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by Joe Sullivan

The headline in Monday's News-Sentinel read, "Taxes in Nashville 50% lower than here." And the story went on to say that Knoxvillians are paying combined city and county property taxes of $6.17 per $100 of assessed value compared to $4.24 in Nashville.

Unfortunately, the assumption that higher property taxes alone equate to higher taxes overall is just as erroneous as the arithmetic in the headline. ($4.24 is 31 percent, not 50 percent, lower than $6.17, as any fourth grader should be able to tell you).

The story failed to take into account that Nashville's Metro government has other taxes that are higher than Knoxville's or simply don't exist here. In Metroland, for example, the local option sales tax rate is 2 3/4 percent compared to 2 1/4 percent in Knox County. Every motor vehicle registered in Davidson County is subject to a $35 annual wheel tax, whereas Knox County has no wheel tax. And in Metro's scheme of things, about 70 percent of all property (assessed value) is hit with the $4.24 rate applicable to its urban services district. Here, by contrast, only a little over 40 percent of Knox County's assessed value is subject to the city's $2.85 property tax rate in addition to the county's $3.32 rate.

The arithmetic required to get all of these differentials on a common denominated basis isn't easy to track; but it's worth the effort in the interest of comparing the overall tax burden in the two metropolitan areas. The comparison table that follows starts by showing how much additional revenue Metroland's higher sales tax, wheel tax and broader property tax would yield if they were applied to Knoxdom. It then converts these revenues into property tax equivalents in order to measure how much property tax reduction Knoxvillians could expect if they were subject to these other taxes. The conversion factor is that each penny of Knox County's property tax rate yields about $500,000 in revenue. The county as a whole, rather than the city alone, is used for comparison purposes in order to keep it on an apples-to-apples footing with Metro's tax base which covers all of Davidson County.

The table above shows that if all of Metro's additional taxes were applied here they would offset $1.68 in local property taxes. A $1.68 reduction in the combined city and county tax rate of $6.17 to which Knoxville property owners are now subject would bring it down to $4.49, which is hardly out of line with Metro's $4.24 rate in its urban services district.

It's true that the costs of extending city services to an additional 30 percent of Knox County residents would offset some of the additional revenues assumed in this comparison. But city officials estimate that these revenues would substantially exceed the costs. Moreover, extension of city services would bring reductions in county law enforcement costs and savings to county residents on fire protection and garbage pick-up services they now pay for separately.

Another factor to bear in mind when comparing local taxes to Metro's is that Nashville has a big advantage over Knoxville in terms of property value per resident. Assessed value per person of $19,900 in Davidson County is 50 percent higher than the $13,300 value per person in Knox County. This means that metro gets 50 percent more bang for the buck on its property tax rate, which makes it all the harder for its "poor relations" to match up.

Trying to keep up with Nashville may only be a vision for those possessed with delusions of grandeur. And some would say that Knoxville's $162 million new convention center looks grandiose to them. But the 19-cent property tax increase that Mayor Victor Ashe has proposed for convention center financing hardly fits this profile. And those who criticize it should bear in mind that the convention center has been the catalyst for a major downtown redevelopment effort—an effort that would surely screech to a halt if convention center financing is not forthcoming.

The pertinent question is not whether Knoxville should try to keep up with Nashville but whether it can keep up with the city's other needs while also funding the convention center and downtown development infrastructure.

The mayor's budget also includes funding for several road projects and park system enhancements as well as $3 million for the first stage of a projected $24 million First Creek flood control program. But no provision has been made for the balance of this program. Nor is there any money in the budget for the new city transit Transfer Center that was unveiled in February with much fanfare. Along with other benefits, completion of this $21 million new facility on Gay Street between Cumberland and Church Avenues is a prerequisite to removing the existing transfer center from a site that's at the heart of the proposed downtown redevelopment corridor.

Can the city afford to proceed on all these fronts? "There's been a perception that when it comes time to bite the bullet and pay for the convention center that everything else will be cast aside. I can assure you that will not be the case," says the city's veteran finance director, Randy Vineyard.

But won't that mean yet higher taxes? Not necessarily, Vineyard says. Sale of city assets could represent another source of funds, he suggests. While he won't get specific, sale of the city-owned State Street Garage is one such possibility. And the city's existing convention and exhibition center could also be sold or leased as part of the downtown redevelopment plan.

"We're going to work all the harder to find alternate sources of funding to leverage city money," adds the city's director of development, Doug Berry. He's optimistic that plans for the Transfer Center and a Center City Business Neighborhood can go forward on this basis. Even though the city's taxes aren't all that high, either relatively or absolutely, there's not much more leveraging that can be done on the backs of the taxpayers.

April 6, 2000 * Vol. 10, No. 14
© 2000 Metro Pulse