BusinessTN

Innovative solutions spearheaded by innovative elected leaders are needed to meet the challenges presented by the ongoing growth of Tennessee’s major cities. Editor Drew Ruble recently hosted a roundtable discussion with the elected mayors of Bartlett, Chattanooga, Knoxville and Murfreesboro to discuss the obstacles and opportunities facing Tennessee’s urban hotspots. (Memphis’ Willie Herenton declined to participate.)

Mayor Ron Littlefield, Chattanooga
Mayor Bill Haslam, Knoxville
Mayor Keith McDonald, Bartlett
Mayor Tommy Bragg, Murfreesboro

BTN: Mayor Bragg, Murfreesboro is Tennessee’s sixth largest city and among its fastest growing. Is managing growth your top issue?

Bragg: There is a lot of pressure not only on our residents and our businesses but on our city government to coordinate and work with individuals who are trying to stay in business, and to make sure roads, parks and recreation facilities, as well as police and fire coverage, are more than adequate to deal with the popularity of our area. We have been extremely fortunate and we’re trying to make sure the standard of living, the quality of life and the amenities in our community grow as fast if not faster than the population.

BTN: Mayor McDonald, what is the biggest issue facing the state’s ninth largest city?

McDonald: Crime, and/or the perception of crime, is one of our top issues here, having 10 miles of border with Memphis and the crime problem that Memphis has encountered. They are having success running some of those people off. But, in doing so, those people are going to find somewhere else to operate, and we’re just really working hard to make sure we’re not that “someplace else.”

BTN: You’ve had to spend a lot of money on new police officers and crime-related programs, yes?

McDonald: Yes. We’re proposing an 18-cent property tax increase for the purpose of adding 24 new positions and one new ambulance just to stay proactive rather than reactive to crime.

BTN: Mayor Haslam, what about Knoxville? Is your biggest issue keeping up with growth or creating more of it?

Haslam: It’s actually getting the right balance of that. You have to have real growth because your expenses are going to keep rising. Salaries are going to go up, as are health care costs, etc. So you have to have real growth in revenue. Because as you know with property tax, it’s the one kind of tax that inflation doesn’t impact. It all gets readjusted every time they do a reappraisal—the property is worth more but the tax rate has to go down by law. With sales tax and income tax, the inflation helps you. But since property tax doesn’t, you’re going to have to get real growth somewhere or your revenues are going to stay totally flat. Meanwhile, the regular cost-of-living items are going to drive up your expenses. So the challenge for mayors is how to get real growth in an area that’s already fairly developed that does not hurt the quality of life. That’s one of the biggest challenges, if not the biggest, facing any municipal mayor.

Littlefield: I agree. In Chattanooga, jobs and economic development remain the number one issue. I think everyone feels that we can do a better job of dealing with crime—an issue in every city—and all the other challenges if we can just keep economic growth on a steady up-trend. It is no secret to anyone we just had a very narrow miss with Toyota and the Enterprise South Industrial Park that went to Tupelo, Miss., instead. But we are now entertaining a steady stream of other prospects for the same piece of land. So that’s keeping us hopping. In a sense, finishing second on Toyota has just increased the flow of job prospects, so we’re feeling very good about Chattanooga’s chances at this time.

BTN: Mayor Littlefield, you have made dealing with homelessness a top issue in Chattanooga. Can you frame that issue in such a way that businesspeople can relate to the importance and economic impact of it?

Littlefield: It is an economic issue. Many people think that it is all about compassion, which is great if that’s what motivates you. But the city and county are spending about $7.3 million per year or more on services to the homeless population already. So it’s really about spending that money in the most cost-effective manner. We have undertaken an effort to centralize many of our services to create a one-stop shop on a nine-acre-plus site that we purchased last year that is located near our community kitchen—our most active facility that serves the homeless right now. By bringing many of those service outreach programs together, we think we can do a better job of getting the homeless into permanent supported housing.

BTN: Does homelessness affect business recruitment?

