TAX NEWS - June 2010

Tennessee Tax: Spring Hill tax hike talks to continue

Saying it would put Spring Hill on sound financial footing for the next five years, Mayor Michael Dinwiddie is among those who favors raising the city's property tax rate by 28 cents.
 
The city's Budget and Finance Committee last month voted 2-1 to recommend the increase of the tax rate from 60 cents to 88 cents per $100 of assessed value.

The Board of Mayor and Aldermen will hash over the 2010-11 budget again at a work session Monday night. The board has to pass the budget on two readings before July.
 
Dinwiddie, called the 88 cent rate a "responsible number."

He said coming into this year's budget talks he had three goals: pay off the city's debt, fund capital improvement needs and establish a reserve fund.

"This is a number that allows us to do all three of those things and it allows us to do it on a flat growth economy for five years, meaning if the economy doesn't turn around for five years we don't have to have a discussion about property taxes again," Dinwiddie said.

If the tax rate is approved by the board, the owner of a $200,000 home would pay the city an additional $140 a year in property taxes, from $300 to $440.
 
Some residents who showed up to budget meetings said the tax increase would be too burdensome. Vice Mayor Eliot Mitchell initially balked at the tax hike because he said residents have already been hit with increases in water and sewer rates and new stormwater fees.

Talking about paying off the city's debt, Dinwiddie said he wants to put back the money into the state's water and sewer fund that a 2008 state audit found had been illegally transferred into the city's general fund.

The audit showed that mainly between 2001 and 2007, some $4 million had been transferred between the water and sewer fund and the general fund — an apparent violation of state law.

"The state understandably wants that to be paid back," Dinwiddie said.

The city's capital improvement plan needs to be accounted for in this year's budget after being unfunded in the two previous spending plans, Dinwiddie said.

"If we don't fund those programs there's going to be a deterioration in service that's going to negatively impact the quality of life in the city," Dinwiddie said.
 
The mayor said he also wants to reestablish the reserve fund, especially since the city managed to barely escape widespread damages from tornadoes that hit much of Middle Tennessee last year and the historic flooding in May.

The city currently has no cash in reserves.

City Administrator Victor Lay told aldermen recently that raising the city's property tax rate to 88 cents could replenish the reserve fund to the tune of $1 million.

Dinwiddie said that he expects the city is probably a year and a half to two years from seeing a significant turnaround in the economy, but said that it's bound to happen because builder interest is already reemerging.

When and if that financial about-face does happen, Dinwiddie said he and other board members could then talk about lowering property taxes.