Sneak Peek at Thornwood

IMG_6776.jpgThe Thornwood open house offered a glimpse into the sense of community that a mixed use development can generate. Food trucks and live music added to the festive atmosphere as curious residents and potential tenants toured the model units open to the community.

IMG_6762.jpgThere were four apartments open for viewing in the “Residence” building. The model floor plans included two each of their one bedroom and two bedroom units. The building is still very much under construction and scheduled to be completed in March from what one volunteer told me. While the demo units had flooring installed, the main hallways were still under construction and likely will not have their final touches until all the units are complete.

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The finishes were high end with solid surface counters, stainless steel appliances and walk in showers. Each unit had an open floor plan with clear views between the kitchen and living areas. All of the units featured laundry, the larger units had full size washer and dryers. One of the two bedroom units features a “sun room”, a great place for avid readers to relax with some natural light.

The units in the “Market Row Lofts” were larger and had higher end finishes. These units were not quite finished, lacking counter tops and sinks but you could tell the cabinets and fixtures in place were even higher than those of the “Residence.” The large windows brought in lots of natural light. My wife and I were amazed at how quiet the units were given the traffic right outside the windows. There were two units open for inspection. These units are directly above the retail space on Neshoba and Germantown Road.

IMG_6773.jpgThe “Loft” units included two bedrooms and laundry rooms. One had an office space off the entry. Both featured large closets and good storage space.

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It will be nice to see when these units are complete with all their finishes. We met a couple touring the facility that plans to move into the residence in March. They have a unit reserved on the 4th floor which should offer great views of the area.  They will have the convenience of this prime location. They are walking distance to GPAC (and the new Grove), GAC and all the great programming that goes on in Municipal Park.  This retired couple is looking forward to the convenience offered by the combination of uses and location of Thornwood.

WheIMG_6778.jpgn you are in the middle of this development you don’t feel like A major high way is on the other side of the buildings. This is an exciting addition to our community.  I hope we see some good programming that makes use of the green space in the middle of this area. While it is not huge (.34 acres), it is a great spot for some more intimate performances.

The added benefit to our community comes in the form of tax dollars. This commercial real estate is tax at a 40% assessment vs. the 25% assessment on residential. All totaled the estimated revenues from this 12 acres of land (or 0.002% of the total area of Germantown) are projected at $1.5m annually. For perspective, that’s enough to service the debt on our new school every year, buy a new fire truck or pave 3-4 miles of roads.

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Be always sure you are right, then go ahead!

I was recently listening to an audio book and the author cited one of his favorite quotes as being from Davy Crockett. Crockett, the famous Tennessean who served in Congress and lost his life in the battle at the Alamo was known for saying “Be always sure you are right, then go ahead!” I have heard that before but it really stuck with me this time.

We are in a political environment that is full of contradicting information and some flat out lies. It is incumbent on us as voters to wade through all this information and try to discern what is truth. We at the Germantown Voice are working together to lay out some of the key items we see as hot button issues either called out by candidates themselves or championed on social media.

First and foremost, we recommend watching the Germantown Chamber of Commerce Candidate Forum. At nearly two hours it is long but it is worth your time to be an informed voter. The program begins with the Alderman and then transitions to interviews with each of the Mayoral candidates. Be open minded and listen to both candidates.

Listening to Citizens – There is a narrative that says that certain candidates are not listening to citizens. Have you reached out to your officials directly?  You might find they are very responsive. Did you know that the long term plans you hear referenced (including Forward 2020 & 2030) are all citizen led? Those plans were not just a handful of people either: they included over 1,000 participants in task forces and public meetings. The commissions that approve initial concepts for projects are all citizen led. All these meetings are open to the public, many are available on YouTube though the Germantown Municipal Television page.

Development – In general, there is a perception that the city is “pushing” development. Let’s be clear – the city doesn’t solicit development. If you listen to this YouTube video taken from the public hearing on the rezoning of the Cordova Triangle, you can hear the property owner clearly state that developers are approaching them with projects. They continue to approach the land owners even with the moratorium in place. Development is happening because land owners and developers see value in Germantown.  Can you blame them? Look at the success of Trader Joe’s and Whole Foods. Check out the lines at Rise and the new Apple store. So be careful when someone tells you the Mayor and Aldermen are pushing development. Be sure you understand where the demand comes from. The Commission, Mayor and Aldermen are all performing their roles as checks and balances to the system to be sure proposals meet zoning, codes and overall vision of the city. There is a lot to discuss about the value of being sure we grow the right way and we will add to that conversation.

