Chattanooga’s budget already passed. Why are we still talking about it?

By William Newlin

Fast facts

• Chattanooga’s budget passed in June, but the tax rate hasn’t been set yet

• The tax rate determines how much revenue the city collects

• Mayor Tim Kelly is pushing for a rate that would bring in $50 million more than was included in the budget that passed in June. The additional funds would pay for raises in the police and fire departments, infrastructure projects, and more

• Some City Council members have pushed back on the mayor’s proposal

• Aug. 12 at 1:30 p.m.: A City Council committee will meet to develop an alternative budget

Why don’t we have a city tax rate yet?

When Chattanooga officials approved a city budget in June, they were working with incomplete information. They didn’t know the city’s “certified tax rate,” which comes out every four years after Hamilton County revalues all county property. Per state law, when property values go up, city and county tax rates have to go down so that taxpayers aren’t automatically hit with a big tax hike.

Mayor Tim Kelly’s office anticipated this, proposing a budget based on last year’s tax revenue and buying some time until the city could set a tax rate.

But now, the numbers are in, and the mayor and City Council have a couple decisions to make: What will the final tax rate be, and what will any additional revenue fund?

What’s a supplemental budget?

Since the budget process began, the mayor’s office has planned to propose a tax rate above the certified rate to bring in more revenue. The biggest request for extra funds comes from the police and fire departments. They’ve asked for another $23 million for pay raises to avoid “dire” staffing challenges, according to a July 29 city press release.

Whatever the final tax rate decision is, any added dollars will form the supplemental budget that City Council still has to approve.

The mayor’s proposal

The Kelly administration announced a tax rate and supplemental budget proposal in the July 29 release. At around $50 million, the supplement would not only bring up public safety salaries, but would also pay for a number of other items, including a new police position, down payment assistance, road paving, and park maintenance.

At a July 29 meeting, Mayor Kelly said the supplement would also catch up with steep inflation over the past four years, which “ affects every single thing that we spend money on for city services.”

“As a second-term mayor, I’m going to push all my chips forward and own it,” Kelly said. “Because I do believe it’s the right investment for the city.”

See the administration’s full supplemental budget presentation here.

Where City Council stands

Several Council members have pushed back on the mayor’s proposal, including Chip Henderson, District 1, Jenny Hill, District 2, and Jeff Davis, District 3, and Cody Harvey, District 4.

While they unanimously support pay bumps for police and fire, their primary concern is the potential tax burden on homeowners. Chattanooga property values increased 57% follow reappraisal, and that growth will translate to higher tax bills for most Chattanoogans even if the city keeps the certified rate.

“ I’ve been inundated with calls this week,” Harvey said in an Aug. 5 meeting. ”One gentleman said, ‘Please don’t raise my taxes because I can’t live in my house anymore.’”

Both Hill and Henderson emphasized a multi-year approach to funding other priorities, which could be accomplished with gradual tax increases. A committee of Council members plans to go back through the budget approved in June to find additional cuts and propose a tax rate lower than the mayor’s plan.

What this means for you

Given higher property values, the average homeowner would see around a $450 tax bill increase under the mayor’s proposal, per city data.

Chattanoogans have to pay Hamilton County property taxes, too. County Commissioners approved the lowest rate in decades, but again, most homeowners will owe the county at least slightly more due to property value jumps.

A majority of city residents don’t own a home, and Council members have expressed concern about landlords baking higher tax bills into rents. At a July 15 budget meeting, city housing finance director Hanneke van Deursen said landlords have already been passing along expected costs.

“Rents have gone up 47% since 2019,” van Deursen said. “And those go up in part to anticipate increase in expenses.”

What’s ahead

• Aug. 12 at 1:30 p.m.: City Council committee meeting to develop an alternative budget

• Aug. 19 at 3:30 p.m.: Public hearing on the mayor’s supplemental budget 

• Aug. 26 at 3:30 p.m.: Public hearing on alternative budget proposed by Council. First City Council vote on both budget options

---

Contact William at william@chattamatters.com