Please Don't Obsess Over Your Property Tax Rate - It Doesn't Mean What You Think

Much ink has been spilled over the years in defense - or offense - of Davidson County's property tax rate. While pretty much everyone on both sides of the tax debate agrees that it is hard to hold a candle to Memphis - Shelby County, they often fail to consider that tax rates mean little unless you also consider assessed property values.

To simplify the analysis a bit, what I mean is that you can have a low property tax rate because the value of the property within a given political jurisdiction is high. That doesn't mean those property owners pay less. Quite the contrary, they may pay more. Similarly, you often see very high property tax rates because the property being taxed ain't worth a whole lot. Bottom line: property tax rates are only part of the story.

So consider this selective history: Davidson County had assessed property valued at about $7.8 billion dollars in 1984. Also in 1984, the property tax rate was $6.83 for $100 of assessed value. In 1989, assessed value had risen to $10.2 billion and the rate had fallen to $4.81 for $100 of assessed value. By 1999, assessed value had risen to $18.4 billion and the tax rate had fallen to $4.24. In 2008, the tax rate is $4.69 and the assessed value of all property is about $27 billion. (And of course it goes without saying that all the while the cost of running government continues to rise.)

We are heading into an assessment year when all property will be re-assessed by the Tax Assessor's office. So, how rates and property values intersect will again be widely discussed.
Hope this helps.

Metro Budget - III (you should really read this one)

Yesterday we had another budget hearing. Appearing before the Council were MTA, Public Works and Metro Water Services.


MTA: The Metro Transit Authority is headed up by Paul Ballard. Paul has been at MTA since 2002 and represents, for me anyway, the new breed of department head. He has worked in the private and public sectors and brings innovation and imagination to MTA.

The MTA is facing some significant price shocks - chief among those is fuel. As a result we are looking at reduced service and higher fares. How services will be reduced and how high the fares will go will be determined by the MTA board. The subsidy provided by Metro will be cut to $16.9 million or 5.14%. One bright spot is that MTA will be offering the free smart card service to Metro employees. So, like Vanderbilt University, Metro employees will just swipe their smart cards and ride the bus. This is good for Metro because it allows our employees to save on transportation. It is good for Nashville because we put more people on the bus and less on the roads. I hope that the reduced service does not retard adoption of this service.

Public Works: Public Works is the face of Metro government. Every single day of your life you come in contact with the services they provide - from garbage pick-up, to street cleaning to pothole repair to brush pick-up. Nonetheless, they are taking a big budget hit. About 15% and 57 employees are enumerated in the budget book. The 15% would be worse were it not for the use of $3.9 million in reserves from the waste management fund. My understanding is that the 57 employee layoff won't be that large. Whether it is 57 or 47 or 40. That is that number of employees who lose their jobs, their health insurance, their family's security. Tis not something I take lightly.

The Public Works budget calls for reductions but not elimination of any service. Brush pick-up will go from 5 times a year to 3 times. The Public Works department will pick up the brush instead of the contractor we have used the last several years. Street construction program will lose 11 employees. Crews on garbage pick-up will be reduced. It will be tough but the director of Public Works assures us that the public will not notice the difference.

Water: There isn't much new here. I have written ad nauseum about this department. Here and Here and Here.The only news is that the Finance director indicated that rate reform is in the offing about 6 months from now. You may not like the notion of higher rates but consider the fact that were it not for some pretty sound management, your rates would have gone up a while ago.

Dummy's Guide to the Metro Budget - II

I missed the budget hearing on Thursday. Sweetie had surgery so I have had to limit the schedule for everyone around here. I caught some of it on Metro 3 replay. Here's what is new:

Assessor of Property: The Property Assessor is the department that keeps track of all property in Davidson County. They know how much land you own and what is on it. Based on market value, they assign an assessed value and that is the basis for your property tax bill. You may have noticed the Assessor has gotten a bit better in the last few years fixing the fair market value of your property. You can thank the billions of bytes of information on building permits, comparable house sales and rezoning requests for that. The next mass re-appraisal will be in 2009. I doubt we are going to see the kind of crazy increases in market value we have had recently. (That is a good news- bad news thing. The lower property values, the higher the rate. If you look back at historical property tax rates, they were in the $5-6 range back in the early 1980's.) Anyway, the Assessor's recommended appropriation for FY09 is $7,406,200, a 2.41% decrease from FY08. This one should work out ok since the Assessor's actual (versus budgeted) appropriation was $7,230,729 in FY06 and $6,963,104 in FY07.

Trustee: Once the Assessor figures out how much you owe, the Trustee is responsible for collecting it. The Trustee's budget comes in at $2,035,700, a 7.5% decrease from last year. In FY 06, the Trustee's actual appropriation was $1,875,052. In FY07 it was $2,695,944. So, this budget falls somewhere between actual use of tax dollars in recent years. Now, some of that decrease can be made up by eliminating the credit card fee waiver for people who pay their property taxes at the Trustee's office. The Mayor's budget recommends that these "point of sale" fee waivers will be eliminated. I have heard from several constituents who found the fee waiver to be pretty dumb. Government is not like the local grocer who can increase his prices slightly and absorb the credit card processing fee. Your tax bill is the same whether you pay with a credit card or a check. Metro (or more accurately, other taxpayers), should not foot the bill for the convenience or frequent flyer miles of others. The Trustee plans on cutting two budgeted positions.

