MEMPHIS, TN (abc24.com) - If you own a home in Memphis you can breathe a bit easier. Mayor A C Wharton now says he won't get the 47 cent tax increase he requested.
One reason is a majority of Memphis City Council members have let him know there is no way they can justify raising taxes on a $200,000 home by more than 260 bucks a year.
Wharton is concerned about the city's bond ratings, which is basically the same thing as what we'd call credit ratings. If council members take too much out of the city's savings account to avoid a tax increase, the mayor says interest rates on loans could skyrocket, and everybody would end up paying more no matter what.
There's nothing tougher than explaining a Memphis city budget. The politicians speak in a language all to themselves. It is confusing, complicated, and sometimes it seems they go out of their way to make it that way.
So let's try to make it easy.
Mayor A C Wharton's plan calls for a property tax increase. Three other plans from city council members would cut property taxes by taking money out of the city's savings account, called the reserve fund.
"A use of reserves is not in and of itself intrinsically bad. It's the amount, considering the rocky circumstances you're in," Wharton explained.
The reserve money is to be used when you've got problems like floods, or other natural disasters. It also shows all the bankers that the city of Memphis knows how to handle its dough.
According to the mayor, "Everything that we do is being watched with a very keen eye by the ratings agencies."
Let's try to simplify what he's saying even further.
When your credit rating goes down you can still get a loan; governments call loans bonds. But you'll be paying a lot more in interest which will cost you more to pay that loan back. It's the same thing for the city if their rating drops.
"Building roads, fire stations, police precincts. We don't have that much money that's lying around here in a shoe box," Wharton said, "so you have to go to the bond market and get that."
The mayor still wants to see a tax increase for this year to pay for schools. He told ABC 24 News he still feels that his budget, in his opinion at least, is the most responsible plan out there right now.
Still, most council members are predicting a tax cut, meaning they'll use money out of the city's savings account, the reserve fund, to pay the money they owe Memphis city schools.
The vote is scheduled for Tuesday, but they can stretch it out a little bit. A budget needs to be approved by the end of June.