How much cash equals property tax freeze?

By John Rodgers, NashvilleCityPaper.com
December 18, 2006

Seniors who own homes need to closely watch the state Legislature next year if they care about their property tax rates.

That’s because debate has begun over what income ceilings to impose that would allow eligible seniors to freeze the amount they pay on property taxes, a decision that could affect almost 400,000 households in Tennessee.

Nearly 32,000 senior households in Davidson County could be affected.

It’s all a result of a state constitutional amendment overwhelmingly passed this year that allows homeowners 65 years or older to freeze their property tax rates.

The amendment passed with little public debate. But the next steps will be where the debate could intensify.

According to the passed constitutional amendment, the Legislature has to approve legislation to set a household income ceiling to determine which seniors are eligible for the freeze and which are not.

A higher ceiling equals more seniors being eligible for the tax freeze. A lower ceiling equals fewer seniors eligible.

For example, in Davidson County, 80 percent of home owning seniors earn up to $60,000, while 37 percent earn a maximum of $20,000, according to state comptroller figures.

After the state passes its enabling legislation, a city or county government may adopt an ordinance to actually put the property tax freeze for seniors into effect. They are not required to do so.

Sen. Mark Norris (R-Collierville), who sponsored the constitutional amendment, met with city and county government officials last week to listen to their concerns.

Norris has filed a bill to set the household income ceiling at $50,000. A Democratic state Senator, Doug Jackson (D-Dickson), has introduced legislation to set the income maximum at $60,000. The Legislature will convene in January and settling the issue will be a priority.

But there is debate about whether city and county governments can set lower income ceilings than the state Legislature imposes when it passes its enabling legislation.

Norris says that whatever the state passes will be only the maximum income ceiling that local governments can set. They can set lower income limits if they like.

“We want the debate to be at the local level because that’s where it’s easiest for our seniors to go to their county commission or to their city council and participate in the process,” Norris said. “If they gum it up in Nashville, it’ll never see the light of day, and that’s my concern.”

Attorneys for the Tennessee County Commissioners Association, however, say the constitutional amendment mandates that there can be only one income ceiling – the one set in the state Legislature.

“That’s the key question that’s got to be answered,” said House Majority Leader Gary Odom (D-Nashville), about whether the Legislature’s imposed income ceiling applies uniformly across Tennessee.

Norris is requesting a state attorney general’s opinion to try and settle the matter. Local governments are also concerned about how it will affect their property tax base.

A lower income ceiling will equal fewer seniors qualifying and a lesser impact on local government revenue.

Doug Goddard, the executive director of the Tennessee County Commissioners Association, said his organization is “really concerned” that the income ceiling will be too high and not help those who actually need the tax relief.

And if the tax burden was too high on local governments as a result of the higher ceiling, that could spur those governments to up taxes on younger homeowners, Goddard said.

“So I think everybody wants to help out the truly needy elderly,” Goddard said.

If the income ceiling is set so that seniors earning up to only $20,000 a year qualify, Metro will lose just more than $58,000 in tax revenue if it increases its property taxes by one cent, according to comptroller figures.

But if the income ceiling is set at up to $60,000 per senior household, it would cost Metro more than $127,000 in tax revenue. And that $127,000 of lost revenue multiplies itself by each additional cent Metro hikes its property tax rates.