paid. It's ranged from 5 to nearly 11 percent, according to discussion.

Such estimates lead to a calculation on how much money will be raised by each penny in the property tax rate. Currently, the amount is $48,500 per penny on the $3.09 property tax rate as set last summer. That's generated about $14,986,500. Sales tax revenue is the second highest source of revenue for the county.

Until commissioners select a delinquency rate, the value of each penny on the rate can't be computed with great accuracy. It does, however, stand to mathematical reason that since the rate must go up 13 cents - and that's a 4.2 percent increase on the old rate - then the value on the penny would be lower.

Another requirement of state law and the certified tax rate is that if a local government wants to set a property tax rate that's more than the certified rate, then that government must conduct a public hearing so taxpayers will have an opportunity to tell local leaders what they think about the tax rate hike that would increase property tax bills.

"I think, only one time since I've been budget director did we go a cent or so higher than the certified rate," Terry said during the budget committee meeting last week.

The county budget director provided budget committeemen with several examples of revenue from each penny on the rate when different delinquency rates are applied.

She included a delinquency rate that might be called the turning point, beyond which a tax rate hike would be required; that is, a rate hike beyond the certified rate.

"If you go more than 8.5 percent, then you'd have to raise the (property tax) rate beyond the certified rate and then a hearing is required," Terry said.

"Like I tell you every year," she said, "it's a gamble. It's a budget. It's an estimate."

King recalled collections at 92-93 percent "by this time last year," and the year before (during the 2009-10 fiscal year) the trustee's collections "didn't get to 90 percent."

Terry recalled the 2009-10 collection rate was rounded up to 91 percent."

Better collections implied economic recovery, King indicated.

"Maybe times are getting better, but if the (property tax rate) goes up (beyond the revenue neutral certified rate) then maybe the delinquency rate will go up," King said.

County Mayor Joe Boyd Liggett regretted the lack of "all the numbers" to reach a conclusion, and Commissioner Richard Hill indicated that regardless of what the commission does, the general public will get a negative view of their struggle to do the job of setting a property tax rate that will maintain the county's ability to pay its bills.

Hill continued with pessimistic observations, including a state decision to adjust its calculation of land productivity, a factor that adversely affects a farmer's tax bill on land that's classified as greenbelt property. Land classified as greenbelt is taxed less.

In an attempt to refocus the discussion, King said, "I'll tell you what we can do. We can take money from the road budget."

The comment drew some laughter because Road Superintendent Jerry Williams' budget was reviewed a few days earlier. "We had a good time with his budget," King said. Williams' is widely seen as sensitive to even the thought that his budget might adversely affect the property tax rate.

Without a delinquency rate, or the schools' budget, or conclusions on spending for various other departments, King again indicated he doubts that the county budget could be adopted before August.