Smart Growth – This concept is limited to very specific areas of the city. The intention is to maximize the property tax and sales tax generation for these targeted areas like the central business district (think Poplar and Germantown Rd) and the Western Gateway (think Poplar and Kirby). These areas are already commercial but, in many cases have 40+ year old retail space in need of updating. The intent is to make sure those updates help generate more tax revenue thus reducing the dependence on residential property tax. Did you know that the taxable property on the 9.7 acres of Travure will be valued well over $30m when done? You would have to develop nearly 100 homes on 1/4 acre lots valued at $500k to generate the same tax revenue. And my estimates of value are likely very low. The incomplete office building was assessed at $10m in FY18 and the hotel will be worth north of $15m when complete. There is a whole other parcel to be developed as well. That also doesn’t include any sales or hotel taxes generated there.

Apartments – We have all seen plenty on this topic. There are TV ads claiming that 1,200 apartments have been added to our “Fair City.” That is false any way you look at it. As of today, the only fully approved and under construction apartments are Thornwood with 276 units. Thornwood is the first new apartment complex in Germantown in nearly 20 years. You may see a map of developments around the city that cite other projects in the approval process but it is important to know the facts about each of these.

  • Watermark was voted down 4-1 by the BMA (284 Units). However, the developer is suing the city.
  • Viridian (310 units) is concept phase only and requires additional reviews with the planning commission and BMA approval. This project has not moved forward at all (despite what you may read in come social media groups) and will get tremendous scrutiny when it does.
  • Arthur Property (Saddle Creek 265 units) is approved in concept phase only.
  • Parc (371 Units) withdrawn by applicant, not under consideration.

Portables – The fact is that the new elementary school will address all of our capacity needs at the elementary level. Depending on transition plans with the new school, portables could be gone as early as next year. Any candidate that tells you they will do it faster should probably run for school board as they don’t have the authority to change zoning or enrollment plans that would be necessary to facilitate that change. The city has been working with the GMSD Board of Education to address this problem since day one. Twenty-five portables were removed at Riverdale and the remainder will be gone from Farmington and Dogwood within the year.

Taxes – Claims of 45% increases over the last 4 years are just wrong and frankly out of context. By their math your tax rates are actual down since 1990 when the rate was $2.16. Do you pay more taxes than you did in 1990?Of course you do, that is why context matters.

Read our series on Tax Rate Truth  (Part 1, Part 2, Part 3, Part 4)for full details about what the increase really is and the story around why your taxes have gone up. In the last 4 years, we have added a brand new school system, helped address deferred maintenance of the all schools ($26M reduced to $11M), added a police district, seen our fire department upgraded to ISO Class One and invested in our parks and greenways. We get tremendous value for our dollars as our rates are less than half that of Memphis and our services and amenities the best in the region.

“Hold the Line on Taxes” – The annual budget process includes a 5-year projection that helps anticipate the timing of potential tax rate increases. This year the City Administrator projected we should get at 5 more years out of our current rate meaning that whomever is mayor will likely not have to raise taxes in the next term. Listen to it here.

Growth of City Staff – Did you know that in 2000 the city had 400 full time employees? In FY19, we now have 406, including 40 additional first responders. This illustrates the gains in efficiency in running city operations while shifting resources to important areas like fire and police.

Streetscape – You may have seen plans float around for Streetscape work on Exeter. This like many other issues is intended to be a wedge issue that divides the community. This issue was so misrepresented that the city had to issue a statement to clarify the status of the streetscape project. Read the truth here, straight from the city of Germantown.  This project is not actively being worked and will require significant community input before anything is approved.

Carrefour – This property was built in 1973 and has had two major remodels over the years. The developer is seeking to rework this property in three phases. If you listen to the candidate forums it appears that nearly everyone agrees that that property needs to be remodeled, even John Barzizza doesn’t seem against the idea of apartments being included as part of this project. He clearly points out that this is different than a stand-alone complex off Winchester (Listen Here). By the way, there are no fully approved projects off Winchester despite his statement.

