vibinc

And why that’s not such a big deal really

Its budget time again. A time of wrangling and posturing about spending and tax rates and the “appropriate role of government”.

In City Hall, the County Commission, and most importantly, the school board, politicians will be putting together numbers for the upcoming year.

The schools budget hasn’t been released yet, though it is expected on Tuesday, so a complete picture isn’t really available.

What we do know is thanks to a whole lot of economic factors outside of our control, and many more within our control (though few would admit it) we’re going to see a property tax increase in both Memphis, Shelby Co., and likely many of the municipalities that were once thought above such measures.

While we’re talking about an increase, Nashville Metro is talking about a small decrease in property tax rates.

Considering the overall economic climate, this may come as a surprise. I know I was surprised when I heard it. But the underlying reason Nashville gets a cut, while we’ll most likely see an increase goes to a whole lot of issues we, as a community have been unwilling to face. None of which, by the way, have to do with “spending too much”, though that is the most often cited reason.

Home Value and Property Taxes Comparison

Property tax is the single largest piece of the City and County “revenue pie”. As property values increase, the tax rate required to remain “revenue neutral” drops. As values decrease, the tax rate required must increase.

Almost no one wants to see critical services cut: Police, Fire and Trash Collection. Trash collection is its own thing, funded by a fee collected by MLGW, so tax rate has basically NOTHING to do with that (regardless of what Kemp Conrad says), but Police and Fire make up a huge percentage of the City budget. Law and order plays a big role in the County budget as well, though the impact is muted because the Sheriff doesn’t have to staff up the way municipal police departments do. The single largest issue the County has to deal with is education, which we’ll save for after the budget comes out.

The data in the above spreadsheet comes from the Census and from published tax rates and calculations listed in the budgets from each area.

There are a couple of things that should jump out at you immediately:

1. Value – The median home values in each area. As you can see, Nashville’s median value is much higher. This means they can collect the same amount of money without levying a higher tax rate. Shelby Co.’s median home value is one reason for our high tax rate.

2. Vacancies – Shelby Co. has a very high rate of vacancies compared to Nashville, and Memphis is an even higher percentage than that. High vacancy rates depress value and overall collections for two reasons: oversupply and weak demand brings down prices over time, and long-term vacancies not only mean lower collections from that home, but often many of the homes in the area as home values decline, especially if there is a high volume of vacancies in a specific area. (Note: Shelby Co. vacancies include Memphis vacancies, because, you know, Memphis IS in Shelby Co.)

None of this is new. We’ve known it for a long time. I’ll have to address why this is the way it is another day, but for now, lets just say both Memphis and Shelby Co. government have been chasing population rather than giving people a reason to stay. This is also reflected in outmigration information. Again, that’s a different post.

Tax Hikes – The Herpes of Politics

A lot of politicians believe that pushing for a tax hike is like getting Herpes. You might be able to manage it, but it will never go away.

This is due in part to politicians focusing on spending rather than what we get for said spending. Most people prefer a visible police presence in their neighborhood. Fully staffed and nearby fire stations bring down response times and, by extension, insurance rates, not to mention that your chance of survival if tragedy strikes is greatly increased.

Understand, we can’t have these things if we don’t have the money to pay for them.

At the same time, almost no one is talking about the conditions that play in to our tax rate, including oversupply, and vacant, often blighted homes. This depresses our ability to get the same level of service for a lower rate. Note, that doesn’t mean your tax bill will go down. Things still cost what they cost. It means the rate would be less.

The reality is, all this fussin’ about “tax rate” is double talk. Everyone with half a brain in their head knows you can’t field the same level of police or fire presence with substantially less money. It ain’t gonna happen.

But “tax rate” is the thing that fits on most political literature. It’s an easy sell. Its harder to explain to people that a series of policies you put into place helped raise home values.

So, in a sound bite driven world, what we end up talking about is what fits on a postage stamp, rather than the big things that actually play in to that “postage stamp” issue.

How Much Is This Gonna Cost Me?

For a homeowner with a median value, increasing the tax rate in Memphis by the proposed amount will cost $70/year, or about $6/mo.

If you’re fortunate enough to have a million dollar home, it will run you about $60/mo.

In both cases, its pocket change relative to the income one must have to own such things.

Of course, the County is most likely going to raise Property tax rates as well. Even still that’s an increase of about $14/mo. Hardly the oppressive increase that we are told it will be.

Tax Rate, Tail Lights, Total Baloney

When you talk to realtors, they give you a three main reasons people move: Crime, Schools, and Space…not necessarily in that order.

I’ve talked to a lot of realtors over the past several years, and none of them have said someone wanted to move out of Memphis because the tax rate is too high. I’m not saying there aren’t some people who do. I’m just saying its a tiny percentage.

Crime and Schools are the top two things that the City and County could actually tackle to keep people from moving (I don’t think they can do much about space) you have to ask yourself what have they done, and to what effect?

Here’s what they’ve done: They’ve inadvertently fed into the notion that neither are solvable problems.

How have they done this? In a couple of ways.

By threatening to reduce funds for public safety, and thereby planting the idea in people’s heads that the city will now become less safe because fewer police will be on the beat. If you’ve ever had your home broken into (and I have) this plants a seed in your mind that will eventually move you to action.

