Yes on a property tax cap, no on 2%

I saw last week that two bills that would impose a cap on increases to local property taxes have been introduced in the Tennessee General Assembly. One, sponsored by Rep. Jason Zachary of Knoxville and Sen. Bo Watson of Hixon in Hamilton County, would limit cities and counties to increases of 2% annually or 6% over three years. Proposals for increases that exceeded the cap would require voter referendum approval. The other, introduced by Kingsport's Bud Hulsey, would limit increases to 2% annually over four years. Like the Zachary-Watson bill, the proposed act would require voter approval for any additional increase. But Hulsey's bill would require a 60% supermajority of referendum voters for approval. Fifty percent plus one would not do. When I saw the headlines, my first thought was, "I'm not sure this is a good idea. Do we really want to tie the hands of local lawmakers that way?" But I decided to keep reading. I learned that Tennessee is one of only four states that do not cap local property tax increases. The other three are Hawaii, Vermont and New Hampshire. I also learned that a Beacon poll showed that a stunning 90% of Tennesseans polled support some kind of cap. Local leaders such as Washington County Mayor Joe Grandy and Kingsport City Manager Chris McCartt are wary of the cap for exactly the reasons that prompted my initial reaction. Grandy noted that Washington County recently enacted a 25% rate increase after eight years of no increases at all. Kingsport also has been conservative in enacting increases in city property taxes. So, in our neck of the woods, local governments have not exactly gone wild in increasing property taxes. Moreover, common sense tells us that local governments are just as subject to inflation as private businesses and individuals and that if we expect them to keep providing essential services, taxes must be increased occasionally. Everything from building maintenance costs to road repairs to purchasing vehicles is likely to cost more next year than it did this year. We also should remember that when we look at an increase in tax rates, we need to look at the base rate that is being increased. A 25% increase sounds like a lot, but if the existing rate is low, it doesn't appear to be as bad. Twenty-five percent of 1% is only .025%. And so on. Thus, even though the two bills' sponsors are from East Tennessee, I don't think anything going on around here is spurring the proposed legislation. The impetus is coming from Middle Tennessee, especially Metropolitan Nashville and the surrounding cities and counties, I think. According to reports, Nashville property taxes have gone up by 60% over the past five years and 100% over the past 10 years. The city of Mount Juliet recently enacted rate increase of 169%, again according to reports. Those are the areas in which taxpayers are howling for relief. What is going on here? If you've been following the news over the past several years, and especially if you are, like me, a fan of former City Manager Jeff Fleming's blog posts and newspaper columns, you already know. Over the past several years, Middle Tennessee, particularly around Nashville, has seen unprecedented growth in population. Station WGN in Chicago aired a special about the flight from metro Chicago to metro Nashville about five years ago. There are a number of reasons for this phenomenon, but whatever the reason, the sudden growth has taxed the resources of these communities in many ways. Property values have been artificially inflated. Traffic patterns have clogged roads that were already full of cars. Local governments have had to find ways to provide law enforcement, fire protection, and water and sewer service to the newcomers. They have needed to repair roads that suffer from the wear and tear of heavy traffic. We have friends who live in a part of Williamson County that is still largely rural. They seldom go into Nashville these days because the traffic is such a pain. "We wish people would quit moving here," they say. In contrast, Fleming reports, Northeast Tennessee cities and counties are growing at a rate that is sustainable to which local governments can comfortably adjust. Thus, we don't see 60% or 100% property tax increases. What's to be done? I think a cap of some sort is needed, but 2% annually over three or four years strikes me as a bit two restrictive. What about 5%? Bob Arrington is a Kingsport attorney. You can email him at r_arrington@chartertn.net.