In a tough economy, can a city feasibly lower its property tax rate?
Burnside opted not to do so on Monday night — but not for lack of trying.
Three years after taking the bold move of lowering the city’s tax rate to 17.1 cents on the dollar following the swell of new restaurant tax revenue, the Burnside City Council decided to keep the status quo at their July meeting. Headed into the 2010-11 fiscal year, the 17.1 cent figure will remain unchanged.
The tax applies to real and personal property as well as tangible property within the city limits of Burnside. This does not apply to aircraft, documented watercraft, and inventory in transit; while Burnside has an ad valorem tax, the city does not collect the money itself. The tax revenue goes toward the city’s general expenses
Burnside made headlines in 2007 when they lowered the rate by a cent, with councilors stating at the time that it was the “lowest in the county.” Following the 2004 restaurant referendum, the food and alcohol taxes were pulling in $240,000 in tax revenue, giving the city a healthy amount of cash in its coffers, and the freedom to ease the pressure on citizens’ pocketbooks.
Things have changed since then. Not only has the recession felt all across the nation wormed its way into the local economy, Burnside in particular has suffered because the lowered Lake Cumberland has taken a toll on the tourism game. More restaurants have popped up since that time, yet others have gone away — most notably Reno’s Roadhouse, one of the first few establishments to come to town following the pro-drink sales vote. (For 2010-11, the projected combined restaurant alcohol tax remains unchanged at $240,000.)
Yet one city councilor came in to Monday’s meeting hoping to relive the good feelings of the 2007 meeting where the tax rate was lowered. Lula Jean Thompson-Burton, the newest member of the council, brought up the idea of lowering the tax rate further when the time came to set the tax rate for the new fiscal year.
“It’s going to be better P.R. if we can lower the tax rate,” said Thompson-Burton, who was nominated to the council in June by her fellow councilors. “You want your community behind you and your city behind you.”
Thompson-Burton brought a newspaper clipping about possible grant money available through Appalachian Regional Commission programs, suggesting that the city should pursue these grant-writing opportunities and use the money to help improve the city. One possible benefit could be off-setting the cost of lowering the tax rate.
The councilors did calculations to figure out the impact of dropping the tax by another cent, to 16.1 cents per hundred. Currently, the property tax brings in $140,000 in revenue for the city (the total budget of which shrunk again for the 2010-11 fiscal year by about $45,000 from last year). Going down by another cent would throw that tax revenue figure off by $8,120.
Another possibility was dropping it down from 17.1 cents to a round 17.0. The council figured that it would have minimal financial impact on the city to do so. However, the difference would hardly be felt by the taxpayer as well.
Thompson-Burton suggested that “the talk out there” among the towns citizens questioned what the city does with “all that money” they get. The answer is quite simple: With a struggling economy, inflation, and city infrastructure costs relating to sewer system expansion and other projects, the amount of tax money the city sees gets smaller all the time.
“All stuff goes up, every year —groceries go up, everything goes up,” said Mayor Chuck Fourman.
Added councilor Brian Watson, “It’s not this astronomical amount of money that everyone thinks we’re getting. The taxes are not that big.”
Thompson-Burton responded that because most citizens aren’t “sitting here” at the council, directly dealing with the budget, “they can’t see that.” She noted that she was at the same disadvantage until being appointed to the council.
Fourman said he’d like to see the tax rate go down, but “with all of our expenses, I’m not sure that we can (take it lower).” Councilor Jim Rasnick agreed, restating the opinion he voiced back in 2007 that he’d like to see the city eventually issue rebate checks, “but we’ve got to have a balanced budget,” he said.
“There are not many cities, not only across Kentucky but across the country, that are lowering tax rates,” said Rasnick. “I agree with the mayor — at some point, after all the infrastructure problems get solved and we get updated with the restaurant tax and alcohol tax, we hope we can see some benefits.”
Eventually the council (minus Dic Gaskin, who was absent) voted unanimously to leave the tax rate at 17.1 cents per hundred — including Thompson-Burton.
