Like most big cities in the country, Memphis has challenges. Our number-one problem is the loss of population.
According to the census, Memphis lost 48,000 to 50,000 residents between 2000 and 2010. These losses were offset by annexations that forced over 30,000 people to live in the city. This trend is certainly a problem, especially considering that there will be no big annexations over the next decade. It appears clear to me that people are voting with their taillights on three big issues: crime, schools, and, to a lesser degree, our relatively high property tax rate.
As with prior years, the city council should review Mayor Wharton’s proposed budget with a focus on how we can improve on the Big Three issues. Because the city is no longer funding schools, we can deal solely with crime and the property tax rate.
One of the most effective means adopted by local government to combat crime was the development and use of Blue Crush. Blue Crush is, in part, the use of crime data to determine the increased allocation of police resources to the time and place of spikes in crime.
For about 16 months in late 2011 and 2012, the city administration reduced Blue Crush overtime, and the details were cut by 60 to 70 percent. As a result, serious crime increased by 10 percent. In 2013, Blue Crush details have been reinstated, and crime is again decreasing.
With respect to our property tax rate, Memphians pay the highest rates by far of any Tennesseans. When our city and county tax rates are combined, our rate is about 50 percent higher than Nashville.
Since 2008, the city council has been able to reduce the city’s property tax rate from $3.43 to $3.11, largely due to the termination of the school-funding obligation. This 10 percent decrease is a good starting point.
The mayor’s proposed budget increases the city’s operating budget from $597 million to $622 million and increases the property tax rate from $3.11 to $3.39. Over the next six weeks, the council will conduct hearings on the budget and hear from the administration, labor leaders, and the public. As my colleague Shea Flinn has touched upon in this space, there are a few budget myths that must be shared so that we operate with the same factual information.
First, there has been a lot of discussion about privatization or outsourcing of sanitation services. Sanitation operations are run by a fund completely separate from the city’s operating fund. Memphians pay for garbage collection through a fee on our MLGW bill. Therefore, any reduction in expenses in the sanitation department will not be reflected in lower property taxes.
Second, the pension system is underfunded. The city contributes $25 million to $30 million to the system, when our advisers recommend we move to double that amount. None of the reforms proposed would decrease the yearly contribution below our current level. Therefore, any savings achieved with reforms, such as moving to a 401(k)-type system, would not result in a lower tax rate.
Third, a huge decrease in the 400 appointed positions in city government would certainly lower expenses, but it would also result in closing all the libraries and operating city government without a legal office.
There may be several appointed positions that can be eliminated. In past budget cycles, I have tried to do so, and I will probably try again. But the savings to be achieved are not nearly enough by themselves to avoid a tax increase.
Lastly, the millions of dollars spent on capital projects cannot, under the law, be redirected and spent on operating expenses. Examples of capital projects are the purchase of police cars or fire trucks, repaving streets, building water detention facilities, and the construction of the Overton Square garage.
These capital projects are funded by issuing bonds, which is the equivalent of borrowing money. The effect of these projects on the operating budget and the property tax rate is the payment of debt service, the equivalent of a monthly mortgage payment. The ratio is: $1 million in a capital project equals $80,000 in operating expenses.
This is certainly a relevant consideration, but we must realize that cutting a $10 million capital project does not equal filling a $10 million gap in the operating budget; it equals an $800,000 operating expense.
In conclusion, the council must review each expense with an eye on providing quality service to our taxpayers and a focus on addressing the Big Three issues.
Jim Strickland, chairman of the city council’s budget committee, is in his second term serving District 5.
