McMinn Blog

McMinn and Athens residents were excited when on June 3^rd the DPA announced the future development of a $40,000,000 project with senior citizens in mind. The project, named Prospect Hill, would be composed of 97 condos along with 152,000 sq ft. of living centers, professional offices, and retail space. The following week the project, in typical bureaucratic fashion, was approved by the Athens Municipal-Regional Planning Commission. The next step, in further typical bureaucratic fashion, is seeking permission form the Athens City Council.

The good news didn’t last long. On June15^th, the developer went before the Athens City Council to be granted a subsidy, and it wasn’t just the City taxpayers which they were hitting, but they wanted McMinn County taxpayers to provide funds also.

Rather than pass around the hat and ask for volunteered funds or ask for investment backers, the developer wants to use the force of government to obtain part of its financing. Like most states, Tennessee has a program termed Tax Increment Financing (TIF.) Just the fact the name is so ambiguous raises questions in the mind of those who have the slightest idea that government thrives by taking money from one group to give to another group. Basically, TIF assumes that the value of property will rise after improvements are made, calculates that

increase, borrows money through the sales of bonds which it gives to the developers, and sets aside the increase in property taxes to make payments on the bonds. Sounds to good to be true, and it is.

First, by giving this money to the developer, the local would be ignoring the opportunity cost involved. Opportunity cost is the difference between what the governments would be losing by subsidizing this developer minus what the government would receive if another developer came in and did not receive the subsidy, or the same developer proceeded without the subsidy. While it may seem unlikely another developer would come in, no one predicted this one would. And it must be considered that the entire project may not proceed as planned. It is easy to imagine, for one reason or another, the development not being finished in its entirety in the first couple of years, or possibly never coming to complete fruition.

But the main concern of those paying the taxes is why should they provide a subsidy for someone not to pay their taxes. To drive home the point let’s examine a developer who started construction of 10 condos just when the economy tanked. Assume he has only sold two if them, making huge bank payments for 2 years on the unsold units, and paying property taxes on them as well. Is it fair to him for this new development to be subsidized by him and have to compete with his subsidized competitor in today’s market?

It has been well documented that TIF developments tend to shift development rather than create them.¹ A study by Dye and Merriman concluded “…evidence shows that commercial TIF districts reduce commercial property value growth in the non-TIF part of the same municipality.” So, after wasting over $45,000 on the 2003 Hyett Palma study to bring about the “for the rebirth of Downtown Athens,” the City Council is prepared to sabotage the members of the Athens Downtown Business Association. Adding more insult to injury, one should consider the fact a study based on Chicago TIF’s demonstrated “[A]ll of the areas immediately surrounding these TIF districts lost jobs, and these losses more than offset the number of jobs gained in the TIF district. The net decline in jobs was greater, and in three cases dramatically greater, then the decline experienced by Chicago as a whole.²

The moral question which should be asked of City Council members and County Commissioners is why should developers, businesses, and homeowners who are paying their taxes be forced to subsidize this development?

Black’s Law Dictionary: A tax “is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority” and is “any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name.”

We are about to receive the largest tax increase in the history of McMinn County. We have heard very little opposition; the politicians have slipped it in by disguising it as something else. Local politicians are blaming the state legislature; the state legislature is unwilling to take the blame. It is the dream of every politician – raise taxes and not be held accountable for it by the voters.

This tax will not be uniform, some will escape it, and some will pay dearly. It will require a bureaucracy of great proportions to implement, a bureaucracy the local government has not yet planned to establish.

While other local taxes forced upon us take money out of our economy with the hope that most of it will be placed back in the local economy, this tax will send almost all of its revenue to outside places such as Florida coastal areas, the Mississippi Tidal Basin, and the Ohio River Valley.

The tax of which I write is guised as a flood insurance program. The state legislature mandated it last year. Just the fact it was attached to a little noticed communications bill should make one skeptical about its purpose. The fact the government will use mortgage companies to enforce it can only raise further doubts.

A Standard Rate policy for $100,000 on the structure and $30,000 on contents will cost the homeowner $1,004 per year. By comparison, property tax on a $100,000 home in McMinn County is $389 per year.

As though not satisfied the above tax will do enough irreparable harm to our citizens, as reported in the DPA, the County Commission is now contemplating a property tax increase or a new wheel tax. This, following a County Commission meeting at which the Commission voted to spend $30,000 to help the City’s boondoggle Athens Supply buyout. The recession started in 2007 in McMinn County, the County budget that year was set for expenditures of $60,988,796; the last budget was $66,423,913, that is a 9% increase in government spending during the recession while spending by consumers, as measured by McMinn sales tax receipts, has dropped 13 percent.

With so many factories either closed or having cut back, so many storefronts empty, and an unemployment rate of 11.6%, a tax increase is the last thing McMinn taxpayers want – or need.

September of 2001 was the last time the Commission voted for a tax increase (a 12.6% increase in property tax rate.) Of the 8 commissioners who voted for that increase, five were defeated in the 2002 election; the two commissioners who voted against it, King and McPhail, were both reelected.

