A Tale of Three Cities – FY2017 Budget Column

As we delve into what could be the last city budget I work on as a councilmember, I reflect upon both the state of the city and my contributions thus far. I could boast that, during my tenure, no property taxes were raised and we’ve reduced total debt levels. However, those claims would be misleading given that council has so steeply expanded their reach into your pocket by other means. In fact, council is considering doing that very thing, yet again, with this budget. More on that in a moment.

Property taxes and debt paint only a partial picture of a city’s financial health. While both are very important, consideration must be given to their utility and return on investment. For many years, I have published in-depth analyses of some of the major expenditures that have brought us to the point we are today, such as:

• How you were sold a $40M high school that will, in the end, cost you over $126M.
• The fact that the city, not the EPA, was at fault for your water and sewer rates doubling in only a few short years thereby incurring $33M worth of debt on top of the $24M we’d already spent to avoid the EPA mandate.
• An accounting of the $10M you’ve paid on a golf course you were assured would pay for itself but hasn’t and won’t for many more years to come, if ever.
• Your annual $175K subsidy (compare to Farragut who only spends $15K) of a Chamber of Commerce who is largely made up of  non-profits, government organizations and non-Oak Ridge businesses who regularly pressure council to increase your property taxes.
• Frequent disclosures of excessive, non-essential spending such as a $275K parking lot, a $1M fountain, a $300K bathroom and much, much more.
• How crony capitalism has run amuck forcing you to offset the extensive corporate welfare the city doles out on your behalf.
• Demonstrating that you are likely overpaying for your trash services with Waste Connections who is charging less in communities where they had to compete.
• Reminding you of the broken promises of Partners for Progress  which cost you $15M on the failed Rarity Ridge/Horizon Center development sixteen years ago and warning of similar pitfalls in the $13M mall TIF.
• And, because half of your property taxes fund our schools, I frequently challenged our superintendent and school board when they would demand more of your money on the grounds that, in spite of being the one of the most heavily funded systems in the state, much of your money is not making it into the classroom where it belongs.

Some will view the above examples through a different lens if they rely upon what they see around town. We have certainly seen an uptick in eateries and we can all appreciate the aesthetic value of some of the new developments. Those new developments have, however, displaced some pre-existing businesses leaving us with an abundance of vacant properties.

To their credit, both council and the schools have actually made some cuts. Unfortunately, none of those recaptured funds were returned to you. And even though promises were made to reduce the property tax when revenues materialized, that has yet to happen. This budget, for example, projects a $3.2M increase in revenues since 2012. Rather than return that to you in the form of a 37 cent tax reduction, the city manager has proposed we turn  over some of that money to the schools who are sitting on nearly $6M that they can, per their own audit, “spend at their own discretion.” (see page 17 here).

Three years ago, I wrote a column that explored our city’s economic decline and proposed course-correcting steps. I presented an analysis of our nearest and strongest competitor with a challenge that we learn from them.

In brief, with no debt, zero municipal property taxes or significant expense  on economic development ruses, Farragut’s fiscally conservative approach produced phenomenal, demonstrable return on investment. They’d successfully enticed DOE employees to reside in their town, resulting in an average annual household income twice that of ours and a  population growth rate triple ours.

Since council is considering increasing school funding, issuing $9M in new debt and upping your water/sewer bill another 6%, it is practical to revisit our competitive position.

Though council did not vote in a tax increase, last year’s assessment bumped our combined property tax rate from $4.74 to $5.11, ranking Oak Ridge/Anderson County as the second highest taxed municipality in East Tennessee. Taking over the top spot is nearby Newport of Cocke County who voted in a major rate increase, bringing them up to $5.48.

We’ve obviously chosen not to follow Farragut’s lead, so let’s examine the city with whom we are tracking. Like Oak Ridge, Newport is a picturesque community with its own unique legacy (google “Cocke County Confidential.”) While we’ve seen very modest population gains since 2000 (7%), they’ve lost 5% of their residents. Farragut has grown 22%. Perhaps the most telling indicator of progress (or lack thereof) is average household income. Ours ($50,000)  is half that of Farragut ($99,000) while Newport’s is less than half ours at $21,000.

On the education front, Newport has a slightly higher percentage of economically disadvantaged students (58% to our 55%) and their students are testing at about the same level as ours in the core subjects of math and reading, grades 3-8. See the chart below for most recent statistics as well as those of Farragut.

Those figures don’t bode well and some will certainly argue that progress, decline and stagnation are subjective. However, if you walk away with nothing else, consider this: Both our debt and our low income population have nearly tripled over the last twenty years. Those who are  able to afford Oak Ridge’s higher cost of living, our middle and upper class, have left and will continue to do so, many waiting until right after their children graduate. If we continue our current trajectory, we will undoubtedly see them disappear altogether.

But Oak Ridge doesn’t have to become the next Newport. We have a significant resource they lack and it is literally right in our back yard. With a BILLION dollars in annual payroll at stake, we can, and should, aggressively seek to steal back DOE residents.

At the same time, we have to consider austerity measures before they are no longer an option. Many municipalities have filed bankruptcy, something previously thought to be highly improbable, in spite of safe bond ratings. Many of the solutions I’ve offered in the past are still doable, such as :

• Converting city-owned assets into taxable properties like our vacant buildings in Commerce Park, the golf course or the corner lot the Chamber of Commerce occupies.
• Reducing some of the $1M+ you pay to fund local and non-local travel expenses.
• Reducing non-critical positions through attrition.There are over 1,100 city and school employees. While most positions are necessary, not everyone is essential. We surely could afford not to backfill some of the 5-10% who retire or go elsewhere every year.

• Shave 5 cents off the property tax rate by enacting a temporary 10% pay cut on the 40+ city director/school administrator salaries who are averaging over $90K and reinstate once the promises of the UPF, Mall and CVMR materialize.

Throughout the years, many of you have shared with me your frustrations about our city and asked what can be done. Though the answer is simple, it does require a prolonged commitment to hold your elected officials accountable. Attendance at our meetings is primarily limited to the “good ole boys” who’ve been running the show for decades. The working class people of this community need to take back their rightful seats and have their say at the podium and in the papers.

It is too easy to collectively hang together, so single us out on our votes, not our rhetoric. You’ve got at least two council members who aspire to take over Randy McNally’s senate seat.  They know they can’t both win and they know they have to be viewed as fiscally conservative if they stand a chance at winning. Pressure them. Hold them accountable publicly and often.

Council will hold two public hearings and votes on the FY17 city budget on June 6^th and June 13^th at 7:00 p.m. at the municipal building. Whether you agree with my position or not, I encourage you attend and exercise your right to be heard. 

 

	Oak Ridge (Anderson)	Newport (Cocke)	Farragut (Knox)
2015 Combined Tax Rate	$5.11	$5.48	$2.32
2014 Combined Tax Rate	$4.74	$4.15	$2.32
Average Household Income	$50,486	$21,070	$98,834
Average Home Value	$140,337	$90,106	$325,964
Population Change Since 2000	7%	-5%	22%
School Per Pupil Spending	$12,355	$9,216	$9,043
Economically Disadvantaged Students	55%	58%	16%
Grades 3-8 Testing Below Grade Level: Math	43%	45%	22%
Grades 3-8 Testing Below Grade Level: Reading	44%	43%	26%

Sources:

https://www.comptroller.tn.gov/pa/CountyInfo.asp

http://www.city-data.com/city/Newport-Tennessee.html

https://www.tn.gov/assets/entities/education/attachments/asr_1415.pdf