Sunday, May 20, 2007

County Powers Relief Act Gives Shelby County Neither Power Nor Relief

We don’t find many occasions when we agree with Tennessee Representative Brian Kelsey.

On his worse days, he comes across as an inveterate publicity hound, and on his best days, he comes across as youthfully doctrinaire. But in the current flare-up resulting from his temerity to call pork barrel by its proper name in the Tennessee Legislature, he is nothing short of being precisely correct.

Pending legislation sets aside $100,000 for each state representative and $300,000 for each state senator in what is tantamount to setting up state-sanctioned slush funds to pay back the politically faithful in their districts. In the wake of the heightened attention to ethics that followed the Tennessee Waltz indictments, it’s hard to fathom the logic of establishing state government as a co-conspirator in a system of political favoritism.

Truth In Advertising

But what got our attention as much as the willingness by our legislators to use our public money as personal political currency was the typically misleading, and high-flown, title of the bill – the Community Enhancement Grant program. If there was a Truth in Advertising rule in the Tennessee Legislature, nothing would ever get to a vote.

In this vein, we think of last year’s grossly misnamed law – the County Powers Relief Act.

It was one of those votes that legislators love. It had the ring of importance, it eliminated a highly contentious issue (real estate transfer tax, local real estate transfer taxes and impact fees), and it set up a new program that appeared to help urban counties cope with growth, while at the same time, it did absolutely nothing to help counties like ours.

The Rites Of Spring

If you’ve wondered why there was an interruption this year in the annual ritual of the Shelby County mayor pleading with state legislators to lessen his government’s dependency on property taxes, it was because of the passage of the County Powers Relief Act.

It was classic Tennessee Legislature. It gave all appearances of being responsive, while in truth, it did nothing to respond to the persuasive arguments by Shelby County Mayor A C Wharton who has made a compelling case for granting county government more control over its own fiscal future.

In theory, the bill’s purpose seemed so much on point. It said: “The purpose of this part is to authorize counties to levy a privilege tax on persons and entities engaged in the residential development of property in order to provide a county with an additional source of funding to defray the cost of providing school facilities to meet the needs of the citizens of the county as a result of population growth.”

It’s A Privilege, Not A Right

In exchange for the privilege of development, residential construction could be taxed up to $1 per square foot based on the tax liability for schools. It even sets out the process for adding a new tax – by a two-thirds vote of the Shelby County Board of Commissioners at two consecutive meetings.

It all sounded so good, but there was a catch. This new tax is limited to counties that either had a 20 percent increase in population from 1990 to 2000 or had nine percent growth from 2000-2004.

In other words, Shelby County is 0 for 2. Growth in the decade was 8.6 percent, and in the four-year period, its population growth was less than two percent (in its 2005 estimate, the Census Bureau says Shelby County’s population is down 7,500 since 2000).


All in all, the law – motivated by years of pleas from urban counties for new development taxes – did nothing to help large Tennessee counties. More to the point, the law really served the interest of the bedroom counties adjacent to large urban cores. There, the population baseline was low to begin with, so a period of rapid growth resulted in large increases.

Thirteen counties qualified for the tax under the population growth standards for 2000-2004, but the list didn’t include the largest counties in Tennessee. In our metro, Fayette County’s growth was 18.3 percent, and Tipton County missed the cut by four-tenths of one percent.

Meanwhile, urban counties like ours would have to experience a growth spurt unseen in 50 years to qualify for the new tax. The coup de grace was that the law stated that after its passage in May, 2006, no county can enact an impact fee on development or a local real estate transfer tax.


More than anything, it just proves conclusively how little attention legislators pay to their own experts. After all, the Tennessee Advisory Commission on Intergovernmental Relations supported the passage of “general enabling adequate facilities tax legislation, general enabling impact fee legislation” and “general enabling legislation authorizing a local real estate transfer fee.”

The logic of TACIR was simple and contradicts the rhetoric of developers: residential growth does not pay for itself. In its report to the legislature, the state agency said the Home Builders Association of Tennessee claimed that “when all of the benefits of growth are counted, it (development) more than pays for itself. The literature on financing residential growth, however, generally says otherwise.”

As TACIR points out, using indicators more comprehensive than the ones incorporated in the law – such as population, public school enrollment, total wage growth and daily vehicle miles of travel – Shelby County finished in the top third of Tennessee counties qualifying for fiscal relief.

Just The Facts

As the report points out, there is often a correlation between budget pressures and overdependence on property taxes that culminates in higher property tax rates. For example, Shelby County has the highest county property tax in Tennessee, substantially higher than Hamilton or Knox, and edging out Davidson County (although that’s misleading since it is a consolidated government.)

Shelby County’s per capita debt ranks third at $2,309. First is Humphreys County at $4,453, followed by Marshall County’s $2,538. As a point of comparison, the per capita debt for Hamilton is $2,097; and Knox is $1,052. No data was given for Nashville-Davidson.

If legislators had followed the sounder criteria suggested by TACIR, six counties would have been eligible to approve growth taxes – including Shelby. In the end, TACIR – always mindful of which way the political winds are blowing - stopped short of making a formal recommendation. However, for the agency, its report is surprisingly direct.

Deaf Ears

Unfortunately, legislators turned a deaf ear to the TACIR commentary and to the requests from Mayor Wharton and his peers.

As we’ve said before, the spectacle of our county’s mayor traveling to Nashville with hat in hand to beg a bunch of rural legislators to act responsibly on behalf of an urbanized county – not to mention one that’s minority majority – is demeaning and ludicrous.

Surely, we’ve reached the point in this state where large urban counties – with financial expertise that equals or surpasses state government’s – should be given the freedom, in concert with their own people, to set up their own tax structure.

But, that’s not a cause that’s likely to command the support of a majority of our legislators, because the allure of control and power are too great to simply do what’s right.


steve said...

Actually, census figures for 2005 showed 905,000 while the 2000 figures were 897,000.

Smart City Consulting said...

Steve: We're using the American Community Survey 2005 population numbers from the Census Bureau:

It gives the 2000 population as 897,472, and the 2005 population as 889,955.

steve said...

American Survey is also conducted by the census. And it's mailed out to less than 1% of the population. Its sample set for Shelby County was something on the order of a couple thousand. The Census estimate is based on vital stats, residential building permits, utility hookups, school enrollment, etc.

The Survey is supposed to replace the long form in 2010.

The census estimate for 2006 was 911,000, an increase of 6,000 over 2005, a portion of which is undoubtedly due to Katrina relocations.

Smart City Consulting said...


We also thought that the American Community Survey was consistent with some population numbers that are being collected by local governments, but that said, we think we're wading into the weeds on this one, because there are some projections that estimate the current population at 934,295.

Our primary point is that regardless of what projections we use, the law passed by the Legislature is nothing but window dressing when it comes to the needs of our county.

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