With Shelby County’s debt having reached an unprecedented $1.7 billion, Mayor A C Wharton and the Shelby County Commission are devoting much-needed attention to proposals that will generate additional revenues for the county without increasing property taxes.
In January, the commission voted 11-0 to ask the state legislature to allow Shelby County to enact a county-wide tax on real estate transfers, which would generate an estimated $18 million to $20 million in new revenues each year.
A second, temporarily deferred proposal on the commission’s agenda — an “adequate facilities” tax — would, if implemented, deliver a smaller revenue boost. Current estimates project taxes collected in the first year would total about $5.1 million. But the impact could be much larger.
More than the transfer tax, the adequate facilities tax could help mitigate one of the leading causes of Shelby County’s spiraling debt by shifting more of the costs of suburban development to users and beneficiaries. In addition, because new development in many low-income neighborhoods would likely be exempt, the adequate facilities tax should help stimulate growth in these areas.
The current system of funding development almost exclusively through property taxes is unfair. A disproportionate share of expenditures for schools, roads, and community facilities goes to support new suburban development at the expense of the inner city. In fact, low-income homeowners are subsidizing suburban facilities through their property taxes, while schools, parks, and roads in their neighborhoods deteriorate.
Moreover, suburban sprawl has left many poor and African-American Memphians isolated from educational and employment opportunities.
But it is not only low-income neighborhoods that are feeling the effects of uncontrolled development. The Community Development Council of Greater Memphis is a network of grassroots organizations working to revitalize the city’s neighborhoods through economic development.
Some of our newest members are working in places such as Hickory Hill and Raleigh that have recently begun losing businesses and homeowners to locations farther out in the county. If current development patterns and expenditures do not change, these areas — still considered by many to be nice places to live — are in danger of becoming blighted as well.
Besides being inequitable, sprawl is also inefficient. While county taxpayers are paying for new roads and sewer lines, and then paying for the new schools that are needed to support the development that follows, a vast amount of land is already equipped with infrastructure and community facilities. Concentrating development near existing infrastructure and services would certainly be less expensive. But even more promising fiscal benefits may be gained: In 2004, research by the Brookings Institute suggested that such “smart growth” strategies could increase the prosperity of suburbs as well as the urban core.
The adequate facilities tax alone can’t come close to healing Shelby County’s growing pains and will make only a modest contribution to addressing the budget crunch. But it could represent a small but promising shift in public policy toward making development in Shelby County more efficient and more equitable. n
Emily Trenholm is executive director of the Community Development Council of Greater Memphis, Inc.