Alcoa Board of Commissioners enthusiastically approved a resolution on Tuesday to send the Blount County Commission, hoping for a change the cities believe is only fair for taxpayers.
Before the resolution passed, Alcoa City Manager Mark Johnson educated the board during a public briefing on March 25 on how Fund 177, a part of property taxes.
The county keeps 14 cents on every $100 for the assessed value of a home in Blount County to fund county school district maintenance and capital improvement projects.
“I don’t know what could be done to fix this, other than just make people aware of it,” Johnson said. “I don’t think 99.99% of people on the street that are taxpayers have a clue.”
The resolution called for Fund 177 to be equitably split with the city schools.
City residents pay county and city property taxes. Johnson said city taxpayers get an equitable return on all their county property taxes except for Fund 177.
Alcoa city commissioners expressed their intent on educating the public about Fund 177, like Johnson had educated them, before this year’s county commissioner primaries begin.
Maryville City Manager Greg McClain also intends on educating Maryville City Council about Fund 177. Then, he said, commissioners can decide what to do with the information.
“I could see where the politicians might say, ‘Hey, I think it is important that we get this out to those running for office, so they can ask the questions, ‘where do you come down on this issue,’” McClain said.
“In a nutshell, I think from Maryville’s perspective, we believe it is something people ought to be educated on and understand what the issue is.”
Background
Each dollar collected by the county from a city resident is proportionally split in accordance with school average daily attendance.
Ambiguity in the language of the Tennessee Education Finance Act of 1977 allows county schools to keep the entire portion of taxes raised for “education capital,” commonly known as Fund 177.
After years of disagreements and a lawsuit challenging the meaning of the statute’s wording, counties are still able to keep the entirety of Fund 177.
Since the 2020 tax year, city and county residents have paid 14 cents per $100 of assessed value of their home for the fund. Assessed value is 25% of the appraised value.
If a home is worth $100,000, the property owner would pay $35 toward Fund 177 each year in property taxes. In order to calculate this number, multiply the assessed value of a home by .0014.
Fund 177 is the second to lowest property tax collected but has Maryville City Schools losing out on approximately $1.76 million per year and Alcoa City Schools $665,000 based on the most recent average daily attendance.
Alcoa and Maryville receive a portion of county property taxes back to fund education based on the percentage of children in the county-wide population who attend each school system. ADA measures how many students attend each school, on average.
For the 2020 to 2021 school year, about 57% of the total student population attended a Blount County school, Maryville had 31% and Alcoa 12%.
The other side
Blount County Mayor Ed Mitchell said when the county started using Fund 177, officials had been looking for a way to fund school maintenance and capital improvement projects.
After research and conversations with other counties, Mitchell said the county commission learned about and adopted Fund 177 as an option for school funding in fiscal year 2015-2016.
Although the fund was litigated between the City of Athens and McMinn County, Mitchell said the county had won the court case.
Essentially, the court found that the language was unclear on purpose, Johnson said during the public briefing.
Reporting from The Daily Times states that county officials said keeping Fund 177 the way it is helps to not raise taxes for county residents.
Fund 177 is like a loophole, McClain said, that has allowed county school systems to save tax money for school building improvements without having to share it with all the citizens that paid for it.
If the counties issue bonds for improvement projects, like a building addition, the county has to issue a larger sum than needed for the county project alone. Law states that if bonds are issued, city school systems have to receive a portion based on ADA.
Both county and city property owners pay debt service for bonds that are issued. In an effort to not go into more debt, accruing money from Fund 177 can pay for projects instead of the county issuing bonds.
Both McClain and Johnson said bringing the cities’ issues with Fund 177 to the attention of the state legislature will be difficult.
“Counties carry a lot more weight in the legislature, generally speaking, than cities do,” Johnson said, “so it’s always an uphill battle.”