Living in the Past
Property taxes weren't lower years ago, and selecting the correct rate today comes down to simple math.
illustration by Skypixel | Dreamstime
Nostalgia has become a regular feature of City of Memphis budget hearings, with some people suggesting that the city property tax rate was so much better 20 to 30 years ago. Listening to these talking points, it’s easy to think that city budgets are expanding wildly, the city government payroll is swelling, and tax rates continue to climb.
And yet, the facts tell a different story.
The property tax rate in 1980 when Wyeth Chandler was wrapping up his decade as mayor was $3.74, or 63 cents higher than today. If that tax rate had kept pace with inflation, it would today be $10.26.
Through most of Dick Hackett’s terms as mayor, the city property tax rate was $3.31 and it was lower when Willie W. Herenton was mayor. Then, it averaged $3.17 and was $3.25 when he left office.
Some City Council members regularly compare Memphis’ property tax rate with lower tax rates in Nashville, but the difference isn’t about efficiency or smarter management. It’s merely math.
The Nashville property tax rate is significantly lower because the value of the average house there is significantly higher than Memphis — $164,100 compared to $99,000. The difference in home prices is why Nashville has $141 million more in property taxes every year to spend on parks, libraries, and neighborhoods.
Put another way, if Memphis had that much more in property tax revenues, its tax rate could be $1.71. Conversely, if Nashville had Memphis’ median house value, its tax rate would be roughly $7.46 — or higher than the $7.13 cumulative city-county property tax rate in Memphis (city rate of $3.11 plus county rate of $4.02).
This year, for the first time in modern history, Memphis’ “certified tax rate” will be higher because of an almost 5 percent drop in property values. State law requires the recalculation of the tax rate so that reappraisal is “revenue neutral” and no windfall for local government. This is the first time that reappraisal won’t produce a lower property tax rate, because to be revenue neutral for Memphis, the tax rate has to increase. After the state-required certified tax rate is set, Memphis City Council can decrease it.
Even with an increase, the actual tax payment for most Memphis homeowners will still go down. Former Commercial Appeal reporter Jimmie Covington explained: “My appraised value went down 13.3 percent. I calculated what the Memphis tax rate would have to be for me to pay higher taxes than I paid this past year. The city rate would have to go above $3.59.”
But it’s not just the facts about tax rates that get lost in the political fog of budget debates. If few people in the public know that the city tax rate is dramatically less than a few years ago, even fewer know that there are fewer workers (214 at this writing) in city government than two years ago, and the size of government has shrunk so much that basic services — libraries, parks, community centers, and public transit — are delivered on subsistence budgets.
It’s the nature of budget cuts that they often beget more cuts because they set in motion a self-enforcing loop. For example, the budget for libraries was cut 20 percent, which means the number of librarians and library hours is cut 20 percent. Then, of course, the number of people going to libraries drops by about 20 percent, and then, the drop in usage is cited as justification for more cuts in its budget.
Some people suggest that perhaps libraries, community centers, parks, and public transit are luxuries that Memphis cannot afford, and yet we have children and families whose only internet connections are in libraries (whose 600 10-year-old computers are used 1.2 million times a year), tens of thousands of people are using library computers to apply for jobs and buses to get to them, a rise in obesity corresponds to the decline of the city park system, and students are using libraries as homework centers although the system’s book budget has been reduced to record lows and science books don’t even have recent discoveries.
City officials in both administrative and legislative branches understand that the status quo is simply not good enough, and that Memphis needs a growth plan for the future that includes more emphasis on improving neighborhoods, creating economic engines, and funding all services adequately. If Memphis is serious about attracting new economic growth and new residents, it can’t do it by providing bare-bones city services that, most of all, continue the disinvestment taking place in too many Memphis neighborhoods.