Oak Ridge TodayLeonard Abbatiello

May 2012What Makes it Fly?Or: How do we compare w/ others?

Airplanes & CitiesHow are they alike!

Both Need Money to fly!

What are the Forces Acting on Both.

A Different Concept. All Forces must remain In Balance.

Major Forces Acting on Cities

LIFT

Growth

Sales Tax Growth

New Worker Population Growth

New Industrial Growth

Assessment Base Growth

DRAG

Debt

Previous Borrowing

Anticipated Maintenance Borrowing

Maintenance, Other

Underfunded Retirement Programs

THRUST

Income Producing Potential

New Projects

Higher, But Competitive, Tax Rates

Larger DOE PILTS

WEIGHT

Staffing Costs

Bloated Staffing, or Overtime

Underutilized Programs

Capital Improvement Programs

Facilities Repair / Replacement

New Initiatives, (Wants)

Taxation Rev.: Who Gets What?Federal Government:Income Taxes!

State Governments:Sales Taxes, 7 %Some Income Taxes

County Gov: County Property TaxesSome Sales Taxes, 1.37 %

City Governments:City Property TaxesSome Sales Taxes, 1.37 %TN City Taxpayers Are All Double Taxed.

Appraisals Vs. Time100 %Value40 %ValueComputerizationEstimatesReappraisalsApprsl. Equlz.Law in TN PassedCOR1959Tax Basis Uniformity Exists Today in TN!

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0.35

0.45

0.53

0.61

0.69

0.79

0.88

0.94

0.975

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Apprasias vs. Time

19601965197019751980198519901995200020052010

0.350.450.530.610.690.790.880.940.97511

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Cities: How are they funded?General Obligation FndsBusiness TaxesSales Taxes, Lcl.- StateDebt BorrowingProperty Taxes

What Services?Fire, Police, RecreationSchoolsEnterprise FndsDirect IncomeDebt Borrowing

What Services?Electric, Water, SewerState Street Aid Golf Course West End Fnd Econ. Dev. Fnd15 Enterprise Funds, 3 Little Known Cash Funds Exist.

ExpendituresOperational ExpendituresStaffsConsumables

Capital FacilitiesMajor MaintenanceNew Facilities

Debt ServiceSum of: Interest & Return of Principal

Just Like Your Home

June 1960 - Oak Ridge Became a City! Property Taxes Were Paid Before OR was a City.

City Tax History of Oak Ridge42-60 AEC / DOE Owned - Glory Years, No TaxesNo Debt, No Responsibilities!

60- 85 PILT Payments Not Free, but heavily Subsidized.Started going into debt, $0.15 - $1.7 MHighest City Taxes in TN.

86- 96 PILTS Ended, 10 Yr Buyout, $23.2 M lump Sum.Replaced schools etc, debt climbed to ~$22 MTax Rate Highest in Tenn.96 PILTS Resumed, @ Ag. RatesAssistance $$ to Schools largest in Tennessee & Growing

96- 06 Spending like a SailorVoted to Rebuild H. School, +$ 67 M, debt @ ~$55 M

06 - 12 Spent Down, Refinancing, Major + WindfallsHighest Full Service City Taxes in TN

Government Assistance, 1945 -1996, 51 Yrs.

Normalized Tax Rates, (CPI & Tax Rates x - Gth. Value.)Real Rates are +1.6 to 2.4 % Annually for 23 years.

Now is ~40 % more in Real $ than the past.AppraisalsRel. Prop. Taxes Have Increased with Time.

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6.084830289

6.3102342857

6.5445028232

7.259365677

6.0424945021

6.8149127223

7.0889058683

7.7636861658

8.3496377121

7.3887190594

8.1872136336

8.9488983412

8.9533980583

9.6400126482

9.3499766648

9.4950509719

8.4784625066

9.0395763994

9.5925810277

10.1443835513

10.3956470588

8.838848274

8.770134411

Prop. Eval. 1998

Annual Property Taxes, "88 - Present"

Date:

3/4/08

Cal Yr / Tax Year

LandReAppr.ReAppr.ReAppr.ReAppr.ReAppr.