Littlefield: The business community in every major city I’m aware of is taking the lead in trying to address this. Cities certainly want to present the best image to people. Having a lot of unserved or underserved homeless people on the street just doesn’t present the kind of strong business climate image that most cities want. So rather than just shoo-ing them off the street, most cities are undertaking more compassionate and effective programs to get them into permanent housing. In Chattanooga, we have had great success in renovating our downtown and revitalizing our riverfront. Part of that is making sure people who come here to enjoy those amenities are not overwhelmed by homeless people attempting to panhandle them. But before you crack down on panhandling, we believe the best course of action is to provide another alternative for people who are truly in need to get those needs met.

Haslam: Here’s the story I tell business groups in terms of taking a different approach to this problem and problems like this. Once upon a time, there was a city by a river and they kept noticing these bodies floating down the river. They were fishing them out, and some of them had already died and some of them were alive. They put them in hospitals and nursed them back to health and found them jobs and got them on their feet again. But after a while they thought maybe the better approach and the more cost-efficient approach would be to go upstream and figure out what’s happening there to answer the question, “Why are all these bodies floating down the river?” I think businesspeople can understand the concept of trying to attack problems at its source rather than just taking care of the symptoms.

BTN: Several of you alluded to the issue of revenues keeping pace with growth. Meanwhile, the anti-tax sentiment across Tennessee remains quite strong. Metro Nashville voters recently passed a charter amendment handing the power to raise property taxes directly to citizens in the form of referendum elections. Given pressing municipal concerns, not to mention unfunded mandates, is there concern amongst this group that elected officials will be pressured by citizens to curtail any future property taxes?

Bragg: I think there is. In some ways, we as residents and taxpayers feel like somebody else ought to pick up the tab for us. I still maintain that the property tax is the fairest tax. If you’re able to afford to own property, then the distribution of taxes should be laid on all property owners equally. The constant demands of additional services certainly bumps up against that maxim. In light of the “no-tax” mantra, we have tried to offset the increased cost of services by growing our tax base—frankly, by getting people to shop here, eat here and move here so that the expanded tax base covers the additional cost of basic services. Fortunately, for the last 13 years in the city limits of Murfreesboro we have not had to raise taxes.

McDonald: I’m always concerned about politicians who run for office saying they are not going to raise taxes. Now, we certainly have a responsibility to run our cities as efficiently and effectively as we can; however, we also need to do a better job of making sure our citizens understand where their tax dollars are going for them to buy into it. For instance, I expected a real backlash on this 18-cent proposal, but we’ve evidently done a pretty good job communicating with the community. I’ve been speaking to groups for months since that came up, and all of them say it sounds like something we need. There is willingness if there is a perception that they are getting a dollar’s worth out of their dollar. That being said, there is a trend—and I’ve been in Washington, D.C., recently to the National League of Cities as many others were—and there are folks up there, including Tennessee Congresswoman Marsha Blackburn, who are putting together a so-called Taxpayer Bill of Rights for the federal government. Essentially, the national trend toward this idea of “don’t tax us” must be balanced against the fact that citizens at some point have to decide which services they want to do away with.

Littlefield: Chattanooga is somewhat unique because we share a border with Georgia. There’s not a river there or any kind of a barrier, so people in this area are very attuned to differences in sales tax, which are considerable on each side of the line—Tennessee sales taxes are higher than Georgia’s. There are differences in the gas tax. And in our case, we have few other options over here. We have proposed wheel taxes in the past and had them rejected by referendum, so the property tax is just about our only flexible way to increase revenue if we need to. Accordingly, we just need to be very careful when we’re competing with other states for prospects like Toyota, we have to be very creative in making sure our tax structure does the job because we don’t have the flexibility of other states.

Haslam: Ron’s answer is right on target for this reason—we have to have a competitive price. If you’re a business, no matter what you’re selling, you’ve got to have a price that’s competitive. So whether it is Ron competing with Georgia or just people deciding if they want to live in the city of Chattanooga or unincorporated Hamilton County, the deciding factor is whether the tax rate being paid is worth the services provided. That’s really what our job is every day—to convince people that the value received from our city is worth the price paid.

BTN: Talk about the effect on cities of the recent overwhelming passage of a Tennessee Constitutional amendment, the Senior Citizen Homestead Exemption, providing caps to property tax rates of qualified Tennesseans over 65 years of age.

