One of the most important voting items on the October 3 ballot is a referendum on whether to add a sales tax to help fund pensions and health care benefits for firemen and policemen.
As with all tax issues, I always urge a “no” vote. Once a tax is instituted, it just never comes off. The only exemption to this rule happened more than a decade ago in 2006 when Congress got rid of an 1898 tax on phones that was instituted during the Spanish American War.
Who knows if the tax money goes to the proper place? Most of it appears to go to line politicians’ coffers by benefiting their lobbyist friends.
Besides, we pay too many taxes anyhow. This is particularly true in Memphis with our highest in the state sales tax and high property taxes. We are driving people away with these fees.
Amazingly, two city council members are urging the public to vote “no” on the referendum.
Kemp Conrad and Edmund Ford penned an op ed in the Daily Memphian telling why.
Here’s what they said:
Memphis has a critical issue on the ballot this election, and that is why we are asking you to vote “No” on the sales tax referendum. A sales tax increase would return us to a dangerous fiscal path that jeopardizes the long-term outlook for Memphis, and for the police officers and firefighters the referendum purports to benefit.
Normally, a tax increase would be a simple choice of voting “Yes” because you believe in what the tax hike will pay for and you believe the government will use the money for its intended purpose. This proposed tax increase isn’t that.
This sales tax referendum asks you to approve a sales tax increase to return our pension and healthcare benefits to a plan that only five years ago found Memphis on the precipice of fiscal ruin.
Before we explain why this tax increase is bad for our city, we should provide a little context.
In 2015, our city faced a fiscal cliff. There were three options back in those dark days: a 30%-plus property tax increase; a massive reduction in city services, including mass layoffs; or reform of an antiquated, unfair and unaffordable healthcare and pension scheme that Memphis taxpayers could no longer afford for the two-thirds of retirees who don’t even call Memphis home.
Had we not chosen to act, we would have been forced with – at minimum – a state takeover of your pension plan and at worst, a bankruptcy. Pensioners would likely have received a fraction of their retirement.
The Memphis City Council studied the matter in depth and then took bold action to create a hybrid pension plan and adjust to healthcare benefits that were sustainable, yet still fair and competitive. We advocated for this change because we care about the long-term viability of Memphis – not just the next union election.
We also care about city employees – especially those in public safety as they risk their lives every day – and they deserve to have a pay structure and retirement vehicle that they can count on over the long haul.
The Ponzi scheme plan of yesteryear once again being promoted by the unions may be good for union bosses trying to keep their positions, but does not do right by all city employees. The former plan was simply not sustainable.
Even so, this was by far the most difficult issue we had to advocate and vote for in our time on the City Council. This year, the city has achieved the once elusive goal of fully funding our mandated ARC (annual required contribution) – a $50 million annual additional lift – and we did it without raising taxes, but by running our $708 million City of Memphis government more efficiently.
If you vote for restoring the Cadillac benefits of the past, please know two things. First, the experts estimate that maxing out this regressive sales tax, as the referendum would do, will generate $54 million per annum, and in a downturn this number will certainly drop. Also, based on state law, via a referendum, Shelby County government can take half of these proceeds to fund their own programs, leaving the city with only $27 million to accomplish the referendum’s stated goals.
By taking away the private exchange for retirees and shifting more financial burden to the city (taxpayers), the city’s actuary, PwC, and our finance team, have estimated that adding all employees and retirees back into the prior plan would cost $43 million in year one – conservatively $40 million for additional healthcare costs and $3 million for the pension. Even if the county did not take its share, it would only be a matter of time until the additional revenue was gobbled up. But if the county does elect to take its share, Memphis is in the red by $16 million in year one!
It is impossible that the sales tax increase will fully fund any of the listed items in the referendum. Even if the city chooses to restore the benefits of the past, there simply is not enough money in this sales tax to cover the increasing healthcare and pension cost. We will quickly be back in the same dark, deep hole we dug Memphis out of less than five years ago.
Finally, consider two important facts. First, you should know that regardless of what the referendum language states, it’s up to a vote of the City Council every year on how this money gets spent. And we don’t even know who will be on the council next year and what their governing philosophies will be.
Even if the citizens vote “Yes,” the government has no obligation to spend the money on the items listed. Yes, you read that right. You are really only voting to increase the sales tax, not to restore benefits. So, vote “For” if a game of three-card monte with your money seems to be a good idea. You will be the “mark”.
Second, we have already created and funded universal needs-based pre-K. Full stop. And we have doubled our paving budget. Since these items poll well, the unions threw them in for good measure to trick voters.
To close, we are running a more efficient government, reducing costs and using technology to provide better services. Since 2016, our police officers have seen pay increases from 9.75% to 11.75%. Our Fire Department employees will have seen theirs increase by 10%. We have a full-staffed Fire Department and have hired more than 450 additional police officers in the last three years. We are on track to graduate 196 officers in 2019, our largest number since 2009. Attrition is back to normal levels. We are on the right track. Voting against maxing out the sales tax keeps the focus on the right priorities and keeps us moving boldly forward in a fiscally responsible manner.
This is not the time to look in the rear-view mirror and return to the past – the carnage of that wreck is still smoldering behind us. We need to mash the accelerator and keep moving forward. If we do so, our brightest days are ahead. Vote against the referendum and by doing so, you will support the New Memphis.
Has Hell frozen over?