Cell Phone Coverage – This is another attempt to create a wedge issue. Did you know the laws regarding cell towers in Germantown have been changed already? Did you know the city does not own cell towers? The carriers and their partners own them. The City has approved a new tower on the Wolf River Greenline, another at Madonna Learning Center on Poplar, added cell boosters to the schools and increased the allowable height of towers, all to improve coverage in Germantown. Now the carriers need to make their investments, or would you like your tax dollars to subsidize their profits?

Blogs – Like the Germantown Voice, Shining a Light is an opinion blog. It presents some factual information that supports a point of view. Our blog does the same. We try to offer perspective to the community. We don’t all have time to watch BMA meetings or attend commissions, but wouldn’t it be great if we did? Read a diverse perspective but keep in mind that stories can pick and choose what they include. That is why we recommend listening to the Candidate Forum above. You can hear directly from the candidates, side by side answering the same questions.

Social Media Leadership – Is your expectation that elected officials monitor social media and seek out to engage in every post? That would literally be a full-time job. Yes, major issues on social media do get the attention of your officials but usually because someone contacts them directly to start the discussion. Leading via social media is one step away from mob rule as often times the loudest voices may not represent the majority.

Germantown Bulletin Board – Did you know that the group that administers this Board, which reaches 13,000 people, is made up of open supporters of John Barzizza’s “Team?” One admin is also campaign manager for two school board candidates (Brian Curry and Angela Griffith), and is campaign manager or has done campaign work for two alderman candidates (Scott Sanders and Jeff Brown) and Mayoral candidate John Barzizza? To our knowledge there is no political diversity among this group. That matters because they approve all the new posts and moderate discussion. Originally political discussion was not permitted on that forum, now it doesn’t take long for any topic to turn political. Just something to keep in mind when reading posts in that group.

We will close with this final and appropriate quote from Davy Crockett: “I am at liberty to vote as my conscience and judgment dictates to be right.”

Too Tough Talk?

John Barzizza likes to talk tough, but when is talking tough too much?

On August 26, an event was held in Enclave Estates billed as a “Development Update” with “Alderman John Barzizza from the city” giving an update on what is going on in the city. This was not billed as a campaign event. If you look at the invite, it appears to be from the homeowners association. My parents received this flyer on their front door.

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This invite appears to be sponsored by the homeowners association. The HOA (my father is the HOA president) sent an email to members explaining that not only wasn’t this sanctioned by them but an event such as this would jeopardize their nonprofit status.

Once the nonprofit status was cleared up, and the event appeared to be an official update from Mr. Barzizza in his role as an Alderman, my father invited me to attend with him and my mom as their guest and I agreed.

Why would I want to go you ask? Regular readers might guess I have made up my mind on who I want to vote for. Well, I feel it is important to understand both points of view to make an informed decision. That doesn’t happen from reading political handouts, but from also listening to people present their views with passion. At this event I also had a chance to have a positive discussion with one candidate and his campaign manager about shared concerns over rhetoric and threatening behavior that we have mutually witnessed.

The message at the event echoed much of what you see on social media about threats of school overcrowding and their concerns of massive numbers of apartments. We address this in our blog here. I even heard statements made about concerns over people that own rental homes who don’t live in our community.

However, the part that bothered me most was when I heard Alderman Barzizza introduce Scott Sanders. He started by saying that the retired U.S. Marshal “knows how to kick in doors.” Okay, I can understand tough talk to get a laugh. However, the disturbing part followed when Alderman Barzizza proudly stated that as a business owner he knew how to “kick employees” to get things done and continued to say that’s how they would “make a good team.”

Tough talk for sure and somewhat humorous on the surface, even drawing laughs from a few attendees. I am sure Scott Sanders is not campaigning to kick people’s doors in. However, I can’t just gloss over the reference about kicking employees. In a conversation my Dad had recently with another concerned citizen, it appears that Alderman Barzizza made similar comments at another meet and greet. When we heard that this was being said at other events and not just a one off slip we felt it was important to share these words.  This is not just a funny way to introduce someone.

There are many hard-working men and women employed by the city that need to be treated with a much higher level of respect beyond being “kicked” to get things done. Maybe that worked in his business, but our city is staffed with professionals who are doing an excellent job. Germantown has been great for a long time and it continues to be the place to live in Shelby County.  This was done by skilled employees with good leadership, not by prodding and kicking.

This tone matters.

My Mom, Dad and I all heard this and as we recall the quote like this: “I think he knows how to kick in a door and being a business man I know how to kick employees to get things done.”

