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Property Tax proposed as possible future revenue shortfall solution

Farragut’s Board of Mayor and Aldermen held its first budget workshop for fiscal year 2012, discussing revenue and expenditure projections, Thursday, March 10.

“This is early, early stuff,” Town administrator David Smoak said.

“There are still some question marks in the state budget,” he added, so the Town’s estimated revenue projections include conservative numbers.

Even with that caveat, Smoak said he estimated the Town’s local sales tax revenues could be up about 6.8 percent from fiscal year 2011 to FY12, at $7,087,507. Local sales tax makes up half of the Town’s revenues.

Smoak said revenue won’t make a big jump, though, as commercial and residential development aren’t expected to fully recover to pre-recession levels.

“There’s not a lot of commercial in the pipeline,” he said.

State sales tax shares might also be up since Farragut’s population showed an increase in the 2010 census results. State-shared sales tax is based on per capita population; the Town receives $78 per person.

Other sources of revenue — including Hall Income Tax, beer and liquor taxes and permitting and license fees — are expected to stay about the same.

Even with some expected increases, Smoak said the Board should look at alternative revenue sources including property taxes.

“This one I just want to throw up there so everyone knows. It’s just one of those things to look at,” Smoak said.

“For every one cent of assessed value property in the Town, that would bring in an additional $74,500 in revenue. I just wanted to let you see that,” he added.

The Board didn’t vote on any of the budget workshop items — the workshop was for discussion only.

Other possible revenue sources include business licenses, hotel and motel taxes, stormwater management fees and automobile tags.

If there are 500 businesses in the Town and Farragut charged $15 per business license, Farragut would make $7,500. Hotel and motel taxes could bring in about $326,000. Automobile tags could bring in $252,000.

Another option for raising additional revenues includes levying fees for discharging stormwater, Smoak said.

“This is something the Board should definitely consider,” he added. Stormwater fees could bring in about $141,000, which is just over what the Town spends on its stormwater system, including personnel, project and environmental regulation costs.

Smoak said expenditures are expected to be up about 1.6 percent from fiscal year 2011 to FY12, at about $5,415,315.

“We’ve seen very consistent revenue increases with somewhat of a leveling off in recent years,” Smoak said.

“But expenditures are gradually increasing each year.

Fifty-nine percent of the Town’s expenditures are spent on personnel costs. Personnel costs are split between salary (64 percent) and benefits (36 percent).

“We’re in the service industry ... that’s actually a pretty decent number for a municipality,” Smoak said.

Smoak said other expected increases in expenditures include health insurance increases, retirement costs and classification and compensation recommendations. Any large program changes also could increase expenditures, through new personnel or new programs.

“Those are any large purchases that change the way you do business,” Smoak said.


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