Alcoa’s Board of Commissioners enthusiastically approved a resolution Tuesday to send the Blount County commission, hoping for change the cities believe is fair to ratepayers.
Before the resolution was passed, Alcoa City Manager Mark Johnson briefed the board at a March 25 public briefing on the operation of Fund 177, a portion of property taxes.
The county keeps 14 cents on every $100 of a home’s assessed value in Blount County to fund the county school district’s capital maintenance and improvement projects.
“I don’t know what could be done to fix this other than just letting people know about it,” Johnson said. “I don’t think 99.99% of people on the street who are taxpayers have a clue.”
The resolution called for the 177 Fund to be shared equitably with the city’s schools.
City residents pay county and city property taxes. Johnson said city taxpayers get a fair return on all of their county property taxes except Fund 177.
Alcoa city commissioners have expressed their intention to educate the public about Fund 177, as Johnson had educated them, before the start of this year’s county commissioner primaries.
Maryville City Manager Greg McClain also plans to brief Maryville City Council on Fund 177. Then, he said, commissioners can decide what to do with the information.
“I could see where politicians might say, ‘Hey, I think it’s important that we communicate this to those who are running for office, so they can ask the questions, ‘Where are you at on this issue? “,” McClain said.
“In a nutshell, I think from Maryville’s perspective, we think this is something that people should be educated about and understand what the issue is.”
Every dollar collected by the county from a city resident is distributed proportionately based on average daily school attendance.
Ambiguity in the language of Tennessee’s Education Funding Act of 1977 allows county schools to retain all taxes collected for “educational capital,” commonly referred to as Fund 177.
After years of disagreements and a lawsuit challenging the meaning of the law’s wording, counties are still able to keep Fund 177 in full.
As of the 2020 tax year, city and county residents have paid 14 cents per $100 of their home’s assessed value for the fund. The appraised value is 25% of the appraised value.
If a house is worth $100,000, the owner would pay $35 to Fund 177 each year in property taxes. To calculate this number, multiply the assessed value of a home by 0.0014.
Fund 177 is the second-lowest property tax collected, but City of Maryville schools lose about $1.76 million a year and City of Alcoa schools lose $665,000 based on daily attendance most recent average.
Alcoa and Maryville receive a portion of county property taxes to fund education based on the percentage of children in the county’s population who attend each school system. The ADA measures the number of students who attend each school, on average.
For the 2020 to 2021 school year, approximately 57% of the total student population attended a school in Blount County, Maryville had 31%, and Alcoa had 12%.
The other side
Blount County Mayor Ed Mitchell said when the county began using Fund 177, officials were looking for a way to fund school capital maintenance and improvement projects.
After research and conversations with other counties, Mitchell said the county commission heard about Fund 177 and adopted it as a school funding option in the 2015-16 fiscal year.
Although the fund was the subject of litigation between the City of Athens and McMinn County, Mitchell said the county won the case.
Essentially, the court found the language was intentionally unclear, Johnson said at the public briefing.
A Daily Times report says county officials said keeping Fund 177 as it is helps keep taxes off county residents.
The 177 fund 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 every citizen who paid for it. .
If counties issue bonds for improvement projects, such as a building addition, the county must issue more money than necessary for the county’s project alone. The law states that if bonds are issued, municipal school systems must receive a portion based on the ADA.
County and city landowners pay debt service for bonds issued. In an effort not to take on more debt, the accumulated money from Fund 177 can pay for projects instead of the county issuing bonds.
Both McClain and Johnson said it would be difficult to bring the cities’ issues with Fund 177 to the attention of the state legislature.
“Counties have a lot more clout in the legislature, in general, than cities,” Johnson said, “so it’s always an uphill battle.”