Property Name / No.Acres1988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012

Clay Co. Rate:$3.53$3.53$3.53$3.53$3.53$3.53$2.92$3.93$3.93$3.60$3.60$3.39$2.78$2.90$2.90$2.90$2.89$2.89$2.89$2.37$2.37$3.10$3.10

Anderson Co. Rate:$2.99$2.99$3.23$3.30$2.98$2.98$3.08$3.08$3.22$3.22$2.77$3.15$3.32$3.32$3.32$3.32$3.40$2.82$2.82$2.82$2.82$2.82$2.37$2.53

Clinton And. Co. Rate:$3.21$2.76$3.14$3.31$3.31$3.31$3.31$3.31$2.81$2.81$2.81$2.81$2.81$2.36$2.50

City of Clinton Rate:$1.10$0.89$0.89$0.89$0.89$0.89$0.89$0.89$0.73$0.73$0.73$0.73$0.78$0.74

Oak Ridge Roane Co. Rate:$2.57$2.57$2.32$2.11$2.11$2.11$2.45$2.45$2.02

Oak Ridge And. Co. Rate:$2.64$2.64$2.64$2.88$2.95$2.72$2.84$2.84$3.00$3.00$2.59$2.97$3.14$3.14$3.14$3.14$3.22$2.68$2.68$2.68$2.68$2.68$2.26$2.35

City of Oak Ridge Rate:$1.67$1.77$1.82$1.85$2.08$1.73$1.90$1.98$2.19$2.34$2.09$2.31$2.57$2.65$2.94$2.87$2.87$2.55$2.55$2.65$2.77$2.77$2.39$2.39

Knox Co Rate.$2.77$2.77$3.32$3.32$2.96$2.96$2.96$2.96$2.69$2.69

Knox City Rate.$2.85$3.04$2.70$2.70$2.70$2.96$2.81

Loudon Co Rate.@ 25 %$2.11$2.11$1.80$1.80$1.78$1.78$1.84

Assessment Base:20101.16$416.31$441.72$476.16$481.98$498.07$524.39$538.11$547.36$567.70$571.30$582.32$587.77$591.60$580.70$591.95$612.71$634.06$702.96$732.66$773.02$792.40$801.34$808.10

Assessment Base:2000$346.25$358.89$380.79$410.48$415.50$429.37$452.06$463.89$471.86$489.40$492.50$502.00$506.70$510.00$500.60$510.30$528.20$546.60$606.00$631.60$666.40$683.10$690.81$808.10

CPI Rate, 82-84:115.7121.1127.4134.6138.1142.6146.2150.3154.4159.1161.6164.3168.8175.1177.1181.7185.2190.7198.3202.4211.1211.1216.7220.2

Normalized Assmtnt.:$2.9927$3.4378$3.4672$3.5376$3.4901$3.4928$3.5868$3.5803$3.5451$3.5682$3.5353$3.5442$3.4821$3.3786$3.2789$3.2578$3.3084$3.3249$3.5449$3.6198$3.6622$3.7529$3.6983$3.6695

x Tax Rate:$6.0848$6.3102$6.5445$7.2594$6.0425$6.8149$7.0889$7.7637$8.3496$7.3887$8.1872$8.9489$8.9534$9.6400$9.3500$9.4951$8.4785$9.0396$9.5926$10.1444$10.3956$8.8388$8.7701

Cur. AssessmentGrnBelt +

Lot 73, & Cabin1.00Comb GB$112.87$112.87$121.93$124.58$115.48$111.01$114.73$114.73$119.95$119.95$145.43$165.38$174.30$174.30$174.30$174.30$178.50$179.78$179.78$179.78$179.78$179.78CombComb

01 005H C 005H 005002/28/962/24/972/26/9810/31/982/19/002/15/012/15/022/27/032/25/0412/19/042/15/06* XNR-804

Lot 74, Lake Front1.00$2,875.00$67.28$67.28$72.68$74.25$125.16$125.16$129.36$129.36$101.43$101.43$249.30$283.50$298.80$298.80$298.80$298.80$306.00$620.40$620.40$620.40$620.40$620.40$681.00$728.00$728.00

01 005A B 005A 017002/28/962/24/972/26/9810/31/982/19/002/15/012/15/022/27/032/25/0412/19/042/15/06

Lot 75, Adj. (73)1.20Comb GB$67.28$67.28$72.68$74.25$93.87$93.87$97.02$97.02$135.24$135.24$119.80$136.24$143.59$143.59$143.59$143.59$147.05$162.15$162.15$162.15$162.15$162.15CombComb

01 005H C 005H 006002/28/962/24/972/26/9810/31/982/19/002/15/012/15/022/27/032/25/0412/19/042/15/06* XNR-804

Lot 81, West Lot1.70Comb GB$71.01$71.01$76.71$78.38$126.65$126.65$130.90$130.90$136.85$136.85$159.97$181.91$191.73$191.73$191.73$191.73$196.35$210.80$210.80$210.80$210.80$210.80CombComb

