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Oak Ridge Today Leonard Abbatiello May 2012

Oak Ridge Today Leonard Abbatiello May 2012. What Makes it Fly? Or: How do we compare w/ others?. Airplanes & Cities. How are they alike! Both Need Money to fly! What are the Forces Acting on Both. A Different Concept. All Forces must remain In Balance. Taxation Rev.: Who Gets What?.

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Oak Ridge Today Leonard Abbatiello May 2012

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  1. Oak Ridge TodayLeonard AbbatielloMay 2012 What Makes it Fly? Or: How do we compare w/ others?

  2. Airplanes & Cities • How are they alike! • Both Need Money to fly! • What are the Forces Acting on Both.

  3. A Different Concept. All Forces must remain In Balance.

  4. Taxation Rev.: Who Gets What? • Federal Government: Income Taxes! • State Governments: Sales Taxes, 7 % • Some Income Taxes • County Gov: County Property Taxes • Some Sales Taxes, 1.37 % • City Governments: City Property Taxes • Some Sales Taxes, 1.37 % TN City Taxpayers Are All Double Taxed.

  5. Appraisals Vs. Time Estimates Computerization 100 % Value COR 1959 Apprsl. Equlz. Law in TN Passed 40 % Value Reappraisals Tax Basis Uniformity Exists Today in TN!

  6. General Obligation Fnds Business Taxes Sales Taxes, Lcl.- State Debt Borrowing Property Taxes What Services? Fire, Police, Recreation Schools Enterprise Fnds Direct Income Debt Borrowing What Services? Electric, Water, Sewer State Street Aid Cities: How are they funded? • Golf Course • West End Fnd • Econ. Dev. Fnd 15 Enterprise Funds, 3 Little Known Cash Funds Exist.

  7. Expenditures • Operational Expenditures • Staffs • Consumables • Capital Facilities • Major Maintenance • New Facilities • Debt Service • Sum of: Interest & Return of Principal Just Like Your Home

  8. Property Taxes Were Paid Before OR was a City. • June 1960 - Oak Ridge Became a City!

  9. City Tax History of Oak Ridge Government Assistance, 1945 -1996, 51 Yrs. • “42”-”60” AEC / DOE Owned - Glory Years, No Taxes • No Debt, No Responsibilities! • “60”- “85”PILT Payments – Not Free, but heavily Subsidized. • Started going into debt, $0.15 - $1.7 M • Highest City Taxes in TN. • “86”- “96”PILTS Ended, 10 Yr Buyout, $23.2 M lump Sum. • Replaced schools etc, debt climbed to ~$22 M • Tax Rate Highest in Tenn. • “96” PILTS Resumed, @ Ag. Rates • Assistance $$ to Schools largest in Tennessee & Growing • “96”- “06” Spending like a Sailor • Voted to Rebuild H. School, +$ 67 M, debt @ ~$55 M • “06” - “12” Spent Down, Refinancing, Major + Windfalls • Highest Full Service City Taxes in TN

  10. Real Rates are +1.6 to 2.4 % Annually for 23 years. Now is ~40 % more in Real $ than the past. Normalized Tax Rates, (CPI & Tax Rates x - Gth. Value.) Appraisals Rel. Prop. Taxes Have Increased with Time.

  11. Zuchelli Rept. Conclusions There are at least 6 un-acted upon major studies.

  12. Schools Performance, 2011 Like Performing Area Schools are Available.

  13. Continuum of Financial Conditions • Green - Stable Conditions • Yellow - Flag Warnings • Lt. Orange – Early Decline • Deep Orange – Advanced Decline • Red Flag – Serious Conditions A City Comparative Method Exists Today.

  14. Indicators of a Cities Financial Dyn. • Advanced Decline • Most New Workers choose to live elsewhere • Most Maintenance Services postponed • Debt Service is greater than 30% of Prop. Tax Revenue • Assessment Base growth % is less than the Inflation rate • Bond Rating may be reduced • May begin to reduce, or dump traditional services to County. • Interest rates are rising, further increasing debt service burden • A very high Property Tax Rate, rising @ ~ ½ Inflation Rate Oak Ridge Ranks Here!

  15. A Comparison of Oak Ridge • Alcoa • Bristol • Cleveland • Johnson City • Kingsport • Maryville • Oak Ridge OR is the Lowest Ranked of the Group and Getting Worse.

  16. Birmingham $6,300 Bond Rating AA Bankrupt 11/11 After, Caa1 (7 of 9 Council in Prison) Oak Ridge, TN $3,600 Bond Rating AA Bristol, TN $2,700 Maryville, TN $2,300 *Clinton, TN $540 * (Not Full Service) A look at G.O. Debt, $/Citz $6,000 $4,000 Debt Scale, $ / Citizen $2,000 OR Has The Highest Rel. Debt Burden in TN. $0

  17. Birmingham 120 % Bond Rating AA Bankrupt 11/11 After, Caa1 (7 of 9 Council in Prison) Oak Ridge, TN 36 % Bond Rating AA Maryville, TN 26 % Bristol, TN 16 % *Clinton, TN 13 % * (Not Full Service) Ability to Pay Debt, % Tax Rev. 100 % 60 % Pcnt. of Prop. Tax Revenue 30 % OR’s Ability to Pay Higher Taxes and Compete is Already Compromised. 0 %

  18. Comparison of Actual CPI Index and O.R Actual Growth Oak Ridge CPI Change We Can’t Grow Fast Enough to Stay Even w/ Annual Inflation

  19. “Drawdown Fund” Use Stops in ~ 2004 The “Fund Balance” was magnificently managed. Now it has been mostly consumed.

  20. Debt 2012 Debt has Grown at an Unacceptable Rate, Yet Wants & Needs Still Exist.

  21. Conclusions ? • The Weight, Lift, Thrust, Drag analogy works! • We can now effectively compare Cities! • We can answer: “How Much Debt is too Much?” • Oak Ridge is not well positioned! • It’s Time to: Implement A New Approach!

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