Property valuations rise 14.4% as payroll-tax revenue is steady, so mayor proposes cutting property-tax rates

UPDATE, Monday, Aug. 24: The council heard first reading of the ordinance.

Property valuations in Midway are up substantially, and Mayor Grayson Vandegrift is recommending that the City Council reduce tax rates so the city will get about the same amount of tax revenue and property owners will collectively pay about the same amount of taxes.

Vandegrift has called a special council meeting for Monday to give first reading to the tax ordinance so the council can give it second reading and enact it at the regular meeting Sept. 8, "to get our tax preparations out on time," he told the council in an email. "The state was behind in sending the compensating rates."

Each year, the Revenue Cabinet looks at assessments made by property valuation administrators and calculates for each taxing authority a compensating rate, one that would give it about the same amount of property-tax revenue as the current year, which Vandegrift has proposed. (It also calculates what rate would raise revenue by 4 percent, the most that a taxing authority can get without being subject to a petition for a referendum on the rate.)

The valuation of real estate in Midway went up 14.7%, to $135 million, from $117.7 million. Personal-property valuations were $5.35 million, up from $5 million. The total valuation rose 14.4%.

Vandegrift was aware of the increases in July, when he named Council Member Logan Nance, Fiscal Court Magistrate Liles Taylor of Midway and Midway Business Association President Cortney Neikirk to a committee to study the possibility of tax rebates due to rising valuations.

He said then that valuations are rising because housing demand exceeds supply, and valuations in the city weren't closely scrutinized for four years before its housing market "really took off." He said Property Valuation Administrator Judy Bobbitt told him she divides the county into quadrants that are reviewed every four years and assessed at fair market value, mainly on comparable sales in the area.

The mayor also said in July that rates could be reduced, “but we’ve already cut them 30% and I don't want to hamstring ourselves or future leaders from being able to raise them if the revenue is needed."

His thinking has changed. He has proposed compensating rates of 6.2 cents per $100 on real property, down from 7 cents, and 6.4 cents on personal property, down from 7.5 cents.

He said in his email that there is an argument that cities shouldn't cut property-tax rates because "you can never get that revenue back," but he said that does not applies to cities like Midway, which rely mainly on occupational taxes on wages and net profits.

He said City Clerk-Treasurer Cindy Foster told him that occupational-tax income in the second quarter was virtually the same as in 2019, though "we expected to take our worst hit due to the pandemic."

Vandegrift said the coronavirus will continue to be unpredictable, but "Our numbers and the new businesses we're bringing in, along with the construction crews building new facilities, gives me great confidence that we will exceed our revenue projections for this fiscal year. Other revenues are holding steady as well, but occupational tax butters our bread."

He added, "I believe these rate cuts are appropriate since individual families and businesses are struggling. Anything we can do to ease their tax burden, not add to it, seems prudent and necessary."

He said his proposal amounts to a 12% tax cut on real estate and a 15% cut on personal property, "but as you can see from the calculations, it will overall still generate the same amount of revenue for the city."

The meeting will be held via Zoom at 5 p.m. and will be on the Facebook page Midway Streaming Government Meetings.