01 005H C 005H 009002/28/962/24/972/26/9810/31/982/19/002/15/012/15/022/27/032/25/0412/19/042/15/06* XNR-804

Lot 83, East Lot2.10Comb GB$74.75$74.75$80.75$82.50$156.45$156.45$161.70$161.70$169.05$169.05$185.59$211.05$222.44$222.44$222.44$222.44$227.80$222.08$222.08$222.08$222.08$222.08CombComb

01 005H C 005H 010002/28/962/24/972/26/9810/31/982/19/002/15/012/15/022/27/032/25/0412/19/042/15/06* XNR-804

XNR-804, 81 ac./ 87 ac.81.00$11,500.00$151.74$151.74$163.92$167.48$292.04$292.04$301.84$301.84$315.56$315.56$283.93$322.88$340.30$340.30$340.30$340.30$348.50$1,153.38$1,153.38$205.86$205.86$205.86$273.00$291.00$291.00

01 005 - 005 02800All Comb GB2/28/962/24/972/26/9810/31/982/19/002/15/012/15/0207/16/03GrnBleltQul.GrnBleltQul.2/15/06

(Combined GB Lots w/, 73, 75, 81 & 83 after 6-10)

12/19/04

A. C. Norris Sub Total:88.00$544.93$544.93$588.67$601.44$909.65$905.18$935.55$935.55$978.08$978.08$1,144.02$1,300.96$1,371.16$1,371.16$1,371.16$1,371.16$1,404.20$2,548.59$2,548.59$1,601.07$1,601.07$1,601.07$954.00

Pcnt. Inc., Yearly:0.00%8.03%2.17%51.25%-0.49%3.36%0.00%4.55%0.00%16.97%13.72%5.40%0.00%0.00%0.00%2.41%81.50%0.00%-37.18%0.00%0.00%-40.41%

2/28/962/24/972/26/9810/31/982/19/002/15/012/15/022/27/032/25/0412/19/042/15/06

Dale Hollow Shore, #451.00$750.00$22.95$22.95$22.95$22.95$22.95$22.95$18.98$25.55$25.55$27.00$27.00$13.00$21.00$22.00$22.00$22.00$22.00$22.00$22.00$18.00$23.00$23.00$23.00$23.00

05 016K A 016H 022002/11/0212/19/042/15/0612/10/062/13/08

County Date2/15/022/27/032/25/0412/19/042/15/0612/12/062/13/08

110 Dover Ln. Rd., Co.TaxCoTx$82,450.00County Tax:$0.00$2,176.81$2,232.27$2,191.57$2,191.57$2,191.57$2,191.57$2,191.57$1,863.00$1,938.00$1,937.58

02 021CG - 021CG 02700CtyTxCity Tax:$0.00$1,989.62$1,989.63$2,085.26$2,085.26$2,167.04$2,265.17$2,265.17$1,970.56$1,970.56

Cty Date7/30/997/15/007/15/017/11/027/16/037/20/047/1/057/15/067/7/07

6/31/996/31/007/23/9710/31/98

105 Morgan Rd., Co.Tax0.65$440.22$440.22$480.24$491.91$667.08$667.08$696.51$696.51$735.75$735.75$774.41$888.03$938.86$938.86$938.86$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00

02 014BT - 014BT 05100$295.15$303.49$308.49$346.84$370.33$424.29$465.98$485.60$537.10$573.89$624.91$690.31$768.43$792.35$879.06$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00$0.00

Additional Fees:Garbage Fee included prior to 1998Garbage Fee Added:$60.00$60.00$60.00$60.00$60.00$60.00$60.00$60.00$60.00$60.00$60.00$72.00$72.00$72.00

House ( City & Co.) Total:$735.37$743.71$788.73$838.75$1,037.41$1,091.37$1,162.49$1,182.11$1,272.85$1,309.64$1,459.32$1,638.34$1,767.29$1,791.21$1,877.92$4,166.43$4,221.90$4,276.83$4,276.83$4,358.61$4,456.74$4,456.74$3,833.56

Appraised Value$66,700$66,700$66,700$66,700$98,100$98,100$98,100$98,100$98,100$98,100$119,600$119,600$119,600$119,600$119,600$277,300$277,300$327,100$327,100$327,100$327,100$327,100$329,800

Pcnt. Increase, Yearly:0.00%1.13%6.05%6.34%23.69%5.20%6.52%1.69%7.68%2.89%11.43%12.27%7.87%1.35%4.84%121.86%1.33%1.30%0.00%1.91%2.25%0.00%-13.98%

Percent of Value, %:1.10%1.12%1.18%1.26%1.06%1.11%1.19%1.21%1.30%1.34%1.22%1.37%1.48%1.50%1.57%1.50%1.52%1.31%1.31%1.33%1.36%1.36%1.16%

