Tuesday, August 12, 2008

Memphis' Most Taxing Problem Deserves Council Attention

Memphis City Council owes no apologies for taking the long view on tax equity when it withheld $66 million funding for Memphis City Schools.

Some may trivialize their motives, others may vilify them as opportunists and a few may even suggest that they personally don’t care about students, but it’s worth remembering that about 75% of Memphians don’t have children in city schools.

For this vast majority of Memphians, it’s taxes, stupid.


It doesn’t mean that Memphis officials don’t care about schools, but it does mean that this new group of Council members finally did something city government should have done a decade ago: They started the process to equalize taxes with other Shelby County cities like Germantown and Collierville.

We’ve pointed out before that we thought the Council members eroded the ultimate impact of their message when they increased the spending of city departments by $40 million, essentially funding it with the cuts to schools. But we are told that this was a temporary aberration, and that a majority of members are still fixed on the goal of bringing the city property tax rate below $3 in the next budget cycle.

This year’s cut in school funding brought down the property tax rate to $3.25, a cut of 18 cents. It’s a start. Without the accompanying increase in city spending, the tax rate could have dropped all the way to $2.95 and real momentum could have been created. (It’s worth mentioning that for a majority of Memphians, taxes is only the first step. The second step is for city government to get the basics right.)

Incentives For Growth

That said, there are signals from the Council that it’s taking a two-step approach: this year, schools, and next year, general government spending. We hope so, because the tax burden, more than schools, has fueled the recent exodus of people out of Memphis.

At a time when federal tax policies have punished middle class families, whose incomes have been essentially flat for way too long, these families can move out of Memphis and give themselves an increase of disposable income with lower city taxes (unless they live in the unincorporated area where they get an even greater bump). Hopefully, rising gas prices and the attendant weakness in suburban home prices will cause some of these former Memphians to take another look at their former hometown.

But first, Memphis City Council must remove the existing financial disincentive that accompanies a city address. There’s really no way that City of Memphis can get its property taxes to a level comparable to other county cities without shifting city-funded services that are more regional in nature to the regional tax base of Shelby County Government.

No Way To Cut Enough

After all, to get the Memphis property tax rate in the same ballpark as Germantown, City Council would have to cut the funding that it gave city departments this year and then cut about $80 million more. That would get the city property tax rate below $2 and it would at least be within shouting distance of Germantown’s $1.54 rate.

It is inarguable that there is no public service more important than public education (although these days a public vote would probably put crime-fighting ahead of it). And yet, the tax system funding public services must be equitable and even-handed. The tax structure in Memphis is just the opposite.

Memphians not only have the highest combined city-county tax burden of any people living in Tennessee, but our tax structure is built on the backs of people who can least afford it. The poorer you are in Memphis, the more you pay in taxes as a percentage of your income.

More Than Band-aids Needed

While local efforts to expand tax sources are well-intended, in the end, the current tax structure is so badly flawed that even new sources are just stopgap answers that don’t address the fundamental flaws in the system. That’s why the Memphis City Council really had no choice but to target services that city government is not mandated to provide (and for decades, city and county governments have agreed that Memphis’ funding of schools was discretionary), but more to the point, it had to look at services that are legally the responsibility of Shelby County Government but are also funded by City of Memphis.

After all, we’ve been talking for 30 years about putting all school funding where it belongs – on Shelby County’s larger tax base – so that Memphians, like every one outside of Memphis, don’t pay twice for schools. We’ve talked here for way too long about making the Memphis tax burden more rational, and despite all the talk, nothing has changed.

Meanwhile, the city tax rate has moved up and the middle class has moved out.

The Right Conversation

Those who attack the Council for failing to value our children simply miss the point. It’s not city government’s responsibility to fund public education, and any way, it’s pretty hard to argue in a city where schools spend $1 billion a year in operating and capital funding that we’re not serious about our children’s future.

We’ve said here before that often it’s not that we’re coming up with the wrong answers in Memphis. More to the point, we’re not having the right conversations.

With its vote to cut school funding, Memphis City Council served notice that the conversation is definitely shifting to the right one.

No Shell Games

That wasn’t the case with its recently announced compromise to prevent a cut in state funding to Memphis City Schools. The financial sleight of hand to move money from the school fund balance to city budgets where the money would then be sent back to the school district was long on cleverness and short on answers.

Memphis City Schools was right in rejecting this proposal. A city schools official drew on her rural upbringing when she rightly described it as a “trifling” approach. In addition, City Council members would be better served if they didn’t try to use amp up alleged compromises to engage in political upsmanship.

This is a serious issue and discussions should be handled soberly and straightforwardly. At this point, City Council and the School Board of Commissioners should be able to agree that this question about funding responsibilities deserves to be answered once and for all.

Job 1: Tax Equity

In the meantime, both bodies should acknowledge its importance and promise to the public that their commitment is to address the question with the statesmanship that it deserves.

We know that Memphis City Council members are getting heat in some quarters for their votes on school funding, but the best way to address it is honestly and candidly. After all, the vote to bring more equity to the tax system was precisely the right move at the right time for roughly 75% of Memphis families.


Harvey said...

Awesome post. I like the way you slated tax equity as job #1. It doesn't mean that we don't have other jobs to do as a city, but it gives us a starting place. It also makes sense that tax restructuring needs to fall in place before other issues are handled.

Zippy the giver said...

I just hope that having a starting place is coupled with appropriate action aligned with the goal. I hate the atmosphere of "HOT AIR" at Memphis City Government. Big promises that have no action as step two are always a veil over monetary impropriety here in memphis.

Anonymous said...

You're right. We're not having the right conversation and that should be a discussion on fixing the tax structure.

I'm not of the belief that any amount of cutting school budgets or reducing government spending will produce some long lasting tax equity--if that's the utopia we're supposed to seek. Reductions hardly ever spark growth.

More importantly, though I am in the 75 percent without a child in either school system, I do recognize the value of education and my commitment as a citizen to do my part to ensure that our community continues to produce the quality and knowledgeable citizenry we need to grow in the future.

It's not all about me--or you.

Anonymous said...

First of all, I agree with you in this article. However, I have understood that the County should pick up the tab for funding City schools that the City has been doing for many years.

Why have we not heard an outcry for the funding burden to shift from the City Council to the County Commission?

Anonymous said...

Anonymous 11:42,
The county is ignorinig it hoping it will go away. The question is why haven't our reporters for the major news outlets been asking these questions of them? Why has no one asked SCS school board members?

Zippy the giver said...


Zippy the giver said...

Maybe it's because people are so easily fooled by a nice man who uses kind words in daylight but behind closed doors and in the dark something different and more focused on goals other than civic and fiscal success are higher on the agenda.

Ebenezer said...

Entertaining post. It displays admirable arrogance and hubris in classifying a valid word as rural in origin and usage. I love it! More! More! Show those rednecks that we're not trifling with them. After all, we are "Smart City Memphis", even if the rurals do claim that's oxymoronic. That's the kind of quaint vocabulary we've come to expect from them, though, talking about oxen when we're trying to discuss important urban matters.