Are taxes in Tupelo too high?

By Emily LeCoz/NEMS Daily Journal

TUPELO – A typical middle-class Tupelo homeowner pays $470 more in annual property taxes than a rural Lee County equivalent, a disparity some say drives good families from the city to the sticks.
As municipal leaders wrestle with how to boost Tupelo’s middle-class population after a decade of stalled growth, city taxes have emerged for some as a source of concern.
“Some people see our taxes as being too high,” said Mayor Jack Reed Jr. “But, as a citizen, what I hope is that we get a fair return for our taxes.”
The city’s property tax rate is 32.47 mills. That means for every $1 of assessed property value, an owner pays $0.003247 in taxes.
For a $150,000 home – the value typically assigned to middle-class dwellings – that’s $487.
Tupelo’s millage rate ranks in the middle of Lee County’s nine municipalities. Four communities have higher tax rates, with Verona’s 37.44 topping the pile; and four have lower rates, with Shannon’s 21.61 rounding out the bottom.
Tupelo’s tax levy drops to the county’s second-lowest when excluding the 10 mills set aside for the Major Thoroughfare Program. City residents vote every five years to tax themselves in order to fund the successful road-improvement program.
The next election is set for May 3.
Rural residents pay no city taxes, and therefore bear the lightest burden. But their county taxes are higher to cover the cost of volunteer fire protection – they pay 38.77 mills in county taxes versus the 34.77 mills charged to city-dwelling Lee Countians.
All residents also pay school taxes that vary depending on the school district in which they live. The Tupelo Public School District’s millage rate is set at 65.31, the highest in the county. Lee County Public Schools charge 62.62 mills. Residents in the Baldwyn School District pay the least with 58.87 mills.
Neither the city nor county government control school millage rates. They are set by the school board.
All together, the combined property tax burden for a Tupelo family in a $150,000 house is $1,988 a year. That’s compared to $1,521 in combined taxes on the same house outside the city limits – a difference of nearly $470.
The same house located in the fast-growing suburbs of Guntown and Saltillo generates $1,858 and $1,866, respectively, in combined property taxes.
Cities collect property taxes to feed their budgets. The money pays for municipal services like police and fire protection, road and drainage work, planning and code enforcement, parks and recreation and administration and finance.
For most cities, property taxes pad the bulk of their budgets. But that’s not the case in Tupelo, where a bustling commercial sector funnels a steady stream of sales tax dollars into the city coffers. Fifty percent of Tupelo’s general fund budget comes from sales tax revenues versus 20 percent from property taxes.
“Tupelo is blessed with a strong retail area that generates significant revenue for the city, thus, allowing the city to set ad valorem rates slightly lower than areas with lower sales tax revenues,” said P. Greg Jarrell, a CPA with Franks, Franks amp& Jarrell who performs the city’s annual audits.
“For example, Tupelo generates $497 per capita of sales tax revenue while a city such as Clarksdale generates $126.08 per capita sales tax revenue,” Jarrell said. “Bottom line: Cities must fund basic services whether from ad valorem revenue, charges for services and/or sales tax. Cities such as Clarksdale have few options other than to set ad valorem rates higher than cities such as Tupelo, given their per capita sales tax revenues are slightly more than a fourth of Tupelo’s revenues per capita.”
Clarksdale has one of the state’s highest city tax rates at 67.77 mills, but others far surpass it. The Delta town of Friars Point set a 83.74 mill levy, the nearby town of Winstonville set its rate at 96 mills.
Jonestown, also in the Delta, has the state’s highest property tax rate of 109.03 mills.
Cities without a solid base of upper-and-middle-class homeowners tend to have the highest property tax rates. With fewer expensive homes to tax, the burden on lower-income families becomes greater as cities struggle to maintain the same level of services.
This scenario has fueled Tupelo’s efforts to halt its middle-class slump. It has a $15.7 million neighborhood revitalization plan on its table that City Council members could adopt within weeks. The plan, though still controversial, aims to attract and maintain more middle-class families through a series of initiatives.
“Doing nothing causes us to fall into a further degraded state, of losing citizens and homeowners and straining systems,” said past Community Development Foundation chairman and Tupelo banker Mitch Waycaster, speaking last month in support of the plan.
“It could eventually cost the taxpayers as sales and property tax revenues could continue to decline,” he said, “causing a tax increase just to keep the level of services we’re accustomed to.”
Tupelo’s tax rate has risen 2.5 mills in the past two decades. It was 29.97 mills from 1992-1999, then it dipped to 26.46 mills in 2000. In 2001, it rose to 27.47, and four years ago it bumped up again to 32.47.
Jarrell said called Tupelo’s millage rate “quite reasonable” compared to other similar-sized cities in the state. It’s lower than that of Clinton, Columbus, Corinth, Greenville, Gulfport, Hattiesburg, Jackson, Meridian, Natchez, Olive Branch, Southaven, Vicksburg and West Point.
But it’s higher than those set by Biloxi, Booneville, Hernando, New Albany, Ocean Springs, Oxford and Starkville.
Of the 276 municipal property tax rates identified by the Mississippi Department of Revenue, 138 are higher than Tupelo’s and 137 are lower.
City Council members haven’t mentioned a tax increase for the foreseeable future, but somewhere down the road it’s probably inevitable.
“Everybody wants low taxes. But you’ll pay those taxes one way or another; it’s just a matter of how,” said Mississippi State University Political Science and Public Administration Professor Jerry Emison. “Do you want to write a lower check to the government and then pay in the long run for less services, deteriorating neighborhoods, declining home values and poor schools? Or do you want to pay a little more to the government and get good public services? Either way, you’re going to pay.”
Contact Emily Le Coz at (662) 678-1588 or emily.lecoz@journalinc.com.