Is that how you want your city employees treated? I know I don’t.

Tax Rate Truth – Part 4: Reserve Funds

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It is vital that we maintain the healthy reserves that keep our community fiscally secure. Alderman Massey refers to these as “profits” in his discussions on the topics; however, it is more accurate to think of them as savings accounts. In the next to last reading of the budget Alderman Massey (seconded by Alderman Barzizza) proposed a property tax cut (discussed in this blog). Their proposed cuts remove the funding that goes into our reserve balances and potentially require the draw down of those reserves.

Reserves are built over time with the knowledge that there are significant investments in infrastructure that are needed to maintain a city like Germantown. This is something the city has done very well over the last 20 years. Responsible fiscal management has lead to award winning budgeting processes and allowed our city to not just grow but thrive. This firm financial base is the foundation for our best in class city services like our Fire and Police. They don’t come cheap and require investment to maintain those levels long term, along with our schools and quality of life amenities like GPAC, Library and Parks.

Let’s look at a real world example. The city will likely need a new fire station in the not too distant future. This is something that is in the city plan and part of the strategy for building reserves. We as a community could pay for this one of two ways. We could build reserves and pay for most of it as the expense is incurred or we could borrow money to pay for it. At current rates and a 20 year bond term we would pay $6,476,702 for a $5,000,000 fire station as opposed to paying cash out of our savings.

But the implications of borrowing money go beyond the cost of borrowing money. This is where experienced financial leadership and municipal planning become extremely important. If you borrow money for the fire station you can’t borrow money for other improvements or even maintenance items in the city. Think about all the deferred maintenance that is being addressed for GMSD as they catch up on years of neglect. Like your household, the city has limited borrowing capacity so we need to be wise about what we choose to use the bond funding option for. It doesn’t stop there either. The more you borrow the more reserves you need to maintain your bond rating or the rates for borrowing go up. The other option is that you get a tax increase every time the city has to do a major project. Poor planning puts the city in a “paycheck to paycheck” mentality and increases the likelihood of more frequent tax increases.

The other thing of concern is that if we follow the policy proposed in the last budget meeting it is likely that we would lose our AAA bond rating. This just compounds the fiscal issues by raising the rates at which we borrow money. While this policy may reduce your tax rates in the short term it is very concerning in the long-term impact of raiding the piggy bank for a short-term win. It takes years of disciplined fiscal management to get in our enviable position. Unfortunately, one bad budget can undo all of that work.

Tax Rate Truth – Part 3: Sales Tax Risk

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Too much dependency on sales tax leads to a need to raise property taxes when the economy slows down. Improperly tying support of our schools to sales tax revenue also will lead to property tax increases.  Here we see a clear example of this in FY14, proof that we need to be careful about how we use our variable revenues. Recent budgets show the City has learned from these lessons and remains conservative in their sales tax revenue projections. What does that mean in layman’s terms? If you are paid on commission for your work, you probably shouldn’t build your household budget for the year on your best month of sales. Alderman Barzizza and Massey both pushed for the last two budgets to include a higher dependency on sales tax revenues.

Hear him in his own words here. Then listen to Patrick Lawton explain the way sales tax is budgeted and why.

Shortfalls in sales tax projections first impact Infrastructure Replacement Programs (IRP) and then Capital Improvement Programs.IRP projects are things like roads, drainage and water main projects that provide services to our city.  CIP projects are investments in our future like a fire station, schools or greenway improvements. Being conservative in our estimates allows the city to pay cash as opposed to issuing debt and maintains our fund balances needed to keep our rates low. Click here for more info on the Reserve Balances in Tax Rate Truth – Part 4

The budget doesn’t clearly call out the impact of the sales tax shortages other than showing a 4% shift. High level math says that a 4% shift in the General fund of $43.6 Million would be a $1.7 Million shift into property tax funding. With the FY14 Budgeted Property Tax Revenues of $28 Million that implies that roughly $0.12 of the $0.445 increase is due to Sales Tax short falls.

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Keep in mind that the value that you get for that $1.97 (or $1.95 for FY19) tax rate. Our neighbors in Memphis pay $4.05 or over double our rate. Collierville pays $1.83 but they have a much larger dependency on Sales tax with more big box stores like Lowe’s, Home Depot and Walmart. They also see more sales tax revenue from car dealerships and the Carriage Crossing Mall. Collierville’s dependency on sales tax, and shortages this year, resulted in them having to cut positions from their FY19 budget. We don’t want to be in that position.