Anderson County Total:$1,713.83$1,713.83$1,918.43$2,188.99$2,310.02$2,310.02$2,310.02$3,547.97$3,636.47$4,740.16$4,740.16$3,792.64$3,792.64$3,792.64$2,817.00$2,957.00

Date Paid, Co. Tax:1/31/851/31/861/31/872/19/882/19/892/27/902/19/912/1/922/19/932/26/942/26/952/28/962/24/972/26/9810/31/982/19/002/15/012/15/022/27/032/25/0412/19/042/15/0612/12/062/13/08

Date Paid, City Tax:6/26/916/27/926/5/936/27/946/31/996/31/007/23/9710/31/987/30/997/15/007/15/017/11/027/16/037/20/047/8/057/15/067/7/07

Double Couty Pmt, Bi Yearly(evnyr)$9,873.45$8,626.20$0.00$2,980.00

Annual Grand Total:$1,303.25$1,311.59$1,400.35$1,463.14$1,970.01$2,019.50$2,117.02$2,143.21$2,276.48$2,314.72$2,630.34$2,952.30$3,159.45$3,184.37$3,271.08$5,559.59$5,648.10$6,847.42$6,847.42$5,977.68$6,080.81$6,080.81$4,810.56$23.00

Paymts Increase, %Yearly:0.00%0.64%6.77%4.48%34.64%2.51%4.83%1.24%6.22%1.68%13.64%12.24%7.02%0.79%2.72%69.96%1.59%21.23%0.00%-12.70%1.73%0.00%-20.89%-99.52%

&C&F

Prop. Eval. 1998

Zuchelli Rept. ConclusionsThere are at least 6 un-acted upon major studies.

Schools Performance, 2011Like Performing Area Schools are Available.

Continuum of Financial ConditionsGreen - Stable Conditions

Yellow - Flag Warnings

Lt. Orange Early Decline

Deep Orange Advanced Decline

Red Flag Serious Conditions

A City Comparative Method Exists Today.

Indicators of a Cities Financial Dynamics*

February 19, 2012

SOUND CONDITION

Green Flag Indicators

High Quality Services.

Sustainable operations, w/ Facilities replacement.

Total Debt Service between 0 to15 % of the

- Property Tax Revenues.

Assessment Base Growth % equal, or greater than Inflation rate.

A Low to Midrange Property Tax Rate.

When Problems occur..

Yellow Flag Warning

Many New Workers choose to live elsewhere

Delayed Facilities Maintenance

High Quality Services continue

Borrowing is accelerating

Refinancing is occurring

Debt Service is greater than 10% of Prop. Tax Revenue

Assessment Base Growth % is less than the Inflation rate

Early Decline

Most New Workers choose to live elsewhere

Owner Home Maintenance Substandard

City / Schools Maintenance Ignored / delayed

Borrowing is accelerating

Refinancing is occurring to reduce debt payments

Debt Service is greater than15 % of Prop. Tax Revenue

Assessment Base Growth % is less than the Inflation rate

Advanced Decline

Most New Workers choose to live elsewhere

Most Maintenance Services postponed

Debt Service is greater than 30% of Prop. Tax Revenue

Assessment Base growth % is less than the Inflation rate

Bond Rating may be reduced

May begin to reduce, or dump traditional services to County.

Interest rates are rising, further increasing debt service burden

A very high Property Tax Rate, rising @ ~ Inflation Rate %

Red Flag Condition

Most New Workers choose to live elsewhere

Most Maintenance Services postponed

Debt Service is greater than 50% of Prop. Tax Revenue

Defaulting on Debt Payment, or is cash strapped

Bond Rating is lowered

Assessment Base Growth is near zero, or negative.

Borrowing is either impossible, or only at high interest rates

Has a very high Property Tax Rate, rising annually

Is considering Chapter 9 Bankruptcy

* Full service Cities are Cities with at least: K-12 Schools, Fire, Police and Recreation Depts.

Out of 295 Tennessee Cities, there are only approximately 20 Full Service Cities in Tenn.

Comparable ones are:Alcoa, Bristol, Cleveland, Johnson City, Kingsport, Maryville

Indicators of a Cities Financial Dyn.Advanced Decline

Most New Workers choose to live elsewhereMost Maintenance Services postponedDebt Service is greater than 30% of Prop. Tax RevenueAssessment Base growth % is less than the Inflation rateBond Rating may be reducedMay begin to reduce, or dump traditional services to County.Interest rates are rising, further increasing debt service burdenA very high Property Tax Rate, rising @ ~ Inflation Rate Oak Ridge Ranks Here!

