Governments Look To Property Taxes To Make Up For Pandemic Revenue Shortfall

As local governments look to make up the shortfall in tax revenues due to less consumer spending during the COVID-19 pandemic, many state and local leaders have discussed boosting property taxes as a means to make up for the shortfall.

Nashville Mayor John Cooper told local TV station WTVF that he could see the city attempting to hike property taxes by 20 percent or more.

In April, Cooper called the budget situation “the worst in Metro’s history,” seemingly expressing disappointment that the federal stimulus money from the CARES Act can’t be used by city governments to help pay for their budget needs. Nashville estimated its budget shortfall would be about $250 million.

“So cities have to deal with that revenue loss, created by COVID-19, on their own,” Cooper said.

The mayor told WTVF that the shortfall will be made up by cash reserves, which would need to be replenished during the next fiscal year.

“There is no choice but to have a significant increase in property taxes,” he said. “Measured in a percent, it’s going to be on the order of more than 20 percent to be sure.”

The Texas Tribune reported that a fight could brew in that state in the fall over possible property tax increases as city and county governments prepare their fiscal year 2021 budgets. The Texas Legislature passed a law last year that would require local governments to get voter approval for any property tax increases of more than 3.5 percent. The requirement used to be 8 percent.

But the new law also allows an exception for disasters. The Tribune pointed out that Gov Greg Abbott proclaimed a state of disaster for Texas in March and noted that state code lists epidemic as a type of disaster in defining the term.

State Sen. Paul Bettencourt, R-Houston, who co-authored the property tax bill, said he doesn’t believe the COIVD-19 epidemic triggers the exception, but Texas Municipal League Executive Director Bennett Sandlin believes it does.

“It’s clear to us,” Sandlin told the Tribune. “That’s different than saying we think cities should raise taxes; it’s not like this is a field day. But the way the bill is written, it’s clear that the [3.5%] rollback is suspended.”

In New York City, the pandemic is not only devastating businesses, but it also is decreasing property values. The Commercial Observer reported that retail and residential tenants are asking for rent concessions from their landlords in a city whose budget depends on a $30 billion property tax levy.

The New York City budget anticipates continued property tax increases of 4 to 6 percent per year, but that seems highly unlikely given the pandemic. Benjamin Williams, head of the property tax department for Rosenberg & Estis, notes that the city was able to raise additional revenue in recent years without increasing the tax rate because of the increase in property values.

“But when property values and assessments decrease due to the coronavirus, the city can decrease taxes and give owners relief, or increase the tax rate to make up for the shortfall,” he said.

Williams pointed out that March 2 (before the pandemic hit) marked the property tax protest application filing deadline, so anyone who didn’t file a protest before then will have to wait until 2021 to get tax relief.

Williams said that two months in lost rent equates to a 17 percent reduction in income, and that number could grow as the pandemic continues.

“Though we don’t know the degree to which the coronavirus will ultimately wreck the New York City economy, we do know that property taxpayers need any relief they can get now,” he said.

This is the second in a series of stories by the Taxpayers Protection Alliance looking at how the COVID-19 pandemic affects taxation and budgeting. The first can be read here.

The Center Square – Johnny Kampis
Johnny Kampis is an investigative reporter for the Taxpayers Protection Alliance Foundation, and has been published in The New York Times,, and the Atlanta Journal-Constitution.

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