Proposed state law postpones consideration of Surgoinsville tax increase

Surgoinsville Mayor Merrell Graham told the Board of Mayor and Aldermen earlier this month that the board should table the proposed tax increase pending approval of legislation in the Tennessee General Assembly.

Tennessee Municipal League, which provides liability insurance to Tennessee cities, recently sent an email urging cities to protest two proposed bills.

In January the BMA discussed a proposed 13-cent property tax increase following Vice Mayor Bobby Jarnagin's suggestion to bring the rate to $1.10.

City Manager, Megan Gentry told the board at its Feb. 12 meeting that the city generates about $3,500 in revenue for every penny on the property tax rate.

For a home assessed at $100,000 that proposed 13 cent property tax increase would add $32.50 to their annual property tax bill.

The rate was lowered to 96.6 from 1.20 following the 2021 property tax reassessment. State law prohibits cities and counties from increasing their property tax revenue as a result of property reassessments. That's why a "State Certified" tax rate is provided for each town to generate the same revenue after property values are reassessed.

City Attorney Joe May told the BMA that two bills are currently in the Tennessee House and Senate that would enact a local property tax cap, preventing Surgoinsville from increasing taxes.

"The board needs to be aware that there's been a move in the General Assembly to (halt tax increases)," May said.

Bills under consideration

On Feb. 9, the Tennessee Municipal League (TML) sent City Hall an email about two proposed bills in Tennessee Legislation to cap property taxes.

The email took a stance against the bills, adding that a property tax cap could prevent cities from taking on projects that help communities due to lack of funding.

"Please do not assume your legislators understand the implications of a local property tax cap and how it might affect your financial stability," the email said.

The first bill under consideration is (Senate Bill) SB171/ (House Bill) HB565 which would prohibit a local government from enacting an increase in property tax that would result in a total revenue increase that exceeds inflation plus 2 percent. It would also prohibit governments from realizing a total increase in revenue of inflation plus 6 percent from the past three years.

The second proposed bill is SB2248/ HB1968, which is a "caption bill."

The email explained that as a caption bill, "Specifics will not be known until the amendment is filed."

However, TML said that it was certain that SB2248/ HB1968 would be used as a vehicle for an anticipated property tax cap.

Fight the tax cap

The BMA was hoping to have a new rate by spring to include in the Fiscal Year 2024-2025 budget but will take time to learn what happens with the bills before deciding a new tax rate.

Mayor Graham said, "So we actually need some time (to wait before passing the tax increase)."

According to May, both SB171/ HB565 and SB2248/ HB1968 are in committee.

May also said that it would be in the board's best interest to call local legislators if the town wanted to fight the tax cap, adding that a cap could prevent the town from projects down the road.

"If you have a big project that the citizenry want, it may prevent you from being able to afford it," May explained.