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The Claiborne County Commission has adopted its first reading of a $70 property wheel tax to balance the new fiscal year budget. While county government waits to finalize the document with its second reading, the public could call for a referendum with just a petition of 1,000 signatures that includes the names of at least 686 verified voters.

Claiborne finance director Eric Pearson has run the time frame with all variables. Pearson has concluded that there is not enough time to make the budget deadline if a referendum vote makes it to the polls.

Pearson sent an email on Friday evening to all 21 commissioners explaining the various scenarios. The Claiborne Progress has obtained a copy of that email.

“After further research into the wheel tax, I do not believe that it is a feasible option for the 2024 budget,” Pearson said, in his email. “The primary problem with the wheel tax is that there is no guarantee that the revenue will be collected because the wheel tax increase is subject to a referendum. If the wheel tax resolution is approved on the second reading on June 20, then there is a required 30 day period to allow for a petition of registered voters to call a referendum on whether to levy the wheel tax. Signatures have to be turned in to the Election Commission by July 20…. It is likely that enough signatures will be gathered to require a referendum.”

In the email, Pearson says that the commission would meet in August to call for the referendum if enough signatures were to be gathered by the July 20 deadline. The earliest that the Claiborne Election Commission can prepare for a special election is early November. The county would have to come up with $50,000 to $60,000 to pay for the special election, something that has not been budgeted, according to Pearson.

And here is the rub. The absolute deadline to adopt the budget is Aug. 31 which falls after the July 20 petition deadline and before the earliest that the referendum can be held.

“This is the problem: the budget has to be adopted before the referendum results are known. The budget cannot be balanced on $2 million in revenue that might not be collected. If the budget assumes $2 million in revenue that is rejected by a referendum, then the General Fund will run out of money in the 2024 fiscal year,” reads Pearson’s email, in part.

He says the one way to make the property wheel tax feasible is if there are not enough signatures to move forward with a referendum.

“This scenario requires delaying budget adoption until after the July 20 deadline for a petition. If there are insufficient signatures for a referendum, then the wheel tax could be implemented but it would likely not be implemented until the September renewals, possibly not until the October renewals. This means that at least two months of increased wheel tax revenue will not be collected. The budget would have to offset this revenue loss through a property tax increase,” continues the email.

Pearson concludes in the email that the wheel tax is not a feasible option for the fiscal year 2023-24 budget due to the time frame involving so many unknown variables. However, he does go on to say the variables could line up to allow a property wheel tax for the following budget year. He claims the wheel tax could at that time be used to reduce the property tax increase needed for the fiscal year 2023-24 budget.

“The best approach is to assume a referendum on the wheel tax for the scheduled election in March 2024. The Commission would vote on a wheel tax resolution in October and November 2023. Assuming the resolution is approved, there is a 30 day period to gather signatures for a petition. If the petition is successful, the referendum can be held with the March election (which means no additional cost for a special election),” reads the email.

Pearson points out in the document that the commissioners will have the results of the March election and will be able to move forward with the 2025 budget knowing whether they can include the property wheel tax as revenue. If so, Pearson says the Commission would then be able to reduce the property tax rate during the drafting of the fiscal year 2024-25 budget.

“This provides sufficient time to determine through the budget process how much of a property tax reduction to make knowing the exact amount of increased wheel tax that will be generated in FY 2025,” concludes the email.

Nowhere in the email does Pearson suggest reducing spending to balance the new budget.