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City may reduce tax rate
Alderman suggests 15 cent tax decrease
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The lean financial years are over for the city of McMinnville. Under consideration is reducing the property tax rate by 15 cents, lowering it to $1.94.
Finance Committee chairman Ken Smith, who recommended the reduction after years of being opposed to lowering the tax rate, says he has changed his mind about not reducing property taxes because the city is “flush with cash.”
“I have, throughout my career, said I don’t want to reduce taxes. I want to keep them where they are and by growth, we would always have enough money to cover things. People, we are just flush with cash. We don’t need more than $3.6 million,” said Smith.
According to numbers presented by Smith during Tuesday night’s Finance Committee meeting, the city’s unrestricted cash is projected to be $5 million at the end of June.
“We shouldn’t have anything more than 20 percent of our yearly budget,” said Smith. “I’m projecting that our yearly budget next year will be $18 million and our unrestricted cash should be $3.6 million. We will have $1.4 million in excess cash.”
With the excess money, Smith suggests the city consider the following projects:
• Reduce property taxes by 15 cents to $1.94 which would cost $300,000.
• Purchase a fire engine (pumper) which would cost about $250,000.
• Set aside $250,000 as a down payment for building a new police building.
• Renovate the ball parks at the Civic Center and the soccer complex for $150,000.
• Prepay two years of the City Hall capital outlay notes to Regions Bank which will cost $246,584 and result in the debt being paid off in August 2017.
• Spend the remaining $200,000 funding other city projects, such as expansion of the greenway and begin renovating the Civic Center.
“I want us to think about this as we go forward,” said Smith. “I think the citizens deserve a tax decrease, only because we have so much money. If we weren’t flushed with cash, then no.”
Mayor Jimmy Haley reminded the committee that state-shared taxes might go down and when a prior board reduced the property tax rate, it created a financial shortfall that resulted in the need for cuts to the city’s operating expense and an increase in the property tax rate over three years.
Smith says former city administrator David Rutherford did a “tremendous job in reeling in overspending” and the board raised taxes, which combined went too far in correcting the problem and creating excess money the city does not need.
“What that board did a decade or so ago was not business sense,” said Smith. “We went too far to the other side and have created a large amount of free cash flow and we need to use part of that free cash flow. This is just like any business.”
Alderman Ben Newman says they cannot look at running the city the same as running a business because a business can expand into new areas to generate additional revenue, while the city cannot.
“The difference between cities and businesses is that cities, a lot of times, are tied to what the state pays out and we don’t have much of a say in that,” said Newman. “Businesses can run certain programs to increase revenue. They have more control over their revenues. Our control over revenue is through taxes. We can’t always look at it just like a business because it’s just not the same. Our income and expenses are totally different than a business.”
Smith responded, “No, we are not totally different.”
“We rely on the state for a large portion of our income and we don’t control that,” said Newman. “Businesses don’t do that. That can change without us having a say in it.”
Alderman Mike Neal added, “That surplus could be needed.”
“I’m not saying we should just keep piling it up,” said Newman. “That $5 million, I think, is a good cushion. It allows us to spend what we need at the beginning of the year before taxes start coming in. We’ve talked about having a rainy day fund. This $5 million is our rainy day fund.”
Smith added, “Our fund balance is our rainy day fund. Keeping a fund balance that’s over 30 percent of your budget is too much. I think if you ask most people in this city they will tell you that it’s too much money and that you need to do something with it. If we aren’t going to give it back to the people, then let’s do some projects.”
Haley suggesting paying off more of the city’s debt.
The meeting ended without a resolution.