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Blowing Smoke?

Forget Hurricane Elvis. The real fiscal calamity is $23 million in unpaid property taxes.



Mayor Willie Herenton began his fiscal year 2006 budget presentation to the City Council last week with a speech outlining the city's budget deficit, a proposed 54 cent property tax increase to combat it, and plans for restoring city services to an acceptable level. The mayor mentioned a number of factors contributing to the revenue shortfall, including a reduction in state-shared revenues, increased security measures following the September 11th terrorist attacks, and the 2003 windstorm commonly referred to as Hurricane Elvis.

In fact, the July 22nd windstorm was the second factor mentioned by the mayor on his list of contributing factors to the city's monetary woes.

Hurricane Elvis did leave widespread destruction in its wake; even the Flyer offices were closed for a week following the storm, due to a power outage. But since then, the storm has taken the rap for everything from lower economic production to a decline in the number of city tourists. During last year's round of budget meetings, for example, administrators and division directors bemoaned the storm and the resulting decreased revenues. Lower property-tax revenues, increased repair costs, and equipment and supply purchases were all partially attributed to the storm.

Admittedly, the city did suffer damage requiring millions of dollars in repairs, but most of those funds were reimbursed, and are still being reimbursed, by the Federal Emergency Management Agency (FEMA). When asked about the windstorm's actual lingering effect on the budget shortfall, Herenton told the Flyer that it was "infinitesimal."

"It's all listed [in the proposed budget]," he said. "Look in there, you'll see."

But the windstorm monies -- both reimbursed and outstanding -- are hard to find. No line items exist for these categories, and the reimbursed funds are distributed throughout city divisions for various uses.

FEMA records show that Shelby County received about $52 million in reimbursement funds for the storm. That money was then distributed by the Memphis/Shelby County emergency branch to the city, MLGW, Memphis City Schools, outlying communities, and for uninsured personal property losses.

FEMA's reimbursement rate is 75 percent of incurred expenses. City finance director Charles Williamson said the city received $5.1 million in April, bringing the city's total to $8.6 million. An additional $1.5 million is still expected. Once that payment is sent, Williamson will present a final report to the City Council. Under former finance director Joseph Lee, the city submitted $14.9 million in costs to FEMA. The city's insurance company has also reimbursed the municipality $2 million. To date, the city's windstorm-related expenditures are $13.6 millon. At these reimbursement rates, the city will be left with only about $2 million in outstanding costs.

The real budget eye-opener is unpaid property taxes (see chart below). City treasury records show more than $23 million in uncollected taxes for 2004.

"The effects from the windstorm are residual because some people still haven't paid their property taxes from that year [2003]," said Williamson. "If you've got to choose between house repairs and paying property taxes, then you're probably going to repair your home first."

Bottom line: While the storm did have some effect on the city budget, the lower-revenues trend was established long before. The mayor mentioned this catastrophe in his budget speech, but nowhere did he mention the "conservatively optimistic" revenue predictions compiled by the city's budget and finance office which skewed the financial outlook. •


Property Tax Collections

2000 2001 2002 2003 2004

Taxes Outstanding $3,564,483 $5,386,282 $7,891,289 $11,171,917 $23,245,779

Bankruptcy $133,683 $250,563 $617,031 $786,163 $1,177,978

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