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I will begin by saying that this is simply my explanation of the current state of the Grundy County Budget. I only present this as an attempt to provide the public with needed information. The commissioners have approached the issue with due diligence. The budget is lean. The money needed is to balance the budget, not build the jail. The operation of the new jail is a factor in the current decision making. If you read the entire report you will be better informed. Please take the time to become informed.
So where are we today? Not in as good a shape as many of us thought. Our fund balance, which is posted in the newspaper, is in the black, but the problem is that it is shrinking.
Having money in your “fund balance” is necessary if you want to maintain good standing with your creditors. Consider your own checking account. Most of us try to keep a little money in the bank to cover any checks we write before our monthly paycheck gets deposited. If we do not have any extra we run the risk of having an overdrawn account.
Until recently, Grundy County has been very fortunate to have a healthy fund balance because we were able to create a nice little “nest egg” during years when our revenues were greater than our expenditures. This is no longer true. For the past few years the situation has reversed, and expenditures in the County have exceeded revenues.
How is revenue generated at the county level? Generally speaking, Grundy County government runs on personal property tax, sales tax, fines and fees, and state generated revenue from gasoline and other taxes. When setting a budget, we have to estimate how much money will come from all of these sources. We try to make a conservative estimate so as not to “count our chickens before they hatch”.
How, then, did our expenditures get ahead of our revenues? There are many reasons for this, all of which are legitimate. Maintenance on county buildings, state mandated cost of living increases in salaries for staff and officials, outsourcing of inmates due to overcrowding at the jail, increase in medical bills for inmates, and increases in utilities are just a few examples of budget expenditures that have increased and will like continue to do so.
To keep up with these increasing costs, we have dipped into the fund balance instead of increasing our revenues by raising taxes. Obviously we cannot continue to do this. The fund balance is shrinking and our costs continue to rise. In fact, we are now faced with an even greater expenditure ahead, the operating of the new jail that is expected to be completed in summer of 2015.
The time has come when the county commission must generate more revenues. Taking this step will not be popular because no matter what we do, it will hit the citizens in their wallets. We have to look at what is most effective.
So what are our options? Really there aren’t many.
First on the list, because it is by far the biggest source of county revenue, is property tax. Every county in the state relies on property tax as their primary source of money to provide services to its citizens.
So how does Grundy County’s property tax burden compare to others in the state? Well, our tax rate is $2.09, and that is below the average of other counties in Tennessee (http://www.comptroller.tn.gov/pa/LR.asp?W=12). In fact, the local property tax has remained fixed at the same rate for over 10 years.
During that time, some of you may have seen an increase in your property taxes and some may have seen a decrease. That is because your property is reappraised every four to six years. The only way that the county can get an increase in total property tax revenue without raising the rate is from new property development—new houses and businesses that are built. We all know that Grundy County has not been getting a lot of new development in recent years, so there is little revenue gain from that source. The lack of new development is a problem that we have to solve, but it is not one that we are going to solve in time to fix our current deficit.
Therefore we really have to look at adjusting the property tax rate as one potential source of the increase in revenues that the county must generate to cover its increasing costs.
Other than a property tax increase the only source of income potentially large enough to cover the anticipated need is a wheel tax, which I will discuss in a minute. And how big is that need for next year? It’s pretty big. In fact, it is over $900,000.
That is what happens when you are borrowing from Peter to pay Paul, as we did last year when we diverted money from specific funds (like the one we use to pay off capital debt) to pay the General Fund bills. So if we replace the money we borrowed and try to run the budget on the current property tax we could have the following scenario:
General fund estimated revenue: $4,396,586
General fund estimated expenditures: $5,327,054
This totals: (-) $930,468
Furthermore, while we must generate an extra $930,468 to meet the current estimated budget, we must also be looking ahead at the estimated operating expense of the new jail that is to open in 2015. And on top of this, we have to make the changes this year because the year 2014 is the property reappraisal year and the county commission cannot levy an increase in property taxes during a reappraisal year.
Let’s look at what a property tax increase and a new wheel tax can generate.
Property tax impacts those who own property, whether it is a house they personally live in or land they own. Some people own land in Grundy County, yet do not live here. They still receive a bill. Some people own homes that they rent out to other people. In this case the homeowner receives a bill but may recoup that cost by folding it into the rent he or she charges. Most people in Grundy County are living under a roof, thank God. According to the latest census (http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_11_5YR_DP04 ) there are 5,455 occupied homes in Grundy County. Of those homes, 80.2% are considered “owner-occupied homes.” 19.8% of the occupied homes are categorized as “renter occupied.” All of these houses and other parcels of land are taxed at the $2.09 rate. An increase in property tax rate of about 40 cents would generate more than $900,000.
A wheel tax impacts those who own vehicles. Currently the estimated total number of vehicles (including motorcycles) that would be eligible for a wheel tax in Grundy County is 12,500. Some people own no vehicle, some own just one vehicle, while others own several. A wheel tax of $25 dollars could generate $312,500, but we would have to subtract from that the administrative cost of collecting a new tax. Therefore it would require a substantially higher wheel tax per vehicle to generate enough revenue to cover the deficit for the coming year. A wheel tax can be brought to resolution by the commission. If a certain percentage objects to it, the matter goes before the public for a vote.
The County Commission has weighed all the options and the budget finance committee will present a proposal at our special called meeting. That proposal will involve an increase in property tax and a shift in the Solid Waste fund to offset an even greater increase passed along to the taxpayer. Here is what we estimate to be the fiscal impact of this increase in property tax.
General fund estimated revenue: $5,388,235
General fund estimated expenditures: $5,327,054
This totals: (+)_$61,181
As you can see, this increase would put the county back in the black with respect to its revenues and expenditures. With the additional money coming from Solid Waste we would have a good start toward saving money for the opening of the jail.
How much would this increase affect you? The increase is about 20%, so if your property tax was about $250 last year, it would be about $300 this year. If your tax was $500 last year, it would be about $600 this year. If your tax was $1000 last year, it would be $1200 this year. Remember, the elderly or disabled on a fixed income who meet eligibility criteria can apply for property tax relief.
If a significant wheel tax is passed by the people, we could possibly lower the property taxes. It would have to be significant, as we still need to have money set aside for opening of the jail in 2015 and its operation thereafter.
Thank you for your time and interest in this matter.
Emily Partin, Grundy County Commissioner