City of Memphis Mayor Paul Young sketched out an abbreviated version of his proposed $834 million 2025 budget — including a 75-cent property tax increase — to city council members during their Tuesday, April 23 meeting.
“My intent, definitely, was not to raise taxes,” Young said. “We have two options: we cut programs, services and people, or we can raise taxes. These really are the two options. I look at this as more revenue, more opportunity.”
For the owner of a $100,000 home, the hike would amount to an additional $188, raising their annual tab to roughly $863. The hypothetical bill currently amounts to $675.
According to the first-term mayor, the hike is necessary to protect the city’s bond rating.
“There are standards that are given to us from the rating agencies and the comptroller for the state for how we should maintain our balance,” Young said. “If your rating agencies downgrade us, we’re paying more for the debt.”
The tax is also estimated to add $105 million to the general fund annually.
Credit agencies require cities to maintain a minimum surplus of 10 percent of their budget in a rainy day account. The city’s goal is to maintain $110 million in the fund.
“We’re $20 million away from being below that standard,” said Young.
The state is even more hard-nosed.
Ideally, the comptroller expects two months operating income – $140 million in this case – to be set aside. There will be a $53 million shortfall on that front, if no action is taken.
Since the surplus years of the pandemic – which included a $163 million of federal ARPA funding in 2021 – annual contributions to the general fund, or “rainy-day fund” have waned. By comparison, only $6 million was added last year.
“This year…we balanced our budget by having to pull from our rainy day fund at $11.7 million,” reminded Young.
This was due to additional costs to the Memphis Fire Department’s payroll. The council approved the funding earlier in the month. The new hires were not factored in to former Mayor Jim Strickland’s 2024 budget.
If an increase isn’t passed, the city will need to raid the rainy-day fund again. However, Young has signaled his intention not to use the fund.
“Across these years, those dollars have been applied and we are where we are,” explained Young.
The additional revenue would also fund priorities, like crime-reduction programs and across-the-board raises for city employees.
Staffing is a “primary deficit-driver.” The increased costs are fueled by vacancy-filling. Due to competition from the private market – and higher-paying municipalities – attrition has taken a toll across city divisions.
“Those are people that get trained-up as fast as they can and leave for another job,” said Young.
All told, new hires account for a $10 million budget hit.
“When we start talking about costs, unless we’re impacting personnel, it’s really hard to get the major reductions that we want. That’s not to say we can’t find things. We’ll go through months of this process. We’ll find some things,” said Young.
Seventy percent of Young’s first budget request is devoted to personnel costs. In addition to new hires, the proposal also asks for a 3 percent raise for all city employees. Nearly three-quarters of personnel costs are public safety-related, Memphis Police Department and Memphis Fire Department staff.
Public Works, Solid Waste, Community Assets and other divisions make up the rest of the payroll costs.
There are additional costs too. An adjustment to the state’s appraisal ratio runs $14 million. Pension contributions tack on another $14 million, then add another $15 million for inflation, likewise under budget operations – like the Memphis Fire Department payroll shortfall.
“It was one of the most in-depth presentations we’ve seen, as it relates to the proposed budget,” said Council Chairman JB Smiley. “We just look forward to engaging the people and ultimately hear from the people and see what they think about the proposed budget.”
