To help you stay informed we will do our best to provide high level summaries for the bi-monthly Board of Mayor and Aldermen (BMA) meetings. These summaries will be fact based with a focus on key items covered in the meetings and summaries of the votes taken. Where needed we will cover important discussions individually.
The supporting documents provided to the Alderman for this meeting can be found byclicking here.
A video of the full meeting can be viewed on YouTube by clicking here.
Budget Work Session 5/8/19: In preparation for the proposal of the FY20 Budget a public work session was held on 5/8/19. The budget was reviewed in about an hour and twenty minutes. All of the department heads were present to answer questions however, there were only a few. Those questions included the impact of the $2.5M grant to GPAC and questions about expense in the special revenue drug fund. The City Administrator identified budget amendments that will need to be made based on the GPAC grant and FAC recommendation for school security funding.
6. Citizens to Be Heard – (7:51) Two spoke in favor of GCC Purchase. Fourteen residents spoke against the cell phone tower citing health, environmental and property value impacts, one person spoke in favor of the cell phone tower.
Note: Alderman Massey was not present for the Executive Session or BMA meeting. No notice was given as to the reason for the absence.
9. Preliminary Agenda – (1:20:21) Reviewed in executive session and questions were asked and answered. No adjustments were made or proposed and the Preliminary Agenda was approved (4-0)
10. Contract – Germantown Athletic Club Renovations Phase IV –(1:22:10) Phase IV is the addition of a Mezzanine and sitting area for a cafe. It will include a rework of the entry and check in desk. There will be additional activity space in the lower level. The funds for these improvements come from the dues generated by members and not from tax revenues. This phase totals $1,412,493. Passed (4-0)
11. Supplement No. 6 – Germantown Athletic Club Renovations Phase IV CEI –(1:29:29) This item is for the approval of the contract administration and construction inspections. This fee is $29,500 for Phase IV and brings the total for all the phases of this project to $415,000. Passed (4-0)
12. Ordinance No. 2019-1 – Ordinance to Adopt the FY20 Budget – First Reading –(1:32:14) The proposed budget is for $58.9M for the General fund and $22.5M of Capital improvements. The proposed budget does not include any impacts for the potential purchase of the Germantown Country Club. The purchase impact is unknown and would be added as an amendment when additional details would be finalized. A fifteen page summary of the budget is presented as the Ordinance which can be found by clicking here. Monday, June 10, 2019 will be set as the public hearing for the budget. Amendments to the budget were made based on the feedback for the FAC related to school security. The funds will be targeted via grants and if not successful the FAC recommends provided funds in the FY21 budget to pay in July 2020 to meet security upgrades. Additional amendments were made to funding related to GPAC to account for the $2.5M grant from the state of Tennessee. Passed (4-0)
13. Ordinance No. 2019-2 – Year-End Budget Adjustments – First Reading – (2:18:25) An extensive list of adjustments was presented to account for changes during the year. The detailed list can be reviewed by clicking here. When reviewing this list note that the changes is the total in the “Proposed Adjustment” column of the document. Second reading and public hearing will be held on June 10, 2019. Passed (4-0)
14. Ordinance No. 2019-3 – Real and Personal Property Taxes – First Reading –(2:33:08) This Ordinance sets the 2020 tax rate at $1.95, no change from the FY19 rate. A second reading and public hearing will be held on June 10, 2019. Passed (4-0)
15. Ordinance No. 2019-4 – Germantown Municipal School District Year-End Budget Adjustments – First Reading –(2:35:12) Similar to the BMA, GMSD must amend their budget for actual spending that hits throughout the year. A 31 page summary of the changes can be found by clicking here. A second reading and public hearing will be held on June 10, 2019. Passed (4-0)
16. Ordinance No. 2019-10 – Rezoning of a 15.229 Acre Portion of the Fulmer Property (South Side of Wolf River Blvd.) from “R” to “O” Office Zoning – First Reading –(2:38:30) This item is the rezoning of 15 acres of the 190 of the land known as Fulmer Farms. The section of land in question borders Wolf River Parkway with the Vineyard subdivision on the western border. The purpose of the proposed property is for medical office space which is consistent with the use of other land along this section of Wolf River. Concept site plans can be reviewed by clicking here. A second reading and public hearing will be held on June 10, 2019. Passed (4-0)
To help you stay informed we will do our best to provide high level summaries for the bi-monthly Board of Mayor and Aldermen (BMA) meetings. These summaries will be fact based with a focus on key items covered in the meetings and summaries of the votes taken. Where needed we will cover important discussions individually.
In the Executive Meeting prior to the BMA, the agenda was amended moving items b.-g. of the consent agenda to the regular agenda. For those unfamiliar with the consent agenda, it is a mechanism for approving routine business that doesn’t necessarily need to be addressed individually by the whole board. Items b.-g. of the consent became items 17-22 of the regular agenda.
