City offers 34-cent property tax reduction:Officials say higher sales tax will allow lower property tax
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Members of the Finance Committee formally voted on their intent Friday during a meeting that had been recessed from Monday. It was during Monday’s meeting when aldermen said they needed time to calculate how much property taxes could be reduced if a Sept. 4 referendum asking voters to approve a 3/4-cent local option sales tax is successful.
Aldermen relied on information compiled by City Administrator Herb Llewellyn, who works with the budget on a daily basis. Llewellyn estimated as a best-case scenario that the city’s ending balance for the 2003-2004 fiscal year would be around a traditionally-held $2 million if voters approve the 3/4-cent tax increase and property taxes are reduced to a rate of $1.60.
In making the decision, Vice Mayor Patti Nunley agreed with Donald Hillis, who said the rate should be as low as possible to help “sell” the idea of a higher sales tax to city voters.
“I think if it’s not relatively substantial, it’s just a wasted effort,” Nunley said. “It appears to me, based upon the figures that he has put before us, that we ought to be able to exist this year and next at $1.60.”
Under the $1.60 tax rate scenario, a property owner who owned real estate with a property value of $100,000 would pay $400 a year in city property taxes compared to paying $485 per year under the current rate of $1.94. That same property owner would pay $513 per year under a proposed rate of $2.05 that reflects an 11-cent property tax increase, which would be an increase of $28 per year.
Someone who owned real estate valued at $70,000 would pay $280 in city taxes under the $1.60 rate scenario, $340 under a $1.94 scenario, or $359 if property taxes were increased 11 cents. Someone whose property was valued at $50,000 would pay $200, $242 or $256 under those respective tax scenarios. Those numbers do not include county tax rates.
Aldermen have already said they needed the 11-cent property tax increase and have approved it on first reading, but have pitched the idea of reducing property taxes if the sales tax referendum is successful. They have said they will approve a definitive tax rate and 2003-2004 fiscal year budget on second reading after the September election. The budget was approved by a 4-3 first reading vote earlier this month.
Finance Committee members noted in this week’s meetings some residents have wondered about the longevity of a proposed property tax decrease if the sales tax initiative is approved by voters.
After Friday’s meeting, Mayor Royce Davenport said the $1.60 rate would be in place for “as long as we can hold it,” but noted potential uncontrollable future impacts on the city budget such as state budget cuts or changes in the economy.
Nunley suggested Monday aldermen should be conservative in their estimates of what promises are made to the public in terms of property tax reductions as a matter of integrity.
Paying the tax man
How much city property owners would actually pay in taxes based on the three proposed tax rates:
Tax rate $1.60 $1.94 $2.05
$50,000 home $200 $242 $256
$70,000 home $280 $340 $359
$100,000 home $400 $485 $513