Property taxes in Mobile remain low compared to other Alabama cities

MOBILE, Alabama ? When residents get their property tax bills in the mail late this year, they will spot a consistent charge for city of Mobile services.

Compared to other cities in the state, that charge is a considerable deal for property owners. Mobile's property tax it charges per resident is one of the lowest in the state and, according to a 2012 analysis, is $63-per-capita less than Montgomery and 53-per-capita less than Tuscaloosa.

With limited home rule authority, though, any change to increase the millage rate will require amending the state's constitution. Regarding property taxes, changes to the state's 1901 governing document allowing for rate increases does not happen often in Mobile County.

"It is virtually impossible to change the property tax rates," Florence Kessler, a city attorney said.

But the Mobile City Council will go through the same exercise it does every year in approving its annual millage rate ? expressed in $1 in tax for every $1,000 of assessed valuation. With this year's rate at 7 mills, the owner of a $100,000 house in Mobile will pay $70 in taxes to the city. If the property's value increased by 5 percent, the property owner will owe $3.50 more this year.

For the complete fall 2012 PARCA report on municipal finances, click here.

The City Council will likely vote on the annual property tax during a meeting in May. The city's Finance Committee is scheduled to meet Tuesday to discuss the city's financial situation, including whether enough money is being generated this year from the city's sales tax rate that was raised last year to thwart off potential deficits and raise revenue for equipment purchases.

While the bulk of the property tax bill goes to public schools, approximately $13.7 million will be generated and filtered into the city's general fund. It's a paltry amount compared to the revenues from the city's sales tax -- the city's largest revenue source -- which are at near $111 million, according to revised 2013 budget figures.

The city's revenue generated from its business license is $33 million, the second largest revenue source that goes to pay for police officer salaries and equipment, garbage collection, among many other services.

"We operate the city on sales taxes," Council President Reggie Copeland said. "To be honest with you, the (property tax) is awfully low compared to other cities."

It is. According a fall 2012 report from the Public Affairs Research Council of Alabama, Mobile's property tax revenue ranks at the bottom compared to some of the largest cities in Alabama. Of the top 20 cities with a population over 20,000, Mobile ranked No. 19 at $82 per capita, far below the state median of $186 per capita.

Conversely, the city is No. 3 on sales tax revenue per capita at $771, considerably higher than the median $600 per capita.

Only Dothan has a wider discrepancy between property tax and sales tax revenues.

Mobile's heavy reliance on sales taxes to resolve budgetary issues puts the city in a "dangerous" place when attempting to control its public expenditures, one University of Alabama professor said.

"Over reliance of the sales tax is dangerous in terms of maintaining appropriate levels of public service," said Anne Williamson, assistant professor in the department of public sciences at the University of Alabama.

2010 Revenue comparisons
Property tax per capita
Mobile - $82
Montgomery - $155
Tuscaloosa - $145
State median (cities over 20,000) $186 Tax mills
Mobile ? 8
Montgomery -- 12.5
Tuscaloosa ? 13.5
State median (cities over 20,000) 18.8 Sales taxes per capita
Mobile - $771
Montgomery - $411
Tuscaloosa - $361
State median (cities over 20,000) $600

Source: Public Affairs Research Council of Alabama

Inequity also becomes a problem, she said. The property tax, placed on people who can afford to purchase a home, is replaced as a significant income source by the sales tax that is levied on grocery purchases, clothing, automobiles, furniture, among many other items.

"Property owners have incomes that are twice than that of most renters," Williamson said. "With property taxes, as much as all of us hate them, when you keep them unnaturally low and rely more heavily on sales tax, what you are doing is setting up a potentially very inequitable system in the theory of public finance let alone the practice of how it affects individual people."

Relying less on property taxes than other cities also puts Mobile potentially at a competitive disadvantage compared to Huntsville and Birmingham, according to a 2003 PARCA analysis of the city's revenue sources.

Analyzing property tax revenue per capita from the 2000 Census, the agency determined that Mobile's $100-per-capita property tax difference with Huntsville and Birmingham represented a "revenue disadvantage of about $20 million for a city the size of Mobile."

Some city officials realize this but also understand it's extremely difficult to alter the taxing system. In Mobile, increases in property taxes happen infrequently; the most notable in recent years being the 2001 voter-approved tax increase for public schools. It was the first time voters endorsed increased funding for schools since 1959.

In 2011, voters in Mobile County and Saraland endorsed property tax renewals.

Councilman John Williams and Councilwoman Bess Rich both said the way the city funds its services should be examined.

Williams said now might not be the time.?

"It is many people's opinion we are too high on sales tax and not enough balance (with property taxes)," Williams said. "But I don't think in this economy, it's time to talk new taxes or restructuring."

Rich, who is requesting more details about the city's financial situation, said any talk about changing the way funding local government is done requires voter action.

Copeland said Mobile's taxing system is advantageous for a city that hosts many events, such as Mardi Gras, where visitors are making more purchases and thus, paying sales taxes.

"With the sales tax, you have outside people coming here for different events," he said. "The property tax? I say leave it alone."

John Sharp, Press Register

Source: http://blog.al.com/live/2013/04/property_taxes_in_mobile_remai.html

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