Sumner County Tax Rate Explained - by Commissioner Chris Taylor

Fiscal Health of the County

Sumner County has been revenue neutral since 2002 with the property tax rate, but has been losing overall revenue dollars every year due to inflation and the increased population draining on public services that were set at the same levels. This is explained below:

The certified tax rates for Sumner County are initially proposed by the Property Assessors Office and are based on current property appraisals with a rate that is then set to be neutral, in that the county cannot increase revenue due to appraisals increasing, it must stay the same so if appraisal values go down the rate increases to stay the same, appraisal values go up then the rate decreases to stay neutral. If the county wants to increase revenue they must do so by raising the certified rate after it is accepted. This is done so that local governments must actually raise the tax rate to collect additional revenue on properties, rather than manipulate the assessment process to increase the appraisal value to raise the revenue which would create a false market value. Based on the lowered appraisal values this year the proposed certified rate from the Property Assessors office is 2.087 (this is the neutral number)

Since 2010 the population has increased 20,000 (155,925 to 176,163 a 12% increase) and is projected to grow to 190,388 in 2020 (an 18% increase).  This creates additional cost for public services based on greater usage.

Because revenue has stayed completely neutral it has not been adjusted to at least keep pace with inflation since 2002. These adjustments are referred to as “cost of living”, in that they allow the value of revenue/dollars to have the same purchasing power from one year to the next. Since our county has not made these adjustments the actual purchasing power of current revenue is down, this is exemplified by one dollar on June 30, 2004 now having the purchasing power in June 30, 2014 of only 79 cents. So although we have the same amount of revenue as 2002, it can no longer provide the same return.

This has created a disparity between our expenses as set by previous County Commissions and the revenue that is brought in (see below chart). The previous County Commissions have used reserve funds to offset this disparity each year. Over the previous 5 years they have used in excess of 22 million dollars to “balance” this disparity for the operating cost of the county versus the revenue brought in. 

In addition to the negative disparity created by operating cost vs revenue/inflation/growth there were several elements approved last year by the County Commission that the cost would not take effect until this budget year. They are:

-Newly created Judge/court expected cost of 550,000

- Improvements of libraries expected cost of 121,000

- School Resource Officers in every school expected cost of 1.4 million

 - The county health care policy that is used for employees has been operating at a deficit for the past 10+ years. The County Commission chose not to increase the rates/portions paid for by employees nor did they increase any funding sources for the policy. In 2012 the fund/policy was negative 6 million dollars and the County Commission used 3 million from reserves to bolster it. In Feb 2015 the county will have to put in 3 million additional dollars to keep it functional. This also was not budgeted for by the previous County Commission.

Taking into account the above listed cost and issues the budget for this upcoming year was going to be markedly short of revenue needed to fund it (based on the proposed certified rate of 2.087). By using every reserve funding available the budget would be viable until approximately July 1st 2015. After that date either new funding sources would be needed or a drastic reduction in services. Additionally if the budget went forward as above then the following fiscal repercussions would also occur:

-One of the factors that our bond rating is based on is the level of our reserves for our general fund. By draining all available money we would trigger a reduction in our bond rating. Currently we pay 16.8 million a year for debt services on 126 million. With a degraded rating that would significantly increase the amount we pay for debt services for any future capital improvements.

-There is currently only 5 million dollars a year available for capital cost, and this is used to cover minor repairs and replacement of equipment.  If there were any large cost incurred due to catastrophe (tornado, floods, etc.) and it required repairs to any county facilities, we would not be able to do them.  There is no more money available in the current bond used for capital improvements. The previous County Commission did not allocate any long term capital funding.

Why did the rate have to be set now?

With the Board of Equalization review of the current appraisals for 25,000 properties taking place the Office of the Trustee could not initiate the process to issue the tax cards that are mailed to property owners. That process cannot start without a certified tax rate being set by the County Commission. Due to the reviews taking place that rate was not available until now.

Once the County Commission accepts a certified rate, then the Trustee can begin sending the property information to the State of Tenn., who applies the exceptions and in turn sends it back to the Trustee. Then the information can be sent to the printing element and mailed out to the property owners. This process, best case scenario, takes 3 weeks from the time the rate is set. With our current timeline that has property owners getting their notices for this year in December. If it was delayed any longer, patrons would not get their notices and could not pay their property taxes until 2015. That would entail that property owners would receive two tax bills in the same calendar year and would not be able to claim a deduction on their Federal Income tax for 2014.

Because of the above reason the rate needed to be set at the special called meeting date; we couldn’t wait any longer to begin the process.

Furthermore due to the issues of the impending shortfall/collapse of the next budget (fiscal health section above) the certified rate of 2.087 had to be increased to a level that would at least meet minimum funding to cover the disparity. Once the rate is set by the County Commission it cannot be adjusted, it is set until the next year/budget so the idea of graduating or postponing an increase is not viable.

Why 2.50

With the understanding that the certified rate of 2.087 was not enough to meet current needs as set by previous commissions, a new rate would have to meet the additional listed expenses that were approved but not funded last year. A one cent increase in the property tax equals approximately 400,000 dollars in increased revenues.

The accepted certified rate is the starting point 2.08

The new judge/court, Millersville Library and school resource officers in all schools is a 3.08 cents increase for a new rate of


To close the disparity between budgeted revenues to the General Fund to a manageable amount (see disparity chart earlier) is a 3 cents increase for a new rate of


The operational cost of the new Burus Elementary is a 1.5 cents increase for a new rate of


To close the disparity between budgeted revenues to the General Purpose School Fund to a manageable amount (see disparity chart earlier) is 16.25 cents for a new rate of


The above rate of 2.319 only meets the minimum for this upcoming year. It does not address the continuing disparity in inflation/growth or any potential capitol issues (large repairs, replacement, etc.).

The previous County Commissions have never addressed any long term plans nor their corresponding funding. Because of this the current capital bond had no available monies for future issues/problems/initiatives. Bearing that in mind the current commission made the decision to fund a reoccurring capital fund that would allow for the county to address current needs related to growth and also plan for future projects. This endeavor would require 7 million dollars for annual debt service. This is an 18.1 cents increase for a new rate of


Why establish a long term capital improvements fund?

The county has identified numerous long term capital short comings that have to be addressed over time. A few are:

-The need for 700-800 families in the northern portion of the county to have running water; this has a cost of 30 million. There is the additional economic benefit of the expected growth boom that area would then experience.

-The actual physical state of the school system and its ability to accommodate the 20,000+ increase in population.

-The county has experienced considerable population growth, but the corresponding business growth has not been present. This has fed into the issues the county faces fiscally. In order to truly have a viable economic model we must grow the business side. To do that we have to invest in economic stimulus projects.  This will have the additional benefit or increasing the sales tax revenue which could be used to supplement existing public services (General fund, Sherriff, Public Works, etc.)

This article was originally published by Chris Taylor on his Facebook profile on November 6 and can be found there at the link below.