Hawkins Co. Commission
This may seem unfathomable, but even in 2019 some things still require a plan. As a consumer it’s great to take a device and “buy now”. An unchanging event of life is that complicated issues will always exist. They exist to help us develop character, discipline and maturity. Those attributes lead to competent decisions through careful and methodical planning. Success in all things can be attributed to developing a plan using experience and historical data to guide in the decision-making process. Holding steadfast to the plan, while keeping a close eye on results, is critical for continual success. Typically, the impatient urge to make drastic changes, just simply for the sake of making a change, can be so great that it derails the process. Our populace has been mentally reprogrammed to expect instant results, often to our own detriment.
The basic principle of our county budget is no different than managing home and business finances. It takes a relentless desire to understand how all the pieces of the puzzle work together. Parts of the entire puzzle include being sensitive to how the adjustment of a fraction of a penny to the tax levy or a dollar on the wheel tax affects not only your general fund, but all facets of local government operations. Below is listed a broad overview of what sources of revenue are available to local governments.
Local Option Sales TaxAll local option sales tax revenue is currently split 50/50 between two county services. Half is state mandated to fund your local school system. Historically, the other half has funded fund solid waste. Thanks to Rep. Gary Hicks’ co-sponsorship of Rule 129 Online Local Option Sales Tax, we have the potential for a more robust revenue source. Effective October 1, 2019 Rule 129 requires large online vendors to collect the local sales tax, which for Hawkins County is 2.75%, to be paid to the local government of the delivery point. Naturally, for budget purposes those revenues can’t be responsibly estimated without a track record. For budget preparation in 2020 there will be three fiscal quarters to assist in conservatively estimating those revenues. A significant point of interest for Hawkins County is that our sales tax revenue is substantially lower than all other counties in the state of Tennessee with comparable population. The differences range from $5.2 million to $40 million those counties generate over Hawkins County.
Property Tax LevyAnother source of revenue for local governments is the property tax levy. Bear in mind residential property assessment is based on 25% of value; commercial is on 40%; and business personal property is on 30% of value. Yes…businesses pay property tax on the personal items they own and lease. In Hawkins County our property tax rate is $2.5323 per hundred dollars of assessed value. That rate has been the same for four consecutive years, assuming this budget will pass with that proposed rate. Each penny of the tax rate is estimated to bring in $102,810 in revenue, which totals $26,034,576. Next week, we’ll list where those local dollars flow, the budget numbers to maintain those services, and the difference between the two which will show the revenue generated from other nonlocal sources.
Other sources of local revenueThe wheel tax in Hawkins County is referred to as a privilege tax. That tax is a total of $67, all of which funds local services. The first wheel tax implemented many years ago of $20 was split equally in to three parts: General Fund; Schools; Highway. The second round of wheel tax of $7 was split 65/35 between Teachers Salaries and School Transportation, respectively. The most recent $40 wheel tax was split with $30 going to the general fund and $10 going to fund public safety. As stated above the property tax rate of $2.5323 has been the same for four consecutive years, which hasn’t occurred in almost 30 years. Three years is the longest period of time the tax rate has not changed either by an increase in tax or by virtue of the property reassessment that occurs every 5 years. The state mandates that the property tax reassessment cannot be used to generate more revenue. It is solely to be used as a tool to adjust fluctuations in market conditions without causing a “hidden” tax increase.
From the short descriptions listed above there are two items of importance that should be noted. Hawkins County is at a substantial disadvantage when it comes to sales tax as a revenue source. This shows that we have a shortage of restaurants and retail businesses. Also, that we spend a sizable portion of our discretionary dollars outside the boundaries of Hawkins County either by choice or necessity. The second item to note is although there has not been a property tax increase in four-consecutive years there has been an increase of $40 to the local wheel tax.
The greatest takeaway from the data above is that costs for all things rise over a period of time. Nothing short of a depression or recession can reset that reality. As public servants we have to be vigilant in finding ways to cut costs in a responsible manner by gaining knowledge of not only how revenue cuts affect a service(s) today, but will those cuts create a higher cost in the future due to repairs, upgrades, retraining, hiring through attrition, etc.
Being sensitive to macroeconomic factors must play a sizable role in those plans. One has to wonder if federal deficit increases will create additional funding mandates at the local level. Will those mandates to fund specific areas, once predominantly funded by other sources, translate in to acquiring additional debt, using fund balance for a short-term fix, place a heavier burden on the property owner, force elimination of services, or a mixture of all and more?
Knee-jerk reactions of reducing revenues to appease a small audience can have a drastic long-term effect on the entire population of Hawkins County. Like it or not, our county is a participant in the global economy on a scale that should not be taken lightly. Weaning from dependency on the wheel tax is a priority and will occur in due time, however, there are more things to be considered than a simple call to reduction without a responsible plan of action.
So … what’s next? Our plan should continue on the current course. Monitor the potential positives of the online local option sales tax, request consistent feedback from the property assessor concerning newly constructed properties, task the long-term planning subcommittee with devising a Financial Planning Guide for current and future commissions to enable success/failure benchmarking, work alongside departments to acquire knowledge of 3 to 5-year needs, locate and execute efficiencies in overhead and personnel … just to name a few.
(PUBLISHER’S NOTE: John Metz is a member of the Hawkins Co. Commission, serving District Five. He is Chair of the Commission’s Budget and Finance Committee, Chair of the Public Safety Committee, and Chair Pro-Tempore of the Commission.)