To avoid the possibility of triggering a public referendum and litigation, Mayor Karl Dean’s administration has lowered its proposed property-tax rate increase for Davidson County’s General Services District by five cents from 53 cents to a new 48-cent tax hike.
“There was the potential someone could have challenged it,” Metro Finance Director Rich Riebeling said Thursday. “The budget’s too important to take any risk for potential litigation.”
The mayor’s original 53-cent tax rate increase for residents of the Urban Services District will remain unchanged. Rates are applied to every $100 of assessed property to calculate property tax obligations.
On Tuesday, Dean proposed what amounted to an across-the-board 53-cent hike to Metro’s two property tax rates. The bump would increase the rate paid by residents of the USD –– the inner core of the city that receives extra services –– from $4.13 to $4.66.
Residents who live in Davidson County’s General Services District, however, the suburban periphery of the county and recipient of fewer services, pay a lower property tax rate of $3.56. Increasing the GSD rate by 53 cents would bring the total GSD rate to $4.09.
The issue for Dean’s administration arose after Metro attorneys reviewed a 2006 voter-approved amendment to the Metro charter that requires a public referendum on raising the tax rate above the levels of that year. The legal question was whether the referendum applies exclusively to the larger, gross USD rate, or the GSD rate was well.
Riebeling said the answer was “ambiguous” and a “close call,” one that could be interpreted either way. “But the budget is too important to get bogged down on some sort of technical matter,” he added.
The 53-cent hike on the USD rate would up the new rate to $4.66 — 3 cents below the 2006 rate of $4.69 and, therefore, 3 cents shy of requiring a referendum. But the now-reduced 53-cent increase in the GSD rate would have brought its rate to $4.09, five cents above the threshold to initiate a public referendum on raising the GSD rate.
With a revised 48-cent hike, the new GSD rate would be $4.04.
Riebeling said the mayor’s administration had already submitted a tax levy ordinance to the Metro Council, which will now be substituted with a new version prior to its first of three required votes on May 15.
The mayor has said a property tax increase would add $100 million in additional revenues, dollars that are needed to avoid “draconian cuts” and make substantial investments in infrastructure. The mayor has proposed a $1.71 billion operating budget and plans to submit a $300 million capital-spending plan.
“We will still have the same budget total as we did before,” Riebeling said, adding that the administration can make some other modifications to make up the difference. “Effectively, it will be the same budget numbers.”