County Budget Civility

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After all the pettifoggery that preceded County Commission's budget meeting last Thursday evening, it came as a huge relief to see the salutary way in which Commission approved a $614 million budget after little more than an hour of civil discourse. Both Commission's often blustery chairman Scott Moore and prideful County Mayor Mike Ragsdale deserve credit for the way in which they patched over all the squabbling that had threatened to turn the meeting into a donnybrook. Rancorous disputation over expense accounts, miscellaneous accounts and other petty matters were reflecting very poorly on Knox governance and could have hurt the local climate for everything from economic development to political stability. But after Ragsdale held out some olive branches, Moore and the mayor's other antagonists on Commission managed to see the forest over their sticks and collaborated on a big picture resolution.

Ragsdale, who's prided himself on putting an end to governmental infighting over his five years in office, might have been able to prevent it from flaring up if he'd been present at a Commission budgetary hearing earlier in the month. His absence from that hearing was taken by some commissioners as a virtual thumb of the nose at them, and matters went from bad to worse until they came to understand that he had an unavoidable conflict.

The $614 million county budget that Commission approved adheres to Ragsdale's recommendations in almost all respects. Indeed, it's very difficult for commissioners to do otherwise except in marginal ways. The budget provides for schools as well as the county's present tax rates will support, and by hook and crook manages to come up with the $57 million needed to fund a new, voter-approved pension plan for sheriff's deputies without a tax increase as well.

Where both Ragsdale and commission are to be faulted is for failing to face up to the harsh fiscal realities created by the pension plan and prospective funding needed for stormwater remediation, four new elementary schools that Ragsdale has proposed, more jail space and other capital outlays. Ragsdale should have used the extraordinary pension funding requirements as the justification for a property tax increase, but he chose to postpone the day of reckoning by drawing down $15 million from the county's rainy day fund to cover them this year. This is a resort that cannot be repeated without jeopardizing the county's credit rating. Yet there is no other source of funds in sight to cover the cost of servicing the pension debt in subsequent years, let alone the borrowings that will need to be incurred to pay for some $60 million in new school construction, a preliminary projection of up to $65 million in stormwater remediation projects, road projects, and the list goes on and on.

The lone voice calling attention to this glaring shortfall was Commissioner Lee Tramel. â“At some point we're going to tie that albatross around the taxpayers' neck,â” he warned. â“Folks, we really, really need to be worried about doing what's right rather than getting reelected. No tax increase sounds great, but we owe it to our citizens to be honest with them, and I think a tax increase is inevitable.â” Tramel's admonitions were all the more noteworthy because, as an appointee to fill a vacancy resulting from term limits, he faces reelection next year. Cynics can say that, as a deputy sheriff, he's really got his eye cast on getting funding for a coveted new jail. But Tramel gets my medal of honor award for political courage.

The one commissioner with the standing to have swung support behind a tax increase was its elder statesman and longtime chairman of its Finance Committee, Commissioner Frank Leuthold. Leuthold came out of retirement to fill another vacancy, and he knows full well that a tax increase is needed, but he failed to speak out in support of one.

Instead, he backed a move by his son, Commissioner Craig Leuthold, which reallocated more of the county's $2.69 property tax rate to debt service. Each penny on the tax rate is projected to yield $788,000 in revenue during the fiscal year ahead. So the Leuthold shift to debt service of 11 cents that had previously been dedicated to the county's operating budget would increase debt service funding by $8.7 million.

Viewed in isolation, that's just about enough to cover the cost of borrowing to be incurred this coming year. However, the diversion of this money from the county's general (i.e. operating) fund would deplete its reserves to a level well below the $35 million that County Finance Director John Werner has said is needed to sustain the county's credit rating. To rectify that depletion, other sources of revenue, including wheel tax dollars and interest earnings, will be shifted from the debt service fund to the general fund. So the entire maneuver is mostly just a shell game.

Frank Leuthold defends the shift on grounds that, under state law, property tax dollars allocated to debt service cannot be the subject of abatement via Tax Increment Financing. The city and the county have granted TIFs to developers whereby the incremental property taxes arising from their projects are applied toward their financing

for a period of years, but the debt service component of these taxes cannot be so applied.

Leuthold points to the TIF that's contemplated to support the $56 million Sentinel Tower that's proposed for the former News Sentinel site downtown as a case in point. The 11-cent property tax reallocation to debt service would produce about $20,000 or so in additional county revenue, but in order to get out of the hole Knox County needs more like $20 million.

â" Joe Sullivan

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