Think tank: Tax leeway needed

But General Assembly not likely to grant it

By Richard Locker
The Commercial Appeal
December 14, 2005

NASHVILLE -- A state think tank Tuesday recommended Tennessee's cities and counties be given greater leeway to enact new growth and development taxes without the specific approval of the state legislature.

The recommendation by the Tennessee Advisory Commission on Intergovernmental Relations, or TACIR, gives more weight to Shelby County Mayor A C Wharton's push for a new county tax on development or real-estate transfers as an alternative to property tax hikes. Wharton wants the new revenue to pay down Shelby's $1.7 billion debt, much of which was incurred for new school construction and other costs of growth.

Local governments are limited in the kinds of taxes they can levy without going to the state legislature for approval. Heavy opposition by Shelby County's real estate and homebuilding industries to Wharton's proposals divided Shelby County's state legislative delegation and as a result, the legislature has declined for two years to approve the mayor's requests for new tax authority.

TACIR's recommendation won't be sufficient to sway lawmakers into giving local governments greater tax autonomy than they already have, legislators who are members of the commission agreed. Several legislators on the 25-member commission voted against the recommendation, which was largely backed by local government representatives on the panel.

And outside TACIR's meeting after the vote, Russ Farrar, lobbyist for the Tennessee Association of Realtors, bluntly told county government lobbyists that Realtors across the state would lobby hard against any proposal to tax new development if no agreement is reached to restrict such taxes.

"What I'm saying to you is real simple: We've never had any flexibility on this before. We do now. If we don't sit down and work out an agreement, we're going to fight you worse than before. We've got instant e-mail access to 30,000 Realtors across the state. We'll be pulling out everything we've got to beat you. We're ready to go," Farrar told lobbyists for county governments.

TACIR's support of broader local tax authority was approved following a months-long research study. The recommendation is for the legislature to pass a bill allowing city councils and county commissions to enact such development taxes as impact fees, "adequate facilities taxes," real-estate transfer taxes and others.

Sen. Mark Norris, R-Collierville, a member of the TACIR board, voted against the proposal after a different recommendation he proposed was voted down. Norris suggested enabling local governments to enact certain taxes but only in lieu of raising property taxes and only if they are approved by public referendums and other threshold "triggers" are required.

Norris and TACIR's chairman, state Rep. Randy Rinks, D-Savannah, said the proposal faces difficulty winning approval of the General Assembly.