City of Memphis Mayor Jim Strickland and Shelby County Mayor Mark Luttrell recently called for a reduction in their government’s respective tax rates to prevent a windfall from the reappraisals process.  It’s never happened before, so we asked veteran reporter Jimmie Covington to explain it to us. 

By Jimmie Covington

More than 30 years after it was enacted, Tennessee’s property reappraisal truth in taxation law is working successfully for the first time in Memphis and Shelby County.

As a result, city and county property taxpayers are in line to receive a tax cut this year because government officials set the reappraisal appeals allowances too high in the property tax rates they adopted last year.

What’s brought about the change this time around?

For the first time since the appeals allowance and truth law was passed decades ago, the local reappraisal appeals board—the county Board of Equalization—handled all or most of the appeals during the first year after a reappraisal.

That completion during the first year is very important.

Paying A Fair Share

The state requires that countywide property reappraisals be conducted every four years in an effort to maintain a system in which each property owner pays his or her fair share. The approach calls for the reappraisals to be revenue neutral as far as the governments are concerned.

After each reappraisal, the state requires each local government to establish and get state approval of a “certified tax rate” that would bring in the same amount of revenue as the previous year plus growth revenue from new construction and other property not on the tax roll the previous year.

Despite what media outlets often report, the governments are not banned from receiving a revenue windfall as a result of a reappraisal but the approach is designed to prevent them from receiving a windfall without notifying taxpayers they have implemented a tax increase.

Local governments are allowed to adopt a rate higher than the certified rate after holding a public hearing.

The law also says:

“In calculating the certified rate, the governing body of the county or municipality may adjust the calculation, according to a method approved by the state board of equalization, to reflect extraordinary assessment changes anticipated from appeals to the state or local boards of equalization.

“The state board shall order recapture of the excessive adjustment in the following year if the certified tax rate is found to have been overstated due to overestimation of the appeals adjustment, and in these cases the jurisdiction may exceed the recapture rate only after public hearing.

Secret Tax Hikes

Notice the phrase “in the following year.”

In all the previous Shelby County reappraisals, it took two or three or more years to handle the appeals.

The recapture rates calculated in the first year after those reappraisals were meaningless since most of the appeals had not been heard by that time.

Not so this year. (Some media reporters might want to explore how the appeals were handled in only a year this time.)

After some of the past reappraisals, reporters kept up with the assessment value that the appeals removed from the tax roll over the years of the appeal hearings. Those figures indicated that both governments had received approval for appeals allowances that were too high and as a result the governments had received “secret tax increases.”

Since a recapture rate was only required after the first year, no recapture rate was ever calculated at the end of appeal hearings. Government officials never conceded that there had been tax increases.

A Gap In Understanding

With the expeditious handling of the appeals this year, city and county officials do not have the opportunity to take in increased revenue without telling the public that they are doing it.

The $3.19 property tax rate proposed by city Mayor Jim Strickland in his recent budget message is apparently the recapture rate approved by the state this year. It is 8 cents lower than the $3.27 certified rate that the City Council adopted last year. The message indicates the amount of revenue involved is about $8 million.

It seems highly unlikely that the council will adopt a rate higher than the $3.19 since that would put the council in a position of continuing the tax increase that was approved last year.

The $3.19 would be an actual tax cut for all property owners in the city compared to what they paid last year.

Because of the fuzzy wording in the budget message, most if not all reporters who covered the announcement failed to understand and present to the public that a true tax cut was being proposed. Some media outlets reported that taxes would remain level.

(Over the years, Memphis and Shelby County mayors and council and commission members generally have not had a good understanding of the tax requirements and impacts of property reappraisal programs. In that way, they are like most members of the public.)

Tax Cuts

Some city property owners will be receiving their second city property tax cut in two years.

After the reappraisal and the reduction of the city property tax rate from $3.40 for each $100 of assessed value to $3.27 last year, some property owners received tax cuts while the taxes of others stayed the same or increased from the previous year as a result of the interaction of the new property values and the new rate.

Reappraisals and the resulting certified rates affect different taxpayers differently.

This year is not a reappraisal year and an 8-cent property tax rate cut would apply to everybody.

City officials never disclosed or the news media never reported the penny amount of the appeals allowance in the $3.27 tax rate. County Assessor Cheyenne Johnson’s office also declined to disclose that figure although it is clearly a public record.

Now Like The Others

The state Board of Equalization said the assessment value of the city’s appeals allowance was $517,052,777.  The news media has not reported what the appeals total turned out to be.

(County government’s appeals allowance in the county’s $4.13 certified rate was 13 cents. Instead of the certified rate, the County Commission approved a $4.11 rate. Presumably the 2-cent cut was in the appeals allowance. County officials estimated that appeals would cut $656,579,068 in assessed value from the county’s tax roll. County officials posted the calculations of the county certified rate on the county’s website.)

Some county officials have reported that county government also is completing the fiscal year with a major budget surplus.

County Mayor Mark Luttrell has now gone through the same recapture rate process that the city mayor and council are now going through.

The recapture rate requirement has apparently worked well in the state’s 94 other counties. Over the years, those counties have not had the long, drawn-out appeals processes that have occurred in Shelby County.


This post is written by Jimmie Covington, veteran Memphis reporter with lengthy experience covering governmental, school, and demographic issues. He is a contributing writer with The Best Times, a monthly news magazine for active people 50 and older. 


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