Compromise could thaw property tax freeze controversy

By John Rodgers, NashvilleCityPaper.com
April 2, 2007

A recent state attorney general’s opinion could build compromise between state lawmakers and local officials regarding a disagreement on a property tax freeze for senior citizen homeowners.

During election year 2006, most Tennesseans focused on the constitutional amendment to ban gay marriage while another amendment — which allows the freezing of senior citizens property taxes — received little debate and passed overwhelmingly.

But three months into the legislative session, the property tax freeze amendment — now in the state constitution – is causing far more controversy than the ban on gay marriage, and most Tennesseans will be far more affected by it.

What is hanging up the bill is an “income ceiling” that home-owning seniors would have to be under in order to qualify for the property tax rate freeze.

According to the amendment, the state Legislature must determine the income ceiling to decide which senior citizen homeowners 65 and up qualify for the property tax freeze.

The higher the income limit, the more senior homeowners that would qualify for the freeze. The lower the limit, the fewer senior homeowners who would be eligible.

After the Legislature sets the limit, local governments can opt in to the system and freeze their seniors property tax rates.

So far, the state Legislature has not done anything regarding implementing the property tax freeze as local governments have become increasingly concerned about its possible effects on cities and counties’ budgets.

Local government officials argue that freezing the property taxes of often their most wealthy citizens — seniors — shifts the property tax burden onto younger, less financially stable homeowners.

“The shift is going to have to occur somewhere, and when that happens, somebody is going to have to pick up the burden,” said Margaret Mahery, the executive director for the Tennessee Municipal League. “And there are only a couple of major ways that cities and counties have to raise revenue and one is through the property tax.”

Senate Republican Leader Mark Norris (R-Collierville), the main legislative proponent of the constitutional amendment, criticized local government groups, saying they are “secretly hoping” the legislation doesn’t pass because “government doesn’t give up revenue easily.

“They are just doing everything they can to kill this legislation and the hopes of a lot of our senior citizens along with it and I think it’s unfair and I think it’s disingenuous,” Norris said. “It’s just government not wanting to give up its money and that’s all there is to it.”

While both sides — local governments and the lawmakers who shepherded the amendment through the Legislature — are coming to odds, a state Attorney General’s opinion issued last month may provide both sides with a compromise to pass the enabling legislation necessary for the constitutional amendment to actually start freezing property taxes.

The March 23 opinion states that while cities and counties cannot adopt lower income ceilings than the state, the Legislature could allow the counties to use their median income level as a ceiling.

“It’ll certainly be better than what’s available now,” Norris said of the compromise. “It’s probably not as much as I would have liked or as I think is deserving.”

Mahery said establishing a median income ceiling “would be a reasonable way to go” at this point.

It’s undecided whether the Legislature will use the median income of a county or the median income of that county’s seniors as the income ceiling.

According to the U.S. Census Bureau’s latest available data, the median household income in Davidson County was $41,981 in 2004.

If Metro imposes the property tax freeze and the income ceiling is set at $40,000, then Nashville would lose about $102,362 in revenue for each cent it raised property taxes, according to figures released from the state Comptroller of the Treasury.

“We just need to work with local governments and try to reach some kind of agreement,” said House Majority Leader Gary Odom (D-Nashville).

There are two bills already in the Legislature that would impose income ceilings of $50,000 and $60,000 for “total annual income from all sources.” Those two bills are scheduled for a hearing in the House Local Government Subcommittee this week.

The delay on imposing the amendment has been beneficial, Mahery said, because of the attorney general’s opinion that clarified differences of opinion on seniors maximum amount of income.

“It was very wise to wait and to make sure that they were methodically and thoughtfully thinking out the plan because once you put this plan into motion, it would be awfully, awfully hard to rescind it,” Mahery said.