Town leaders decide repealing property tax was a bad idea

Spring Hill officials now look back on the three-year elimination of the city’s property tax as the greatest contributor to financial troubles from which the city only recently emerged, reports The Tennessean.

Alderman Eliot Mitchell, who was on the board that unanimously voted in 2005 to eliminate the property tax, now calls it his “worst decision” since first being elected in 2003.

It wasn’t until subsequent years that Spring Hill officials say they realized how detrimental the vote was, when the city became financially restrained by a burdensome internal debt and inability to build infrastructure and road projects to keep up with its rapid growth.

“That one decision, eliminating the property tax, affected us all the way from 2005 to 2013, even though they reinstated it in 2008,” City Administrator Victor Lay said. “When you eliminate property taxes, there are some benefits. A lot of folks will move to your town, but not having adequate revenue creates a lot of other problems.”

Only in the past few years has Spring Hill gotten back to a relative point of stability.
The city earlier this year paid off a five-year, $4 million internal debt caused after a past administration illegally borrowed money from its water and sewer department to bolster its general fund between 2001 and 2007.

…Every year that the tax was reduced through 2009 — the year after it was restored — the city saw budget shortfalls, growing significantly by 2006 after the tax elimination, with a $2.2 million shortfall. In 2007 it was a $3 million shortfall, and in 2008, it was $830,000.
That was the year a state audit declared illegal the internal borrowing of $4 million, and the city learned it would have to pay it back. Since then, many board members have publicly blamed the quandary on the tax elimination.

…During its no-tax years, the city lived off millions of dollars in reserves put aside during the boom economy. When the money ran out, transportation projects, parks and other capital purchases needed to keep up with growth were halted.