JONESBOROUGH, Tenn. (WJHL) — Washington County commissioners are staring at a roughly $5 million budget hole, but Mayor Joe Grandy said he’d like to avoid a tax increase the same year as Johnson City passes one and the county has a couple of levers it can pull to avoid one, at least this year.
One of those levers is likely to provoke controversy — a change in allocation of the rural portion of local option sales tax, which brings in about $8 million total annually.
“This year a number of communities around us…are necessarily having to make some changes in order to cover increased salaries and other things, so our goal is to avoid that this year and not to double burden our citizens with the tax change,” Grandy told News Channel 11 Friday.
It would take about a 15-cent property tax increase to make up the current gap without making cuts or finding other revenues. A penny in property tax brings in about $350,000 in Washington County.
Grandy said Washington County isn’t immune to the common factors that have been prompting numerous local governments to consider tax increases. Labor costs are the most prominent factor and Grandy said the county has raised wages significantly, particularly in law enforcement, and probably isn’t done yet.
“The market’s changed and the business world is seeing different salaries in almost every place,” Grandy said.
“To provide the service that people expect from our county in public safety and education and all of the other services that the county provides, we have to keep good people,” Grandy said. “Losing our good people and having to retrain new people is very, very expensive.”
Salary increases make up the bulk of higher budget requests this year as well, for the new fiscal year that begins July 1. But Grandy said several years of increases have helped reverse shortages, including in the county jail where one-third of correction officer positions were open at one point.
“That’s been rectified but it’s taken a little extra salary to accommodate that.”
Starting pay for road deputies, meanwhile, was just $12.30 an hour a half decade ago according to Grandy. It’s now reached $18 an hour and could go to $21 this year — increases Grandy said he doesn’t begrudge one bit.
“We’ve got to be competitive and we have to protect our citizens,” he said.
Pulling the levers
Grandy said commissioners are considering two primary ways to balance the budget without a tax hike.
One is an idea that was floated three years ago and abandoned after loud opposition from supporters of both the Washington County and Johnson City school systems.
Grandy said while all other counties in Tennessee keep the entirety of local option sales tax (2.5% in Washington County) for general government — and Johnson City does the same — Washington County has shared half of that total with the school systems every year since 1990.
Keeping that money in the general fund would increase county revenues by about $4 million, and leave both school systems needing to adapt their budgets in other ways.
Grandy said Washington County Schools have a fund balance of about $22 million.
“It’s required to be a little less than $3 million, and so from my seat, I feel like we need to balance total county dollars before we go to the citizens and ask for more,” he said.
County commissioners apparently agreed in their last budget workshop.
“That was the direction that they gave the budget committee so I think that’s probably what we will move forward with presenting back to them,” Grandy said.
“That will impact the general fund roughly four million dollars and hopefully avoid the necessity to change our property tax rate to cover these salary changes.”
Even with that decrease, if sales taxes stay robust the school system is likely to need far less than the $8 million in fund balance it would need to budget without more money from the county, Grandy said. The schools budgeted $6 million in fund balance drawdowns in the current year but will probably spend less than a million from it, he said.
The second option to avoid a tax hike lies in the current debt service fund balance. That has a self-imposed floor of $5 million, but it currently sits at close to $11 million. Grandy said he’ll recommend the commission use up to $2.5 million from that reserve if needed.
As for a tax increase soon if not this year, “it’ll happen,” Grandy said. “But my goal is to push it a year out so that it doesn’t tag team with Johnson City’s.”
Johnson City commissioners passed a 25-cent property tax increase on first reading June 1. It faces two more readings to become official.