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VOL. 40 | NO. 13 | Friday, March 25, 2016

Senate poised to do real damage via de-annexation

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Memphis Mayor Jim Strickland makes a persuasive argument against de-annexation legislation now being considered by the state Legislature, providing a long list of figures to show it would devastate the Bluff City.

Strickland, a Democrat, is even drawing support from Republican Lt. Gov. Ron Ramsey and Gov. Bill Haslam, if not from Memphis-area Republicans.

The measure would allow residents in 14 areas on Memphis’ fringe to hold referendums to break away from the city, in addition to affecting Kingsport, Knoxville, Chattanooga and Cornersville.

In just 10 of those Memphis locations, a total of 111,000 people – 20 percent of the population – could vote to de-annex, costing Memphis $27 million in residential property taxes, Strickland says.

The House approved the de-annexation bill March 14 in a 68-25 vote. And, after an hour of debate on the Senate floor Monday, a 19-12 vote sent it back to a committee for discussion on 13 amendments.

On Wednesday, the Senate committee approved an amendment allowing de-annexation by refendum in all Tennessee cities. Additional amendments will be discussed when the committee reconvenes March 29.

If Memphis commercial and industrial areas go away it could lose another $50 million.

Memphis and Shelby County combined already have the highest property taxes in the state, the mayor says removing these side pockets of middle and high-income residential areas would force the city’s 30 percent poverty rate to “skyrocket,” along with the unemployment rate and crime rate.

“If we take on these additional challenges, it’s going to result in a huge property tax increase. In my opinion, that’s one of the last things we need in Memphis, because it chases more people out of the city,” Strickland says, trying to sell his concerns to the Shelby County legislative delegation on Capitol Hill.

“It will also have a negative impact on economic development. Memphis is a catalyst for economic development in all of West Tennessee. We’re in a battle now to recruit businesses.”

Memphis could keep industrial and commercial properties on the tax rolls, though Strickland says it’s too early to say whether the city would maintain those because it would still have to provide police and fire service.

On top of this potential loss, the Memphis City Council needs to come up with $20-$40 million to fund its pension plan and to hire some 400 police officers, according to Strickland.

And if that’s not enough, it would see a $15 million loss if the Hall income tax on interest and dividends is watered down further.

Even though de-annexed residents would continue to pay toward Memphis’ general obligation debt, they would not chip in on the city’s pension fund or other post-employment benefits, which together total $1.1 billion in unfunded liabilities.

“I can say we’re all in this together, whether you live in Memphis, Tipton County, Germantown, Collierville or Dyersburg. We’re all in it together. I know y’all agree on that,” Strickland pleads.

To make matter worse, despite some limited gains if Memphis were to stop providing services in these 14 areas, Strickland predicts Shelby County will have to raise taxes to serve the de-incorporated areas. He points out the sheriff is calculating 150 new officers will be needed for patrols, along with more vehicles, guns, uniforms, etc., costing roughly $16 million for law enforcement alone.

Shelby County Mayor Mark Luttrell isn’t quite as concrete, saying he’s not ready to advocate a tax increase as his staff studies the potential financial impact.

“I think Mayor Strickland makes some points, there is going to be some cost involved in this. What we’ve got to decide on Shelby County government’s side is will that require additional revenue or can we do it with existing revenue,” Luttrell says.

Annexation “heartburn”

Rep. Antonio Parkinson, a Memphis Democrat, agrees the legislation could affect property taxpayers in his district.

“And as a side note it could cause people to start thinking [about a] metro form of government also to balance that back out, because then everybody would be back in but under a metro form of government,” he says.

He’s not sure how long consolidation would take, since Memphis, a “depressed” city, could be taking the brunt of the financial blow.

At the same time, Parkinson says he understands the “heartburn” for residents who want de-annexation, especially the Southwind situation.

“They were annexed in one day and given a bill the next day, so to speak, and the services were not even rendered yet,” he says.

Residents in these annexed areas have been fighting incorporation for years, saying they never asked to be brought into the city limits and don’t want the services provided.

Two areas of dispute, south Cordova and Southwind, have been in the proposal for a while, but 12 more areas were added to the bill sponsored by Rep. Mike Carter of Ooltewah, just outside Chattanooga. It passed the House on a party-line vote of 73-25.

Those others caught Strickland off guard, putting him in the position of saying he’d be willing to let them go if Memphis could keep the others.

Republican Reps. Curry Todd of Collierville and Steve McManus of Cordova are driving the charge for de-annexation in Memphis. Apparently, McManus woke up one morning and read in the newspaper he’d been annexed.

Todd contends the Memphis City Council had plenty of opportunity to let Southwind and south Cordova go, and he points out Johnson City recently de-annexed one of its neighborhoods.

“Mayor Strickland and I are personal friends and will stay personal friends even though we agree to disagree on some issues,” Todd says, wrenching Strickland’s presentation during the delegation meeting.

