If the post this morning gave you an introduction to the idea of making Memphis smaller through de-annexation via referendum, or some other planned de-annexation, the flavor of which Mayor Strickland indicated he’s “open to”, this post will take a look into some of the challenges of the actual doing of de-annexation.
But first, some housekeeping. We now know what areas would be impacted by the bill, as seen in the image to the left.
We also know that the members of the Shelby County Delegation that are sponsoring the bill, include one member who could be directly impacted by it… Senator Reginald Tate who lives in Southwind.
Finally, the cost of de-annexing all the areas brought into the city since May of 1998? It could be as much as 10% of the current city tax revenue. I can guarantee, the City won’t let that go without a fight.
See, de-annexation is a breaking of a partnership…a divorce, if you will, or perhaps better yet, a splitting off of a business unit, ala what HP did recently.
But its much more than just the splitting. There are assets and liabilities to be divided. There are lawyers to be paid. Make no mistake about it, de-annexation will be more than a referendum, it will be a heavily litigated split that makes Kramer vs Kramer look like Love Story.
In this post I’ll explore more of why Lt. Gov. Ron Ramsey says the idea of de-annexation may be more of a false hope than a real solution for the people who feel aggrieved by their annexation…which in some cases, happened nearly two decades ago.
Section 5a(1) of the amendment that makes the bill says the following:
SECTION 5. Tennessee Code Annotated, Section 6-51-204(a), is amended by deleting the subsection and substituting instead:
(1) Except for responsibility for general obligation debt issued during the
annexed period, all municipal jurisdiction shall cease over the territory excluded from the municipality’s corporate limits on the date of certification of the results of the election. The municipality may continue to levy and collect taxes on property in the excluded territory to pay the excluded territory’s proportion of general obligation debt issued during the annexed period.
What this means is, any debt issued by the City of Memphis for any purpose in the ‘de-annexed’ area would have to be paid proportionally by the departing residents of said area.
That debt could have paid for parks, streets, streetlights, police and fire houses, and any of a number of other things.
So even after an area chooses to ‘de-annex’ they will still be liable, and can still be taxed for covering the debt for the benefits they received while inside the city limits.
But those benefits don’t live there on their own, they come with other costs.
Police and Fire houses mean specialized equipment and the hiring of more personnel. By removing part of the area these men and women were hired to protect and serve, the City may find they need fewer of them, which could mean layoffs.
Conversely, the County could decide to contract with the City to provide police and fire, and then assess a special use tax on the former residents to cover the difference of their decision to leave an area that had services already budgeted.
Further, there are other costs associated with the hiring of personnel…namely pension, healthcare, and OPEB. While the bill specifically spells out that the folks leaving the City would be responsible for the debt, nothing is mentioned about other costs associated with being a city in an area. So we’d most likely have to litigate whether or not the folks in the de-annexed area would be responsible for their proportion of these long-term costs.
Gets complicated doesn’t it?
County Tax Hike
While the City will lose tax base and population, the County will gain more responsibility in a de-annexation.
As I mentioned before, the County, now responsible for providing services to these newly de-annexed areas, will have to tool up to provide services. That means perhaps buying City of Memphis assets, like Fire and Police stations. Don’t think that gets you out of your proportion of debt, because the way bonds work, they might have to be held to a predetermined date (maturity or call) and that date could be a long way away, since the city has done a good job of refunding (refinancing) a lot of its debt and taking advantage of low interest rates.
The County, which is also strapped for cash much like the city is (though you’d never know it from the media) would have to pay for this some way some how. And that would mean a tax hike, likely for everyone in Shelby County.
So newly de-annexed area, you get the joy of several things:
1. Paying your part of the debt for a city you’re no longer a part of.
2. Paying a higher County Property tax rate because now the County has to provide more services.
3. Being responsible for everyone else in the County having a higher County tax rate.
These are innocent bystanders who pay their taxes and go about their own business…now strapped with the cost of your selfishness.
I can tell you, we won’t be happy with you.
Way to go Private Pyle.
When I first saw this floated in the Commercial Appeal I cried alabaster Schadenfreude tears that tasted like the sweet nectar of sweat from Odin’s furrowed brow.
For all your efforts to separate yourselves from Memphis, you could be stuck with us anyway.
That’s right folks, you get us anyway, and all of these valuable prizes:
• The spending of time and money organizing for a ballot initiative,
• The ruinous tens, maybe hundreds of thousands of dollars spent on attorney’s fees,
• The taxes for a City you no longer belong to,
• The new taxes for a County that thinks you’re a selfish dick because now everyone’s taxes are higher to pay for your services.
All of these prizes could be all for naught, if you break the City of Memphis. Because that could set into motion a scenario where the County becomes effectively consolidated (not a metro government) and the whole damn thing falls apart at the seams.
Actions have consequences. De-annexation is not something to throw around like a tennis ball…its a grenade that can hurt everyone in the process.
To his credit, Mayor Strickland has said that he’s open to a discussion about decreasing the footprint of the city. I think that’s a pretty brave position to stake out considering the fiscal challenges that face us, and the generally nasty taste that a ‘shrinking city’ leaves in the mouths of people.
There is a way to do this. Just like there’s a way to have a divorce where the kids don’t suffer, and there’s a way to split up a business that ultimately adds value for the shareholders.
This bill ain’t that. Its ill conceived, and based on a personal beef the two primary sponsors of the bill have with a former Mayor in Hamilton County.
Perhaps theres another way. A way where we could avoid all this by starting a discussion instead of (spoiler alert) ending up on the floor, shattered, like the Roses.
Just a thought.