Originally published December 20, 2004 Growth taxes take next step to Legislature County hopes for support at Assembly By Byron Hensley DNJ Staff Writer ------------------------------------------------------------------------ After more than a year of debate on property tax alternatives to pay for growth, two proposed revenue proposals are on the way to the state Legislature. Resolutions requesting the county be enabled to charge an adequate facilities tax, a squarefootage-based tax on new construction, and a real estate excise tax, a percentage-based tax on the sale price of real estate, were approved Thursday by the Rutherford County Commission. The two measures are seen by proponents as ways to make growth pay for itself. Schools, for instance, are projected to require $550 million in new construction over the next 10 years. A judicial center and juvenile detention center are planned as well. Discussion of alternatives to property tax increases began last year after commissioners approved a property tax increase. At public hearings on the county's 2003-04 budget, many among the public called on the commission to look at other ways of raising money, and the commission gave the task of that search to its steering committee. "Basically, what we're looking for is tools to manage growth," said Commissioner Robert Peay, steering committee chairman. "We don't need to be reactive every time a problem comes up. We need a mechanism in place long term to help us handle the infrastructure needs and growth in the schools." With alternative revenues, commissioners are looking to satisfy residents who don't want property taxes to increase. Of particular concern are people who are retired or on fixed incomes who can't afford higher property taxes, who would not benefit from new school construction and who tend to vote. Retired resident Juanelle Eddleman, of Murfreesboro, approves of the search for alternative revenues. "I think we should look at some of these taxes they're considering instead of going up on property tax any more," Eddleman said. "I'm opposed to property taxes going up any more." Eddleman recalled that when Rutherford County's population began booming in the late '80s and early '90s, it was predicted by some that the property taxes of the new houses being built would pay for the costs of new schools. "It's not working. So they need some additional type of tax besides that," she said. Eddleman, who said she most prefers the adequate facilities tax, admits that she does not plan to build a new house any time soon and, therefore, would not pay the tax. "But even if I was, I still think it would be fair," she said. Some property owners, such as those who expect they may be selling their property in the future, have expressed concern to their commissioners that they would be affected by the real estate excise tax, which taxes all real estate sales. But as far as Eddleman is concerned, "Any alternative tax is preferable to going up on the property tax any more." Eddleman's approval of the adequate facilities tax runs contrary to that of the Rutherford County Home Builders Association, which has said the home building industry is already paying its share to the county's economy and opposes an adequate facilities tax. The home builders, however, have championed the real estate excise tax as a more broadbased revenue source that does not unduly burden their industry. It was home building industry representatives, in fact, who earlier this year brought the excise tax to the attention of a task force convened by the commission's steering committee to study alternative revenues. Much of the research that led to the task force's recommendation of the excise tax was done by Paul Cross, a freelance administrative consultant who has worked with Denny Hastings, the home builders' representative on the task force. Cross suggested the county work toward an excise tax modeled on one in Washington state, where county governments in fast-growing areas are allowed to receive a quarter of a percent of the selling price of any real estate. At a quarter of a percent of the sales price, the real estate excise tax could be considered a fairly minimal tax, Cross said. For example, someone selling a piece of property for $100,000 would pay $250. Cross said that based on revenue sources available in Tennessee, "It was obvious that if there was anything already out there that the county could get its hands on, it had already maxed that out." At a meeting a week ago with the Rutherford legislative delegation, commissioners were cautioned not to expect an easy reception in the upcoming session of the General Assembly, where legislators are seen as increasingly unwilling to pass new taxes. Supporters of the alternative revenue are hoping things will be different from last session when a request by commissioners to increase the county's development tax failed. One of the county's legislators, Rep. Donna Rowland, R-Murfreesboro, has said she will not support any new revenue means without them first passing in a public referendum. If a referendum must take place, that, too, must be approved by the General Assembly, Peay said. "From what our attorney told us, there's no mechanism to have a referendum on an adequate facilities tax," he said. "The only tax that is open for a referendum right now is the wheel tax. If something like that has to happen, it will happen from the state level." Ideally, from the perspective of county officials, change in the county's private act legislation allowing it to charge adequate facilities tax an initial $1 per square foot of new construction could come this spring before the county's annual budget process when the commission sets the property tax rate for the coming year. Getting a real estate excise tax is a longer process because it will mean a change in the state's general law, a process estimated to take at least a couple of years. Peay said the county needs both taxes because neither of them alone will be the answer to revenue needs. "You're going to have to have several options," he said. "If you've got something like the adequate facilities tax, you can't rely on it if the economy turns and building goes down. If you're entirely relying on that, you're up a creek without a paddle. That's why we're looking ata real estate tax, because it's more stable."