On the schools front, the lack of certainty, some of it real, some manufactured, and some imagined…along with low test scores and a general feeling that all is lost. This comes from leaders who choose to accentuate negatives as a political wedge to ultimately fund schools less in search of lower tax rates.

In both cases, this is about political rhetoric meant to shift blame from political leaders to “bureaucrats” in the various departments, or just any other political leader, rather than seeking real solutions to the County’s top two self-identified problems.

It’s baloney, pure and simple, and it shows a greater commitment to the four-year political cycle than the long-term health of our community…whether they mean to or not.

If we were really committed to addressing the long-term problems our community faces, we would redirect our efforts from the “Tax Rate Tango” to poverty cessation. 26% of everyone in Memphis lives in poverty. Another 36.6% is considered “working poor”. That’s nearly 63% of the total population of the City, or 410,000 people. Enough to fill the Liberty bowl almost 7 times.

High poverty means lower than average wages (about $7000 less than state household median), which translates to lower sales tax collections (less disposable income) and the necessity for lower housing rates (which means lower property values and less revenue per home).

This doesn’t mean the City needs to undertake a huge Welfare program. We already have that for Corporations…they’re called PILOTS. It means we have to do more to support efforts already underway by the Federal, State and County governments, as well as the litany of non-profits that work on these issues. It means we have to stop doing the same thing over and over again expecting different results.

Most of all, it takes a little “outside the box” thinking, and a commitment to correcting this issue.

How does that impact crime and schools? The short answer is poverty, crime, and low educational attainment are all intertwined. Poverty doesn’t cause crime or low educational attainment, but higher poverty rates correlate to them.

I’ll delve deeper into that in my next post.

Last night, among other things, the School Board who shall not be named voted to delay their search for a new Superintendent at the suggestion of national search firm Proact..

Who, in their right mind, would want this job?

Think about it: 23 members who can’t seem to come to a decision on anything. 16 of whom would be gone or at least on their way out by the time the new Super takes office. The chance that a vote on a new Super would involved a majority of the “leavers”, and a minority of the “stayer” is not only real, but likely.

Add to that, the litany of questions that have yet to be answered, and the search for a new administrator became too heavy a lift for the search firm.

The irony, yesterday we received a questionnaire from Proact about what we, as parents of an MCS child would like to see in a new Super.

Brilliant irony.

In addition to giving up on the search for a Super, the board took a vote on delaying the merger, which failed. The argument for delay has now come from both sides of the charter surrender vote, which is pretty interesting up to the point that you realize that state law doesn’t allow for a delay in the merger. The timeline is set forth in Norris-Todd, and affirmed by Judge Mays. Short a ruling on the constitutionality of the timeline provision, which is pretty solid honestly, delay isn’t going to happen, so let’s just stop talking about it and get on the to the business of actually getting ready for next year, mmmmkaaay?

The board did vote to approve outsourcing of custodial services to GCA. I don’t generally support this kind of action, but the question hasn’t been about whether or not to outsource for weeks. It’s been about who to outsource to.

I found out late last night that GCA also has a contract with Metro Nashville Public Schools, something that might have been reported before and I just missed. I’m asking my Nashville readers to report back. I know I’ve got a lot of teachers from Nashville that read. I want your perspective on their performance so we at least know what to expect. Hit me up on my contact page if you don’t have my email address or on the tweeter @vibinc.

Other things include transportation and school closings, though I think school closings is a bit of a distraction considering all the other things going on. Seems like we could have brought this up in July, after the approval of the new budget and the start of the next fiscal year, and that would have allowed more time to actually consider some of the open questions that are hindering the release of a proposed budget from Interim Supt. Hopson.

Maybe there’s something about a timeline that I’m missing here. I don’t really know.

In any case, I’m sure the County Commission and Mayor Luttrell are itching to get this budget, if for no other reason than to have something to practice hitting the wastebin from their chair. If the new budget comes in as expected at $1.3b (which is $40m more than last year) you can expect to see exasperated looks and Bugs Bunny style steam springing from the ears of folks, not to mention the normal hyperbole that has little if any basis in fact. I’m talking directly to you Chris Thomas/Wyatt Bunker/Heidi Shaffer.

The bellyaching will, no doubt, be more pronounced than the aftereffects of eating a raw pork chop.

In other action, the board approved a policy that would pay teachers based on performance rather than experience and educational attainment, an irony if nothing else. I get that “book learnin’” doesn’t necessarily make you a better teacher, but shouldn’t teachers, who are in the business of education, always be seeking more education? Isn’t that a valuable thing to seek? Apparently not.

I’ll be taking a deeper look at the whole teacher evaluation/pay issue later this week to hopefully better explain the policy that was adopted by the board last night.

So I guess we’re still in wait and see mode until the next meeting of that August body who shall not be named. Until then, there are a lot of questions to be answered. The largest of which begins with a b, ends with a get and has U all up in the middle of it.

Over the weekend, I was honored to give a presentation on school funding for Livable Memphis at Rhodes College.

Since the we don’t have a budget for the upcoming year yet, even though we’re just 60 days out, I talked about the budget from last year, and hoped to give a little insight as to how things are funded, how much we spend, and what’s coming down the pike.

45 min may seem like a long time, but with as much to cover as I had, there were lots of things I couldn’t get into…like enrollment, or drilling down into each system’s administration. That said, as budget primers go, I think it was alright.

As the school budget emerges, I’ll have more to add.

Below are the videos of the event.

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