A Comparison of Oak RidgeAlcoaBristolClevelandJohnson CityKingsportMaryvilleOak RidgeOR is the Lowest Ranked of the Group and Getting Worse.

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FULL SERVICE CITIES COMPARASION

2/20/12

2011201120112010Trend /

2,01020112010Total CityG.O. DebtAssmt.AnnualG.O.D.Svc / PTx.Flag

CityPop.Tax RateADA Stud.Appraisal, B$$/CtzBase, k$Asmt Gth, %Debt, M$Ratio, %Color

Alcoa8,449$1.961,604$0.644$2,722$206.5862.69%$23.00023.2%

Bristol*26,702$2.193,624$2.130$800$660.383-0.73%$21.36515.8%

Cleveland41,285$1.494,505$3.481$1,534$1,079.1100.00%$63.31728.2%

Johnson City63,152$1.626,940$5.790$1,713$1,796.1640.50%$108.16527.1%

Kingsport48,205$1.856,093$4.251$2,262$1,322.3272.56%$109.05826.8%

Maryville**27,465$2.174,741$2.505$2,259$733.4703.14%$62.05326.7%

Oak Ridge29,330$2.394,213$2.695$3,580$753.3890.20%$105.00036.2%

* Bristol has recently issued another $4.45 M$ G.O. Debt for schools not yet in this accounting.

** Maryville has recently issued another $18.72 M$ G.O. Debt for schools not yet in this accounting.

CityPop.Tax RateADA Stud.Appraisal, B$$/CtzBase, k$Asmt Gth, %Debt, M$Ratio, %Color

Clinton***9,841$0.76815$0.998$536$309.4863.60%$5.27512.9%

Farragut20,676$0.000?$10??$0.2000.0%

Jackson65,211$1.970$3.617$983$1,157.5751.15%$64.10028.0%

Murfreesboro****108,775$1.276,599$8.758$1,569$2,732.6732.54%$170.66072.4%

*** Clinton has only K -6 schools, but it has gone 17 years w/o a property tax rate increase.

**** Murfreesboro has only PreK -6 schools, all debt is 10 - 15 years maximum. It has gone 13 years w/o a property tax rate increase.

Farragut is unique in that it has no schools, virtually no City services, and employs only 33 people. Everything is either subscription or provided by Knox County.

Trend

1. Full service Cities are Cities with at least: K-12 Schools, Fire, Police and Recreation Depts.Getting Better:

2. Out of 295 Tennessee Towns & Cities, there are only approximately 20 Full Service Cities in Tenn.Neutral:

3. Tennessee's major cities, Nashville, Knoxville, Chattanooga, and Memphis have all given the Schools responsibilityGetting Worse:

to their respective Counties.

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A look at G.O. Debt, $/CitzBirmingham $6,300Bond Rating AABankrupt 11/11After, Caa1(7 of 9 Council in Prison)

Oak Ridge, TN $3,600Bond Rating AA

Bristol, TN $2,700

Maryville, TN $2,300

*Clinton, TN $540* (Not Full Service)

$6,000$0$4,000$2,000Debt Scale, $ / CitizenOR Has The Highest Rel. Debt Burden in TN.

Ability to Pay Debt, % Tax Rev.Birmingham 120 %Bond Rating AABankrupt 11/11After, Caa1(7 of 9 Council in Prison)

Oak Ridge, TN 36 %Bond Rating AA

Maryville, TN26 %Bristol, TN 16 %

*Clinton, TN 13 %* (Not Full Service)

100 %0 %60 %30 %Pcnt. of Prop. Tax RevenueORs Ability to Pay Higher Taxes and Compete is Already Compromised.

Comparison of Actual CPI Index and O.R Actual GrowthCPI ChangeOak RidgeWe Cant Grow Fast Enough to Stay Even w/ Annual Inflation

*Drawdown Fund Use Stops in ~ 2004The Fund Balance was magnificently managed. Now it has been mostly consumed.

CITY OF OAK RIDGE DOE UNRESERVED FUND BALANCE March 2001

Debt 2012Debt has Grown at an Unacceptable Rate, Yet Wants & Needs Still Exist.

CITY OF OAK RIDGE DEBT, @ March 2002

Total DEBT Growth Trend: 9.8% AnnuallyG.O. DEBT Growth Trend: 7.0% Annually

Revenue Supported Debt and GO Debt w/ Projected CIP Plan.

Conclusions ?The Weight, Lift, Thrust, Drag analogy works!We can now effectively compare Cities!We can answer: How Much Debt is too Much?

Oak Ridge is not well positioned!Its Time to: Implement A New Approach!

***