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Article published Jan 31, 2005 Builders oppose facilities tax plan Group says homes already face many fees By Byron Hensley New homes are already highly taxed, according to the Rutherford County Homebuilders Association, which maintains a proposed adequate facilities tax would hurt the industry.(1) A square-footage-based fee on new construction would especially affect lower-income home buyers (2) while slowing down the local economy in general, association members said, even though they support a real estate excise tax on the sale of any property. "New homes are already the most heavily taxed commodity (3) in Rutherford County," states a paper released by the association called "The Facts About the Proposed New Tax." Rutherford County Commission voted to request the state Legislature pass a private act enabling it to adopt a tax of $1 per square foot on new residential construction Ð with a maximum allowance of $2 Ð and 25 cents per square foot on commercial development. Commissioners say if it passes it will replace the county's $1,500 development fee on new homes. "Current taxes and fees paid for a 1,700-square-foot home in the county total $14,606.04. New home buyers pay more than their share now,"(4) the builders' release states. The additional cost created by the adequate facilities tax would raise the amount on that same home to $17,856.34, or $10.50 per square foot, according to the paper. That figure on new homes represents taxes, fees and assessments from a variety of sources, (4) said Paul Cross, a legislative affairs advisor to home builders. New homes are subject to building permits from the county or municipalities, engineering and plan review fees, and preliminary and final plat review fees among others, (4) Cross said. The house cited in the example provided by the RCHBA is located in the Murfreesboro city limits off Florence Road, he said. That house would be assessed engineering, development, water tap and growth fees from Consolidated Utility District and city building and plat fees, sewer tap and basin fee, among others. (4) Homes in Smyrna or La Vergne carry impact fees. (5) And there are costs of required infrastructure such as roads, curbs, sidewalks and street signs, (6) Cross said. "When you've got impact fees, development tax, basin fees and others, before you know it you've got a substantial amount of money going into funding various government agencies," he said. The problem with that, said County Finance Director Lisa Nolen, is that only a small part of the revenue goes to new school construction, and the county is expected to spend more than $500 million over the next 10 years on brick and mortar. County commissioners want to adopt the adequate facilities to pay for growth without raising property taxes or the wheel tax. "How much of that money goes to the county?" she said. "Where's the money to pay for the schools?"(7) The county does get a development tax of $1,500 per new home, but that's less than half than the $3,430 Murfreesboro sewer tap and basin fees. To generate an extra $1 million, the county would need either an alternative revenue source or to raise the property tax rate by 3 cents, Nolen said. The development tax last year generated more than $7.2 million in revenue for the county, and new homes more than $16 million in sales tax revenue, according to the homebuilders. Cross said the sales tax on the materials that go into that 1,700-square-foot home total about $3.08 per square foot. Jim Averwater, vice president of the association, said the county should abandon its search for the adequate facilities tax and focus instead on attaining a real estate excise tax, a sales tax imposed on the sale of any real estate. (8) "The thing that croaks me on it," Averwater said of the adequate facilities tax, "is the upfront fees on top of growth fees and permits we'd have to pay." The adequate facilities tax is non-recurring, collected only once in the life of a home, unlike the excise tax, which would also be immune to economic downturns that affect the home building industry. County commissioners also sent a bill to the Legislature asking it to pass an excise tax Ð a percentage of each sale of property Ð but that measure would require a statewide law, which is considered more difficult to approve than a private act. "The next time we experience one of those, their revenue is going to fall off," Averwater said. "They're not going to collect the adequate facilities tax, the development tax or the sales tax. And that's when government will need the money most." (9) It's been estimated that each new home supports 2.5 jobs, Averwater said. "If you lose even as small amount as 100 homes, that's 250 local families that are affected, 250 jobs that are lost. They're going to buy new curtains, furniture, landscaping, and that money gets spread around the economy. You've got insurance people, banking and mortgage companies, even sign makers. (10) "Think of all the people who've got a share in this indirectly. When these people aren't going into convenience stores, the convenience stores feel it." Averwater admits his view is biased because he's part of the home building industry. "There's thousands of people that have a horse in this race, and we all get emotional when something is going to affect our jobs," he said. "The fact of the matter is anybody living is or has been the cause of growth." The homebuilders represent half of the housing industry with Realtors the other half. The Realtors position on the adequate facilities tax is the same as that of the homebuilders Ð opposition Ð but the Middle Tennessee Association of Realtors is not yet ready to embrace the excise tax, said Candy Roberts, the association's president. "On funding issues overall, we feel very strongly that the county needs to be looking at other industries," she said. "Realtors and homebuilders have always paid their own way. We are very strongly interested in looking to other industries to see who is contributing to or benefiting from the growth. There have to be other industries that are contributing." The opinions of some individual Realtors as to the revenue options may vary from the official stance of the association. Realtor Marc Adkins said that as a member of the housing industry he is concerned about the potential effects of the alternative revenue sources on that industry, but he understands the county's budgetary predicament. "It affects the industry I work in, and there needs to be attention to how much job support the industry provides in the county, which goes right back into the tax base. "I think there needs to be a lot of study done on both sides of the fence," Adkins said. "A lot of jobs come from both sides of the business. But I understand growth has to be paid for, so it's up to the commission and the legislators to put a lot thought process into it and make the right decisions." Adkins said all potential revenue options need to be carefully examined, including the property tax and wheel tax. "They bypassed the property tax and wheel tax approach, but with growth, I think there's a lot that needs to be looked into," (11) he said.
