Budget season has arrived in Tullahoma, and the city is faring well going into a new fiscal year, according to City Administrator Jennifer Moody.
During a budget presentation at the April 22 meeting of the Tullahoma Board of Mayor and Aldermen, Moody updated the board on the current state of the city’s budget, tax revenues and potential next steps heading into FY2020.
State of the city budget
According to Moody, all tax revenues for the city are trending higher than the previous year’s figures, which is a good step for the city.
Compared to last year at the same time, Moody said property tax revenues are up .5%, and sales tax revenues are currently sitting at 4.2% above 2018 figures.
Moody said sales tax figures have an “optimistic outlook” for the next year due to a number of new retailers and restaurants scheduled to open during that time.
The hotel/motel tax is currently “trending up 4.2%,” according to Moody, and business taxes are up 2% compared to last year.
Moody said the uptick in business taxes was partially due to 92 new business licenses being issued up to this time.
While tax revenues were up for the current fiscal year, there were some “higher than budgeted costs” related to a number of city repairs, personnel issues and city projects. The items listed by Moody included stormwater drainage system repairs, the downtown crosswalk repairs, the Ovoca/Riley Creek roads traffic study, the hiring of a new IT manager and IT upgrades and turnover within the city administration.
However, Moody said, these increased costs would be covered in part with the surplus brought in by those increased revenues.
Proposed budget assumptions
According to Moody, the city’s property tax rate has been one of the lowest she’s seen in her career due to the city regularly adopting the state’s certified tax rate. Because of this, Moody said, Tullahoma homeowners have, on average, seen a reduction in their annual tax bill. For 2018, she said, the average tax bill was just over $1,120.
Because the city consistently uses the certified property tax rate, Moody proposed the city budget reflect a 2% increase in property tax revenues for the coming fiscal year.
For sales tax revenues, Moody has suggested next fiscal year factor in a 4% increase for the 2019-2010 fiscal year.
The city has consistently seen an increase in sales tax collections since 2013, she said, with figures growing by nearly $2 million in six years.
Moody largely credited the increase in sales tax revenues to the addition of new major retailers like Publix.
Additionally, Moody said the city is in a position to see its sales tax revenues exceed its property tax revenues, which would be a first for her.
Other FY20 budget assumptions Moody included in her presentation include a 2% increase in business taxes and a 4% increase for hotel/motel taxes.
Moody has also included an annual step increase for employee salaries, as well as a cost of living adjustment (COLA). The step increase is set at 1.5%, and the COLA is set for 2%.
Two possible negatives for the city come in the form of the Hall income tax, which is currently being phased out for municipalities due to a state law, and the liquor by the drink tax, which is still being heard by the Tennessee Supreme Court.
The Hall income tax funds should see a 17% decrease for the coming fiscal year in accordance with its being phased out by Jan. 1, 2021, Moody said.
The liquor by the drink lawsuit, however, is an unknown, as it is still awaiting a decision by the courts. Should that lawsuit resolve not in the city’s favor, Moody suggested a one-time pull from reserve funds to cover the difference.
Moody also proposed the city look into raising the fees for two different planning and codes permits in order to increase revenues for that department.
Currently, Moody said, all building, codes and stormwater permit revenues represent less than 1% of the total city revenues.
In 2018 permit revenues sat at just $108,074, whereas the building values were estimated at more than $38 million.
This is, in part, because the fee rates have not been raised in several years. According to Moody, the stormwater permit fees have not been changed since they were introduced 15 years ago.
Additionally, when the Great Recession hit in 2009, building and codes permit fees were halved in order to entice businesses in the area. However, the economy has since recovered and the fees are still halved and the city is “far below our peers.”
The city will have three official readings of the FY20 budget in June. The first reading is scheduled for Monday, June 3, in a special-called meeting. The second reading will take place at the regular city board meeting on June 10. The third and final reading is scheduled for the regular June 24 meeting.
Erin McCullough may be reached at email@example.com.