Below our summary is a link to the entire BMA for your review with approximate start times for each item.
Citizens to be Heard – None
Beer Board (begins at approximately 12:49)
Beer permit for Stacks Pancakes passed 5-0
Public Hearing – Resolution 18R23 – Carrefour at the Gateway Planned Development Outline Plan
Begins at 17:30 of the YouTube video.
No Citizens came forward to speak on this item. Presentations were made by Cameron Ross and Nelson Cannon of Cannon, Austin and Cannon. Cannon, Austin and Cannon is a 30 year old Germantown based development company overseeing the Carrefour redevelopment project. They presented the “Outline Plan” for the project. The project will consist of three phases which will each be approved prior to construction. Discussion was nearly an hour on the this topic.
Outline Plan Approved October 2, 1018 at the Planning Commission
400,000 square feet of Office Space
100,000 square feet of Retail
240 hotel rooms
1,400 parking spots (including a garage)
Green space in the center
This project has been in the works since 2012. The developer said plans may change based on the regulatory environment at the time the final plans for each phase are presented. They would not speculate on changes due to the moratorium expiring, as they didn’t know what the results would be. Phase one is centered on office and retail space.
Vote was 3-1-1 with Aldermen Gibson, Owens and Janda voting Yes, Alderman Massey voting No and Alderman Barzizza Abstaining.
Approval of Warrant – Carrefour at the Gateway Planned Development – Civic Space (begins approximately 1:28:30)
The proposed green space in the center of this project requires a warrant to make sure that everyone understands their responsibility for maintenance and programming for this space. This private land is not the responsibility of the City.
Vote was 4-0-1 with Aldermen Gibson, Massey, Owens and Janda voting Yes and Alderman Barzizza Abstaining.
Contract – Chlorine Tank Replacement Southern Avenue WTP (beings 1:35:46)
$353,075 replacement of failed water treatment equipment. Vote was 5-0
Contract Extension – Third Party Administrator Services (begins 1:39:24)
$166,656 for the 3rd party administration of the insurance for the city. The city is self insured meaning they cover all of the costs of healthcare for their covered individuals. The City covers roughly 1,000 employees, retirees and their dependents. This agreement covers the administration of these benefits and provides access to the Cigna network of coverage. The discussion included interesting information on demographics of city employees. Presentation starts around 1:39:30 of the YouTube video. Vote was 5-0.
Renewal – Medical and RX Stop Loss (begins 1:43:28)
$655,317 for the city’s stop loss insurance. This insurance is caps the city’s liability related to being self-insured for health, prescription and dental programs. The presentation calls out the bidding process used for this has saved $500-600k per year since 2012. Vote was 5-0.
Renewal – Property and Casualty Insurance (begins 1:59:10)
No discussion. Vote was 5-0.
(was b.) Change Order No. 1 – City Signs (begins 2:07:10)
Discussion around soil conditions driving the change orders in items 17-19. Increase of $1,126 or 0.8% of the original total. Vote was 5-0.
(was c.) Change Order No. 1 – GPAC Grove Fire Truck Turnaround and Closeout (begins 2:13:59)
Increase of $11,794 or 17% of the original total. Vote was 5-0.
(was d.) Change Order No. 1 – Greenway Storage – Cameron Brown Park (begins 2:16:58)
Increase of $6,244 or 1.3% of the original total. Vote was 5-0.
(was e.) Change Orders – City Hall Elevator Replacement (begins 2:18:30)
Increase of $9,735 or 3.4% of the original total. Vote was 5-0.
City is seeking bids for potential financial firms to manage a portion of reserve funds. Process is exploratory and agreements will require approval. Process is a sealed bid. Vote was 5-0.
(was g.) Contract – Develop Rebranding and Implementation Plan for Germantown Athletic Club (begins 2:25:05)
Germantown Athletic Club will use a vendor, local marketing firm, Red Deluxe, to look at rebranding logos and café space in the building. The goal is to market the club to the community and continue the growth of this amenity. Vote was 5-0.
The 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.
There 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.
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.
The “Loft” units included two bedrooms and laundry rooms. One had an office space off the entry. Both featured large closets and good storage space.
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.
When 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.
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 a school board candidate (Brian Curry), 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.”
Correction 12/18/18: A previous version of this article stated that Brian Curry and Angela Griffith employed the same campaign manager. This evening Mrs. Griffith informed me that she did not use the same campaign manager referred to above. Apologies to Mrs. Griffith for the misunderstanding. The mistake stems from the fact that her financial disclosures indicate she purchased her campaign sings through Mr. Curry’s campaign manager.
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.
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.
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.
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.
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.
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.
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.
When 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.
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.
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.
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.