City leaders face budget shortfall: Local plant closings and economy to blame

By Bob Robinson
Star Staff

   The City of Elizabethton faces a financial squeeze as budget preparations begin for the next fiscal year, July 1, 2002.
   Among the city's primary sources of income are state-shared revenue, sales and property tax.
   City Manager Charles Stahl said contingency planning may be required if revenues continue to drop. "City Council would be involved in prioritizing the deferral of major expenses," Stahl said.
   The full impact of "actual" revenue losses on the 2002-2003 budget process has yet to be determined.
   However, City Manager Stahl said the city has been losing its largest paying taxpayer each year for several years now.
   The latest, Alcoa Extrusions on Stateline Road, announced Nov. 20 that it would be closing its operations in Elizabethton in June 2002.
   "Alcoa's closing will have a big economic impact on the city, not only as to loss of jobs, but as to loss of revenue. It makes a tough situation more difficult," Stahl said.
   In 2001, Alcoa's city taxes, real and personal property, total $154,674. Alcoa's 2001 real and personal property taxes in Carter County total $148,128.
   The adverse economic impact on the city will also be felt in reduced water, sewer and electricity payments.
   In 2001, Alcoa paid approximately $180,000 in water and sewer fees to the city and $918,872 to the Elizabethton Electric System.
   In 1998, the city had to shake off the loss of another one of its largest taxpayers when Sycamore Shoals Hospital was purchased by Mountain States Health Alliance, a non-profit organization.
   The affect was a loss of real and personal property taxes to the city totaling $141,044.
   Delinquency in paying taxes by another large taxpayer, North American Corporation (NAC), has also been felt.
   City tax records indicate NAC hasn't paid personal and real property taxes to the City of Elizabethton since 1996 and 1997, respectively.
   NAC owes $50,213 in real property taxes for the period 1997-2001, and $76,375 in personal property taxes from 1996-1998, according to the City Finance Department.
   NAC's personal property tax appraisals have also been reduced over the years, from $2,932,000 in 1996 to $1,727,000 in 1997 to $136,000 in 1998. The net affect was a reduction in taxes due the city.
   NAC's real and personal property taxes for 1999 through 2001, totaling $12,127, are due and payable through March 31 without a penalty.
   Some companies have received tax breaks as an incentive to locate here.
   Among them was Frank Schaffer Publications, purchased by McGraw-Hill in May 2001, which ceased operations here before the year was out. Eighty workers were displaced.
   Frank Schaffer's in-lieu-of-tax payments for 2001, totaling $1,000 each to the city and county, have not yet been paid.
   Star Building Systems, another benefactor of an in-lieu-of-tax payment agreement, paid $2,000 each to the city and county for the year 2001.
   Carter County owns the property now occupied by Star Building Systems and formerly occupied by Frank Schaffer Publications, according to the Carter County Tax Assessor's Office.
   Based on state revenue projections for the fiscal year ending June 30, 2002, the City of Elizabethton is expected to receive $99 for each of its 13,000 residents, or approximately $1,287,000.
   The General Fund per capita amount is broken down as follows: State sales tax, $66.87; state beer tax, 42 cents; gasoline inspection fee, $2.31; TVA in lieu-of-taxes, $6.58; gasoline and motor fuel taxes, $23.28.
   The Tennessee General Assembly, during the 2001 session, froze amounts in the state-shared revenue fund. "There is no future revenue growth for 2002," according to Bradley Moffitt, City Finance Director.
   Statewide, in 2002:
   * The Hall Income Tax, a tax on investment earnings, is projected to increase three percent;
   * The Corporate Excise Tax is expected to decrease four percent;
   * The mixed drink tax is projected to increase 4.8 percent;
   * Public safety salary supplements, $600 for police officers and $450 for fire personnel, are projected to remain the same as fiscal year 2001.
   "We will be watching revenues closely in the coming months and defer capital purchases and non-fixed expenses, if necessary," Stahl said.
   However, it will be necessary for the city to pay fixed costs, such as its electric, water and sewer bills, Stahl added.