I was encouraged to see there was a movement in Athens to replace the present form of government. Let us remember the Great Document which states “That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government… “

Oligarchy is defined as a political system governed by a few people. This is what the current form of government of Athens has evolved into. We have and have had for some time, a Council derived from a small group of individuals, the majority of which have the same economic status, the same religion, the same social group and even belong to the same service club. (School Districts/Voting Districts) One should ask how does this happen. It happens because a City Council members can be elected by a minority of the voters as was the case in the 2002, 2004 and 2006 elections. To make matters worse, when one member resigns prematurely the new member is selected, not by the voters, but by the City Council. This was the case with two of the the current council members, when they first assumed power (Perkinson for Roseberry, Jackson for Alvey). Once they are incumbents, they are seldom turned out of office. When was the last time an incumbent of the Council was voted out? Incumbency does have its advantages.

The proposed new system will have the advantage of electing candidates from all areas of the city. Certain areas won’t be unrepresented or over represented, as they are now. Councilpersons will be more responsive to their constituents. Voters from one district who may vote in higher percentages than another district will not be able to have undue influence over another district.

This same oligarchy has extended power by controlling the office of City Manager, which is why it’s time to change to an elected Mayor. The powers that be will try to claim that the voters can’t be trusted to elect a qualified “professional” mayor, but what they really want is to keep control over who holds that powerful office. We saw this clearly a couple years ago when the current City Manager was caught in some wrong doing (commonly referred to as “Firegate”). After an expensive investigation that revealed a series of improprieties causing many citizen to call for his resignation, just three members of the council voted to retain him, most of whom hired him in the first place. These are the same councilpersons who don’t want the system changed now.

Who Decides Who Wins & Who Loses

(Hint: Its Not the Taxpayer)

The 2010-2011 Budget was adopted by the County Commission on September 20^th. Within it were gifts to the 12 local non-profits listed above, all seemingly worthy causes. The National Center for Charitable Statistics lists 187 non-profits for McMinn County, 175 which received no county tax dollars. In reality there will be more than the above twelve which receive taxpayer funds. Throughout the year there will be numerous request from organizations coming before the Commission requesting and receiving gifts. Last fiscal year among them were: The McMinn County Living Heritage Museum $4,232, Cage (for the Englewood Textile Museum) $4,300, the McMinn Central Dance Team $1,000.00, McMinn County American Legion $10,000.00, Central High School FBLA Club $300, MooFest Committee $2,500.

For those who believe the Team Evaluation Center is more important than the Good Faith Clinic, the Economic Development Authority is more deserving than The Missing Children Foundation, and the Behavioral Research Institute should receive tax dollars while the McMinn Area Cancer Relief Fund does not, this is a fair distribution of the taxpayers confiscated funds. For those that disagree with how the funds were used, it is not fair.

One must wonder why some don’t receive while others do. Is it because they are unaware of the giveaway, aren’t politically connected, have all the money they need, or are too moral to use funds taken by force from others? Do some receive simply out of tradition, because they are politically connected, or because they were first in line? We don’t know why those 12 received and the other 175 did not – we only know that the vast majority of taxpayers had no say in which non-profits received funds. Wouldn’t the fair method be to let each taxpayer decide which non-profit received his funds and bypass the government collection/distribution system?

During the recent “Meet the Candidates” forum at Westside Elementary School every candidate running for City Council made every effort to cast themselves as being for industrial recruitment. One candidate went so far as to bring forth the idea that the City should have its own economic development board. As of now, industrial recruitment for the area is left to the McMinn County Economic Development Authority (MCEDA.) The MCED’s Chief Operating Officer is Jack Hammontree.

The website of MCEDA lists 17 industries it claims to have “joined with the County, City Governments, and local Utilities Companies in locating new plants to McMinn County, and assisted a number of existing companies with expansions.” No definitive explanation is given for “joined with.” Nor is a listing of all the industries we have lost provided.

We do know that MCEDA receives tax dollars, lots of them. Not only does it receive regular budget funds from the County and local cities (5 governmental agencies in total), but when it wants to buy up more land special appropriations are usually forthcoming. The 2009 McMinn County Budget lists $60,000 for operating expenses given to MCEDA and another $90,000 for land purchases for economic development. Mr. Hamontree recently requested to raise the amount he could spend without County Commisson approval from $20,000 to $100,000; permission was granted. The above funds do not include the Mt. Verd water project of approximately $6 million. This benefits primarily the MCEDA’s Mt. Verd Industiral Park, which although billed to AUB, in reality the citizens of Athens are paying for it.

The 2008 990 filing for the MCEDA lists the organization’s gross income as $233,093 and net assets of $3,973,994. Mr. Hammontree’s annual compensation was listed as $101,605 – essentially the same as McMinn County Mayor’s $101,745 and Athens City Manager’s $101,179 compensations. The County mayor is an elected position, both Mr. Hamontree’s and the City Manager’s are appointed positions.

The MCEDA holdings include three industrial parks, the 350 acre Athens/McMinn Industrial Park (46% occupancy), the 600 acre North Etowah Industrial Park (23% occupancy), and the 223 acre Mt. Verd Interchange Industrial Park (0% occupancy.)

Recently, local businessman Bill Bennett challenged the effectiveness of the MCEDA in an op-ed printed in the DPA. The next day DPA publisher and MCEDA member Tommy Wilson, defended the MCEDA in the same paper.

The recession has hit McMinn County hard. Driving through the cities the unoccupied buildings make it look more like a depression than a recession. Unemployment has came down from a high of 14.9% to a miserable 11.8%. We will never know whether this would have been worse without the presence of the MCEDA, the question now is should taxpayers be forced to pay over $200,000 per year to subsidize a private organization which already has 877 acres set aside for those phantom industries so many have hoped for so long will come to McMinn County.

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