“I know we’ve talked about sitting down at the negotiating table, but that’s not happened. We’ve not sat down at the table with any of your staff and went through that.”

A former police officer and law enforcement lobbyist, Todd criticizes Memphis for not contributing to police and firefighter pensions for more than six years, saying the city is to blame for those financial shortcomings.

Add that one to the litany of Memphis’ problems.

And though some legislators believe the sky could fall – or Memphis could become another Detroit – if these areas are given the option to leave, a more optimistic Strickland isn’t ready to go that far.

“This just puts us back a step, and we can’t afford that,” he says.

The sponsor

Ooltewah’s Carter came up with the de-annexation bill to target “the most egregiously annexed areas” after traveling across the state studying an annexation measure he passed to give people a voice when a municipality seeks to bring them into the city limits.

In the process, he found pockets of people who never wanted to be brought into a city and aren’t satisfied with the level of services they receive.

The bill affects Kingsport, Knoxville, Chattanooga, Cornersville and Memphis areas, giving certain areas the right to hold a referendum to de-annex upon a petition of 10 percent of the registered voters.

Votes could be held in regular elections set for 2016 and 2018, and they would have one shot to get it done, according to Carter.

“De-annexation is a law now. It’s just not a law available to the citizens. It is a law only available to the cities,” Carter says. “They can kick you out and make you take the debt with you. We’re saying we can kick ourselves out and we have to take the same debt.”

De-annexation is just one part of the bill. One section would stop cities from de-annexing roads but keeping the state funds to maintain them. The other would allow cities to annex property at the request of the owner without the land being contiguous to the city limits.

Carter also disputes some of Memphis’ figures, saying the city’s purported loss of $27 million in residential property taxes would drop to $15 million because it would continue to send tax bills to property owners to collect on debt obligations. He also points toward a national study showing costs for providing services to a home are higher than the property tax it generates.

“If the city is providing the services they promised to serve, and we’re eliminating that duty to serve, remember the day you pull out of the city, they owe you nothing else, but you continue to pay on the debt,” Carter says. “How in the devil does that hurt a city?”

But Carter is running headlong into opposition from Lt. Gov. Ramsey, who is backing an amendment to remove Kingsport from the bill. Ramsey planned to vote against it on the Senate floor because he says he doesn’t believe the Legislature can justify passing a bill targeting only a few cities.

Ramsey is miffed, as well, by Carter’s use of the word “egregious” to determine the cities chosen.

Asked if the state has a panel or group deciding which areas were annexed incorrectly, Ramsey says, “Apparently, it’s Mike Carter who decides which ones are what. … And I do believe it’s gonna be tied up in courts for a long time.”

Taking retroactive moves against cities that legally annexed areas makes no sense, either, Ramsey says, and he points out residents can already use state law to remove themselves from a city if they aren’t receiving promised services.

Total disdain

While Parkinson may understand residents who want out of Memphis, he and Rep. Joe Towns Jr. hold quite different views on how this should have been handled.

“One of my biggest concerns is it does not have statewide application. When they pass these laws, I do not like Shelby County being the target of specific laws when they do not have statewide application,” Parkinson says.

“If you’re going to do it for Shelby County, Chattanooga and a few other select cities, you should do it for all cities across the state. Give them that ability.”

Towns says the House decision should have reflected the merits of the bill, instead of coming on a party-line vote.

“What they’re doing is screwing Memphis. It’s as simple as that,” Towns says. “And they’re screwing it, as I said on the House floor, I think they’re attempting to screw it because the city’s a majority African-American and they’re denying self-determination and self-rule.”

Memphis annexed those areas according to the law some 18 years ago, he says, and those who fought incorporation lost in court.

Taking retroactive steps to circumvent a City Council decision is flat-out wrong, Towns contends, and he says Memphis doesn’t need Carter getting into the middle of its business.

Towns hopes Gov. Bill Haslam, who has expressed reservations about the bill, would step in and veto it. But in passing along party lines, a veto could be overcome with ease.

“Whether the governor vetoes it or he doesn’t, what the city’s gonna have to do is go to court because we see there’s a little bit of discriminatory practices as well as some things that may be unconstitutional,” Towns says.

“I’m hoping the cities will take it to court. That’s what I’m encouraging them to do. Sue the state, sue the hell out of them.”

That would make two Memphis lawsuits against the state of Tennessee, the other involving K-12 education funding.

As Mayor Strickland says, after only six months in office, he is barely keeping his head above water. And this could sink him deeper.

While this Republican-controlled Legislature seems to hold little regard for the decisions of city governments, saying they are a creature of the state, there’s something to be said for self-determination (Southwind and south Cordova are probably saying they want to determine their own outcome).

Ultimately, though, here are two things to consider. Who decides whether a city’s annexation vote is egregious: The courts or Carter?

Regardless of the Legislature’s decision, somebody’s going to lose in this debate. Should it be widespread or a patchwork of repairs on an old quilt?

Sam Stockard can be reached at sstockard44@gmail.com.

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