In her first in-person State of the City address Friday afternoon, Knoxville Mayor Indya Kincannon announced what could be her hallmark proposal — a $15 an hour minimum wage for city workers — but coupled it with a request for the City Council to approve a 50-cent increase in the property tax rate.
Among other changes, Kincannon proposed $77 million for the city’s capital fund, something Kincannon called her parks, pavement and pipes plan.
She didn’t, however, use the speech set on the campus of the forthcoming police headquarters to name the city’s next police chief. Eve Thomas’ last day as chief is May 1 and Kincannon has said she wants to name a new chief ahead of Thomas’ departure.
A tax increase was coming
The city’s budget crunch is part of its own making and partly due to forces out of its control.
Earlier this year, Susan Gennoe, the city’s chief financial officer, said next year’s budget (the budget Kincannon proposed Friday) is the “cautionary year” in which the fund balance, known as a rainy-day fund, shrinks below what rating agencies think is safe.
The bottom line is the city has been spending more than it has been taking in and doing that by dipping into the rainy day fund. This is not unusual for a city to do but it’s not something sustainable long term.
With inflation through the roof, it would stand to reason that the city would benefit from something like the county’s appraisal process, which is increasing bills across the county but the property tax rate is graded down, meaning the city does not benefit from inflation. City leaders are quick to say property owners pay less today proportionately than they did a decade ago once inflation and reappraisals are factored in.
So what was coming was a property tax increase, a cut in city services, or both. And with 2023 being an election year, Kincannon had few good options. It’s politically survivable. Both Mayors Bill Haslam and Madeline Rogero passed an increase early in their tenures and both easily won re-election.
The city has consistently received the highest or next-highest bond ratings given by rating agencies Fitch, Moody’s, and Standard and Poor’s. It is still considered fiscally sound.
Earlier this year, Kincannon announced she would propose a $15 an hour minimum wage and a 6% across the board raise for city employees. The push comes as a new compensation study found city salaries, on the whole, are 10% below the market rate.
Kincannon said the raises will cost the city some $16 million. Raises will not be for city executives.
“Our first responders always have our backs and now it’s time that we’ve got theirs,” she said.