The Richmond Register


December 7, 2012

Some taxing districts do raise revenue more than 4 percent

RICHMOND — With all the renewed interest in taxing districts I am compelled to comment.

One of the biggest problems with taxing districts is a glitch in the compensating rate formula. The compensating rate is supposed to bring in the same amount of revenue as the prior year, taking into account higher assessments. The legislation that established this formula (House Bill 44) also allowed for up to an additional 4 percent to be added to the revenue without a referendum. The current formula, in certain situations, generates a compensating rate that allows tax revenue increases several times higher than the “so called” 4-percent maximum as specified by HB44. Several taxing districts throughout the state have been the beneficiary of this formula for several years.

 I am a strong supporter of our public libraries and would like to see more citizens utilize them. However our own Madison County Public Library’s tax rate could serve as a poster child for what is wrong with the current formula. The DLG (Department for Local Government) calculates the “compensating rate” for taxing districts using the approved legislated formula. Like a runaway train, the library tax revenue has increased by over 10 percent per year for several years, and the tax revenue increase is compounding.

We can be thankful that the library board agreed to a reduced rate increase this year, but we have no assurance of what will happen in the coming years. Budgeted tax revenues for the past three years for the Madison County Public Library follow:

• 2009-10 Budgeted Tax Revenues — $2,081,408

• 2010-11 Budgeted Tax Revenues — $2,306,969 (10.8% increase from previous year)

• 2011-12 Budgeted Tax Revenues — $2,600,000 (12.7% increase from previous year)

• 2012-13 Budgeted Tax Revenues — $2,749,000 ( 5.7% increase, from a tax rate that is less than the compensating rate)

These figures were obtained from DLG which maintains records for only three years.

The formula for calculating this rate is very complicated.

The issue that allows for the exorbitant tax revenue increase has to do with the different tax rates on real estate and personal property. The DLG is aware of this issue but say that they have no other recourse than to apply the approved formula because the way the legislation is written.

You can visit for a link to a presentation on how the compensating rate is calculated.

Another perennial problem with government is, as many of us know, its tendency to absorb as many dollars as possible. Taxpayers get suspicious when taxing districts accumulate millions in reserves and continue to raise taxes.  

Some of our finest citizens in the county serve on our taxing-district boards for little or no compensation, and we should all be grateful for their service. Taxing districts are a wonderful mechanism for providing services that greatly improve the quality of life in our community. We have several magnificent structures in our county financed by taxing districts. Taxpayers appreciate wise investment of tax dollars but expect transparent accountability.

Taxing districts, like many government entities, wield much influence and can be quite adept at “self preservation.” The state legislature has made taxing districts their number one priority this session with HB 1.

Let us not waver in our determination to improve the transparency and accountability of taxing districts. Please ask your state representative to support this effort and to make sure the compensating rate formula is fixed.

Billy Ray Hughes is a magistrate on the Madison Fiscal Court.

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