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RNA Response (1) Less
than one year ago, the builders supported the Adequate Facilities
Tax, as a substitute for the Development Tax, because it was
a fair charge that would not impact the small home buyer disproportionally. (2) More
than likely, the lower-income home buyers will be buying homes
that are smaller than 1500 square feet. At the $1/ sq. ft. charge
for the Adequate Facilities Tax, the smaller home buyer will
be paying less in growth tax than they do now with the $1500
flat fee Development Tax. That is precisely why the homebuilders
favored the Adequate Facilities Tax as the recommendation of
the Alternative Revenue Task Force just last May (2004). (3) Liquor is certainly more heavily taxed. 20% - 25% of the purchase price is tax. It is a personal choice to buy liquor just as it is a personal choice to buy a NEW house just as it is a personal choice to buy a house when your income to debt ratio is marginal.
(4) Let's
remember that the taxes and fees that are charged are charged
for specific services that are received by the buyer.
(5) Impact
fees in La Vergne and Smyrna provide that home with fire protection,
roads and parks. Impact Fees directly benefit whoever lives in
that house for however long they live there. Then they benefit
the next occupant ... and the one after that. (6) All of which benefit the occupant of the house. Without a road, you couldn't get to your house, without curbs, you would have drainage problems, without sidewalks you and your children would have to walk in the street, without street signs no one could find your house, including fire, police and emergency personnel.
(7) ... and the roads, and the courtrooms, and the judges, and the ambulance stations and the staff to pick up rabid skunks, and the teacher's aids, and the preservation of the archives, and the deputies to catch the dope dealers, the rapists and the murderers. The fact is, we need more of these services precisely because of the rapid population growth in our county.
(8) The
problem is that the county needs an alternate revenue source
now, not in 2-3 years, the estimated time that it would take
to get statewide approval for such a tax. With the anti tax forces
as strong as they are in this state, and the realty industry's
potential opposition, there is absolutely no guarantee that an
excise tax would ever be approved.
(9) Here
is the fallacy in Averwater's conclusion:
If there is an economic downturn and the home building industry
slows down, it follows that the county will will also be able
to slow down the building of schools. (10) It is no secret that many of the construction jobs that have been created by growth have attracted very skilled and hard working non- resident and immigrant laborers. What we have to remember is that these laborers, quite a number of whom are hired on an independent contract basis and are often paid lower wages because of their inability to negotiate effectively (language may be a barrier), will go where there is work. If there is not enough work here, they will move on to the next county or state, just as they did when they came here.
Fact : Rutherford County is a thriving community that will continue to grow because of a combination of factors such as location, diversity of jobs, work force and the university among a host of others. Fact : Rutherford County leads the entire nation in new jobs created. Fact : The Development Tax did not slow growth. As a matter of fact, records for the number of building permits issued were set AFTER the development tax was DOUBLED. Fact : The Impact Fee in Smyrna and La Vergne did not slow growth. Fact : The Adequate Facilities Tax will replace the current Development Tax and will not slow growth. Fact : The Adequate Facilities Tax will take some of the burden of growth off of the property tax payer and will benefit the occupants of the home or industry that pays the tax. That property tax payer may very well be a senior citizen on a small fixed income who is trying to pay for medication in addition to rising taxes or the person who just lost their TennCare benefits.
(11) A lot has been looked into. This process started in 2003.
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