County Clerk: The County Clerk collects all other taxes - wheel, hotel and tourism, business, etc. The appropriation for the Clerk is $4.664,200, a 13.29% decrease from last year. I presume the point of sale fee waiver situation will also apply here. The County Clerk will cut 13 budgeted positions, 11 of which will be seasonal and part time employees. In FY06, the Clerk's actual appropriation was $4,356,097. In FY07 it was $4,648,857. So, this year's appropriation is a bit more than the Clerk spent in FY07.

Office of the Mayor: The Mayor's office general fund appropriation dropped from $4,108, 300 to $3,850,200 or 6.28%. Some of that cut will be made up through an increase in federal money. The Mayor's office actual use of general fund money in FY06 was $3,756,099. In FY07 it was $3,902,434. So, this year's appropriation is a bit less than FY07 actual appropriation.

Internal Audit: This department handles the performance and financial audits for the government. Some they do using in-house auditors. Some they do using out-sourced auditors. Basically, this department is the financial police. They make sure tax dollars are spent efficiently and appropriately. Last year, Internal Audit was funded through Internal Service Fees. This year, Internal Audit is being funded through a direct appropriation from the general fund. The difference, you might say, is real "inside baseball" stuff.

Before this year, Internal Audit was paid for by charging each Metro department a small amount of money. So, your tax dollar was sent to a Metro department, like Codes, then a portion of that dollar was sent from Codes to the Internal Service Fee Fund to pay for Internal Audit. With a direct appropriation, your tax dollar goes right from the general fund to the Internal Audit Department. Either way, it is still your money and how it gets to its stated purpose is of little interest to most people. All anyone cares about is how much of their money is being used and if it is being deployed wisely.

In FY08, $1,477,000 was allocated to Internal Audit using Internal Service Fees. In FY09, the direct appropriation is scheduled to be $1,434,200. So, the Internal Audit is getting a bit less of your tax dollars but apparently using them a bit more efficiently and so they are able to add 3 new positions.

Later this week: MTA, Public Works and Metro Water.

Dummy's (that would be me) Guide to Metro Budget I - Schools

This will be the first in a series of posts on Metro budget. I hope this information will help District 23 residents understand what is in the budget and how it impacts our lives. MNPS had their first budget hearing at Council tonight. Here is what we learned:

First the good news. The Schools budget will be $627.2 million, an increase of $35.7 million over last year. The additional money will go to pay salary step increases for teachers ($4.6MM), 2% State Teacher raises ($5.2MM) Salary step increases for staff ($2.00MM) additional costs for opening new schools ($2.8MM) inflationary increases in stuff like utilities, etc ($2.8MM) and $7.8MM for subgroups which is our school system politburo talk for non-traditional education - special education, technical and vocational, etc.

Happily, the state is expected to provide about $9.5 MM more in Basic Education Plan money. That means less pressure on the local taxpayer. Happily also, this budget is being funded with no new tax increases. Also, on the good news front, Metro Schools reserves (like a savings account) have never been higher. We expect to start the fiscal year with $72MM in reserves which is almost 11% of budgeted expenditure. We have been able to build reserves because budgeted expenses have come in a little under expectations. (For the record, budget expenses rarely come in as written. It is impossible to be completely accurate because people quit, retire, etc in a way that you just can't predict with complete accuracy). Meanwhile, revenues have come in a bit higher than expected.

Now for the not-so-good-news. Over $19 million of the schools budget will be funded through spending reserves. This $19MM comes on the heels of $8mm of reserves we spent last year. If we keep this up, those historically high reserves won't last long. So, as it stands between this budget and last, we have spent $27MM for recurring expenses from non-recurring sources. An analogy would be that you raid your savings account to pay your electricity bill. You can do that once or twice, but if you do it every month you might run into trouble. Plus I am haunted by Pam Garrett's (Executive Director of Nashville Alliance for Public Education) who gave me a friendly but reproachful look after last year's budget and reminded me that spending non-recurring money for recurring expenses can lead to no good end. Pam is one of the smartest people in public education so I took her comments to heart.

Now to finish with some really good news. The Director of Schools, Chris Henson spoke at great length tonight about getting input from the schools themselves on how to improve and working to eliminate top-down decision making. This notion that the people that spend each day with your child are best equipped to decide what they need to get the job done is irrefutable and represents a cultural change that can only bring us good things. Chris also said that not every school needs the same thing. Another move to site based decision making that gives me great hope. So, give that man a medal, a pat on the back and here's hoping that either he is the next schools director or we find someone who thinks the same way.