KINGSPORT, Tenn. (WJHL) — Kingsport’s Board of Mayor and Aldermen got a first look at next fiscal year’s budget this week and came away resigned to a likely property tax increase — most likely 12 cents, which would bring the rate to $1.99 per $100 of assessed value.
City Manager Chris McCartt told News Channel 11 that while the city’s economy is growing, costs are growing more.
“All the revenue growth that we’ve seen, and it is substantial, has been eaten away by inflation,” McCartt said.
Under normal circumstances that strong growth might have allowed the city’s budget to absorb increased costs for things like gas and materials. But McCartt said Kingsport has also been trying to close a long-standing pay gap that’s left its employees “on the tail end of the market” for compensation.
Closing that gap in an unprecedented labor market can’t be done without more revenue, he said. McCartt just returned from a statewide human resources meeting, where he learned some local governments in Middle Tennessee are adjusting their pay plans upward by 10 to 16%.
“The Northeast Tennessee delegation was in the single digit area, all over the map, and then the Middle Tennessee area was 10 to 16%. Cities smaller than Kingsport looking at that type of jump.”
Kingsport has averaged a 6% employee vacancy rate the past two years compared to a historical norm of about 1%. The balanced budget McCartt presented funds a 2% cost of living adjustment and a step raise for an average raise of about 4.5%.
He said that’s unlikely to reverse the situation.
“The reality is if we don’t make a substantial jump…from a service standpoint within our city, which is our people, we’re a service-based industry, we’re going to reach critical failures at some point within this coming fiscal year as a result of not having bodies — and we won’t have bodies because we won’t be competitive.”
McCartt is obligated to present a balanced budget each year as the BMA begins its budget process. He said this is the first time as city manager he’s felt truly uncomfortable with the city’s ability to deliver what it should to taxpayers without a revenue increase. The city’s last property tax increase, of 13 cents, came in 2014.
“It is very difficult to walk into a boardroom knowing that you have a balanced budget, which I’m charged to do, but also realizing that there are gaps within that budget that are of concern,” McCartt said.
He said BMA members took the news in stride, asking staff to come back to its next workshop with scenarios from a 12 cent, a 15 cent and a 19 cent increase above the current rate of $1.87. One cent on the property tax rate brings in about $200,000 annually.
The BMA has been grappling with budget amendments and rising costs during this fiscal year, which ends June 30, as inflation has really taken hold.
“We’ve explained, inflation is the cause behind this,” McCartt said. “We’ve had to most recently move several hundred thousand dollars within our fleet budget just to address fuel costs.”
He said he realizes taxpayers aren’t going to be thrilled if property tax rates increase by 6.4%, which is what a 12-cent increase would represent. That’s about in line with the inflation rate or a little lower, though.
“We’re always looking for ways to not have to come to the board with an ask, whether that’s through fees or through taxes,” McCartt said.
“I think the same thing that many people are seeing as they look at their day to day in terms of expenses going up, well your city is seeing those same things, and in order for us to continue to provide the basic services as well as many of those amenities that make Kingsport unique, we’ve got to stay competitive.”