Tax Rate Truth – Part 2: Do The Math

For over 15 years I have worked in corporate finance. I have made a living telling stories with numbers, helping executive leadership to understand complex investments, operations and projects in as simple terms as possible. It is easy to get turned around by all these numbers, it happens to the best of us. That is why I have worked with my father, a retired Certified Financial Planner, to double and triple check these calculations.

The first step in this process is to look at the FY14 rate and its individual components. As you read this you will find that there are clear economic, legislative and community needs that drove the increases.

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Step two is to account for the impact of the FY18 reassessment impact. The reassessment raised the average value of property in Germantown by 9.7% between FY14 and FY18. That doesn’t mean that every house went up in value by that amount, it is simply the weighted average impact to assessed values of property in Germantown. To keep comply with the Truth in Taxation laws and keep the revenue generated from the city’s property tax rate flat, it was calculated that the rate should go down to $1.76. So all of the items above that used to sum up to a $1.93 tax rate now sum up to $1.76. I will refer to that impact as rate restatement. That means that the base rate in FY14 is no longer $1.485, the impact of the reassessment make that $1.354. The math in the table below shows the breakdown of the FY14 rate in FY18 terms.

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One major part of our concern is that the impact of the FY14 reassessment is lumped into their calculation for the tax increase. In FY14, the decline of property values meant that the rate had to be increased to hold revenues flat (the inverse of what happened in FY18). That is the second of the two lines highlighted in red above. That going forward that number is included in my FY14 base as it is not an assessment impact as opposed to a rate increase.

To accurately state a growth rate you have to have a good starting number. When they use $1.485 as their starting point they are omitting two key factors for accurate analysis, assessment impact and rate restatement. So when you restate the rate it is $1.354 and add back the assessment impact of $0.087 your growth rate should be calculated based on $1.441 in terms of the FY18 tax rate.

The table below shows how you add up the restated components of the FY14 tax rate with the FY18 increases to get the final rate approved by the BMA.

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Now we are in a position to calculate a growth rate. We have a correctly adjusted base number to have a true apples to apples comparison. You can see the components that drive the increase. Please take a moment to understand the importance of the Sales Tax Impact and why we must be conservative in our budgeting of it by reading Part 3 of this blog. It is also important to understand that the FY14 increase was intended to restore reserve balances that had been lowered due to the Great Recession, read more about that in Part 4 of this blog.

Also keep in mind that these rates help fund our schools and 9% points of the total increase of 36.7% directly funds the needs of our new elementary school and Forrest Hill improvements needed to access it. The Hall Tax is a state income tax that was allocated to municipalities and is being phased out. That funding gap needs to be addressed. When you look at the components, it is clear to see your taxes were not frivolously raised for no reason. As stated previously, there are clear economic, legislative and community needs that drove all of these increase. These rates have helped fund deferred maintenance at GMSD, invest in parks, improve the police force and add ambulance service. All these things add to quality of life in Germantown and make it the place to live in Shelby County.

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Keep in mind that the value that you get for that $1.97 (or $1.95 for FY19) tax rate. Our neighbors in Memphis pay $4.05 or over double our rate.  Collierville pays $1.83 but they have a much larger dependency on sales tax with more big box stores like Lowe’s, Home Depot and Walmart. They also see more sales tax revenue from car dealerships and the Carriage Crossing Mall. Collierville’s dependency on sales tax, and shortages this year, resulted in them having to cut positions from their FY19 budget. We don’t want to be in that position thus we budget conservatively.

 

Tax Rate Truth – Part 1: Summary

Screen Shot 2018-09-20 at 9.52.10 PM.pngWhen the Barzizza, Brown and Sanders team quote that your tax rate is up 44.1% since FY14 (Fiscal Year), they are wrong.  They rush to over simplify complex financial concepts to raise emotions. They are either not doing research, willfully ignoring fact or blatantly lying to voters.

This topic is complex and requires attention to detail to understand. To assist in this we are breaking the blog up into multiple posts to highlight important key aspects. While this post covers most of our key points, I encourage you to read them all for a better understanding so that you can make an informed decision, not an emotional one.