Haslam: One thing people have to remember is that if seniors pay less, then others are going to pay more. There is no such thing as a free lunch. There’s a lot of maneuvering in the legislature now over what limits they are going to set on income. Personally, I think there ought to be limits on income and assets. In other words, you could be retired and have made a lot of money somewhere, have a lot of assets but not as much income and not be subject to a property tax increase.

McDonald: I agree. The stories most of us heard, right or wrong, were about freezing the taxes of people who’d been in their houses a decade or more and who had very few assets and were on an extremely limited income. That’s what people voted on. If we had framed the discussion on whether you would be willing for 80% to 90% of senior citizens in Tennessee to get a tax freeze and you pay the additional cost for them, you would have gotten a different result. But it is what it is. It has passed. I support it for those people in a limited income or limited asset situation. But there is a growing senior population, and growing assets of that senior population. It’s foolish for us to think that we can give our seniors some of the very services they need most, like police and ambulance service, but not pay for the inflationary cost that comes with providing those services.

BTN: At press time, the General Assembly was debating the so-called “Competitive Cable Services Act,” a proposal for possible radical changes in state law governing cable television and video franchising. Essentially, the legislation would eliminate local cable television franchising and replace it with a statewide franchising process. BellSouth/AT&T has argued that the current system is burdensome and time-consuming and a barrier to competition. Can you explain the opposition of cities to this proposal?

Bragg: We believe municipal governments play an integral role on behalf of residents in ensuring viable and stable service delivery, and cable services, which now include Internet and telephone services, are no different. Many of us are aware how it is getting harder and harder to talk to an actual person when you are asking questions about service or need service. I believe the best service can be delivered with these municipal franchise agreements, and I think the taxpayer is rewarded by quality service delivery as a result. So as a municipality, we would oppose any degradation in service quality. The statewide franchise would really take that service excellence away from the local residents.

McDonald: The current bill assumes that there is not the ability to compete right now, which is absolutely false. We would allow them to come and get a franchise. In fact, we’re the only city in Tennessee that had a franchise with AT&T/BellSouth. We had it for 10 years. They never acted on it during that period of time. So it was not so difficult as some of their lobbyists would have others believe. Though I understand that it is still in that bill to continue to pay the fees directly to the locals, they also put in there an ability to basically usurp our authority in terms of right-of-ways, aesthetics codes, etc. Those are things we have to deal with everyday: people concerned about the aesthetic value of their community, people that drive our streets. It seems like every time we put down a fresh coat of asphalt one of the utility groups wants to cut across it. So it’s about having that kind of local control so we can use a holistic approach to our planning for our easements and our right-of-ways. The business community ought to understand that it should be a level playing field, which is what typically everybody considers to be the best arena for competition. They currently have that. We’re not opposed to the competition. But we do want it on the same playing field.

Haslam: I think most mayors love the idea of competition. We want to encourage that and make sure that happens; however, we also believe that local government is where the best decisions get made about local conditions, and it concerns us that some of the local control is taken away under this bill. If there’s a way we can answer some of those concerns about the loss of local control, then I have no issue with expanding the people who get in to the market because competition is good.

McDonald: The other piece is the channel we use for public education. Part of this bill basically makes it impossible for us to run the education channel. And those have been, at least in Bartlett, extremely successful. I have people who continue to stop me and say, “I saw the board meeting. What about this?” Or, we produce a couple of our own shows to inform people and I hear feedback like, “I’m so glad to know that.” Well, they want like eight hours of non-repetitive, continuous programming, which most governments just can’t afford without their own television production company. But the ability to stream and repeat things so people during the day can get the information they need is very valuable.

Haslam: That’s a good example of some things that can be adjusted in this legislation to make it work. But right now, it’s not a level playing field and they’ve taken too much local control away. If they can solve those, again from where I sit, I love the idea of the added competition.

BTN: Any last thoughts?

Haslam: As someone who has been in business all his life and fully thinks the market can handle problems better than government can, I’m naturally somebody who believes in keeping government costs at a minimum. I think most mayors are. But we all have to balance that with the challenge we have to make budgets balance. We have nobody else to pass things on to. The Feds can say, “The state can take care of this.” State government can say, “Local governments can take care of this.” Well, it’s us at the bottom. Every day we face the struggle of creating revenues and keeping expenses in check without hurting the quality of life.

BTN: Thank you, gentleman.