First and foremost the FY14 increase of $0.445 included a state required $0.095 increase to offset the impact of lower property value assessments. Shelby County reassesses property values every four years and Tennessee’s Truth in Taxation law requires that the rate be adjusted so as to not  impact the revenues collected by the city. FY14 is when you saw continued impacts of the down economy resulting in lower assessment prices. With lower assessments a higher rate is needed to collect the same revenues for the city. Because not all homes are impacted by assessments the same way, your actual tax bill will very even if there were no change in the rate. The $0.095 assessment impact is clearly called out in Mayor Goldsworthy’s cover letter on they FY14 budget.

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Had nothing else changed in FY14, the tax rate would have increased $0.095 and it would not be considered a rate increase.

Second, you need to do what is commonly referred to as an apples to apples comparisons of the increase to calculate the growth. It is like buying a car.  One cannot fairly compare cars on price alone – features must also be compared to adjust for price differences. My math below is a summary of several steps taken to do an apples to apples comparison of the base rate in FY14 vs. the easily identifiable increases that make up the FY14 and FY18 tax increases. Since FY14 your tax rate is up 36.7%, yes that is significant but not the 44.1% they claim. Based on my research I was able to isolate a few key drivers of the tax rate increase. The column on the right shows you just how much your taxes increased for each of these drivers.

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Tax Rate Truth – Part 2: Do the Math. My detailed calculations to normalize rates due to the impact of assessments are available here.

Two of these factors simply replace tax revenues from other sources. The FY14 shortage in Sales tax and the elimination of the Hall Income Tax. These two items account for $0.19 (or 13.2% points) of the $0.529 (or 36.7%) increase.

It is important to understand what makes up that increase and what you get for those dollars. The city’s investments include the addition of ambulance service, a new police precinct and capital spending for GMSD as part of this funding. Keep in mind that GMSD inherited $26 million of deferred maintenance from Shelby County. The last estimate I saw was that we had worked that down to $11.4 million in just 4 years. A significant portion of that being covered by capital funding from the city.

Now, let’s put the increase into context. In finance, we use a calculation called Compound Annual Growth Rate or CAGR to put into context growth that occur over time or at random intervals. It helps you to see what the increase would look like if it were steady as opposed to occurring at random intervals. The CAGR calculation tells us that the annual growth rate of property tax rate in Germantown was about 2.5% between FY04 and FY17. The current tax rate is expected to support the city for another 5 years and if that holds true the CAGR would drop to under 2%. During these 14 years the CPI or inflation rate has had a CAGR of approximately 2%. Thus our city has grown, given pay raises, serviced debt, added a school system, upgraded roads, parks and built stable reserve funds all at the cost of living increase in taxes.

That kind of growth shows strong fiscal management over the long term. Keep in mind that property tax is intended to generate flat revenues over time even if the value of your home changes, unlike income tax where you pay more as you make more.

In addition to the assessment impact, the FY14 rate includes adjustments for sales tax shortages and funding of reserve balances. High level math indicates that the sales tax shortages left the budget short $1.7 million. We have warned about the dependence on sales tax in our school funding blog, this is a real world example of potential impacts. Even in a strong economy, an over dependance on sales tax has created problems for Collierville this year and resulted in cutting employees. The city has learned from this lesson and now budgets sales tax revenues conservatively in order to protect the property tax rate. Alderman Massey and Barzizza have both pushed for higher dependency on sales tax in the last two budgets. Tax Rate Truth – Part 3: Sales Tax Risks.Click here to read more about the importance of managing sales tax conservatively, hear John Barzizza’s comments and see the story about Collierville cutting employees due to this issue.

Reserve funding sounds like a savings account for a rainy day. In some cases it is and in other cases it is used as a savings account to be able to pay cash for things. Reserves also play a big part in our credit rating and the interest rates on money we borrow. Tax rate stability is also very dependent on reserve balances. Inflation impacts just about everything. For example, many vendors have escalation clauses in their contracts. To keep tax rates stable I may build a reserve early in a contract and draw down on that reserve later in the contract. For simplicity, say I am obligated to pay a vendor $100 over 5 years. I would build a reserve for that by putting $20 a year into the fund. My actual payments may be $18 in year one,$19 in year two, $20 in year three, $21 in year four, $22 in year five. Still a total of $100 but if I don’t use a reserve I have to raise rates every year. Click here to see more about the importance of reserves and how they are helping us meet our demands for schools, fire and parks. Tax Rate Truth – Part 4: Reserve Funding. Click here to see more about why reserves are a crucial part of our financial stability.