Kingsport Spirit

Explaining how property tax works is difficult at best. Today, in two separate publications from Tennessee and Virginia, I saw articles detailing rate changes. One was in Radford, Virginia, the other in Kingsport/Sullivan County, Tennessee.

The articles state that Radford will increase it’s tax rate by almost 20% to $0.92, while Sullivan County’s preliminary certified tax rate is $1.60 (down from $2.49), and Kingsport City’s is $1.34 (down from $1.99) after the countywide property reappraisal.

Also of note is that Radford, like many Virginia cities, is completely independent of the county. In other words, if you live in Radford City, you don’t pay property tax to the county. But there’s a catch. Independent Virginia cities must fund county-type services like sheriffs, courts, schools, and EMS, in addition to police, fire, parks, etc. Virginia is the only state in the union that does it this way. Radford pays a pro-rata share to participate in a regional multi-jurisdictional correctional facility, which is an innovative way of sharing an otherwise exorbitant cost.

So, if I can do all of that with a tax rate of $0.92, while Tennessee’s rates are significantly higher, then I must be coming out ahead in Virginia, right? If that’s the case, Kingsport should lobby for independence from the county, right?  

Not so fast. There are other caveats.  

In Virginia, all property assessments are based on 100% value.

In Tennessee, residential property assessments are based on 25% of value, commercial and industrial assessments are based on 40%, and non-residential personal property is based on 30%.

Furthermore, the article noted that, “Historically, Radford’s city budget relied on profits from (utilities).”

In Tennessee, utility funds must be used only for utilities. In other words, a city cannot operate a utility that uses ‘profit’ from ratepayers to subsidize the city’s general fund. Water customers pay for the water system, sewer customers pay for the sewer system, and so on. There’s no such thing as skimming profit from utilities to lower city property taxes in Tennessee.   

Applying the formulas, a $250,000 residence in Kingsport/Sullivan County, TN would pay $1,837 ($837 to the city and $1,000 to the county), while the same residence in Radford City, VA would pay $2,300 to the city only. That’s a 25% savings in property taxes paid, even though the tax rate is higher in Tennessee.

The article noted that property taxes in neighboring Blacksburg, Christiansburg, Montgomery County, and Pulaski County were even higher.

Of course, these financial impacts don’t consider the Virginia income tax that would also be paid by the same household (Tennessee doesn’t have an income tax). An individual making $50,000 in salary in Radford would pay $2,104 per year in income tax. If there were two earners, that would increase proportionally–on top of already higher property taxes.

Virginia residents also pay annual personal property taxes on vehicles, while Tennessee residents do not. In Radford, a $15,000 vehicle would pay $382.50 per year. If you have more than one vehicle–which most families do–that cost would increase proportionally.

To be fair, Tennessee’s higher sales tax must also be considered. In Kingsport, it’s 9.75%. In Radford, it’s 5.3%. Assuming a household spent $25,000 in taxable consumption, that’s $2,438 in Tennessee vs. $1,325 in Virginia.

Putting it all together, a Kingsport household with 2 earners totaling $100,000 income living in a house valued at $250,000 would pay $4,275 in city and county property tax and sales tax. A similar Radford household would pay city-only property tax, sales tax, vehicle tax, and income tax totaling $8,598. That’s 100% more.

During budget and reappraisal cycles when tax rate resets are deliberated, it can be unsettling to think about what might happen in your situation. While it may not provide much comfort, I have been doing these analyses for more than 40 years now, and I can tell you that Tennesseans are blessed compared to their peers in surrounding states.

At the end of the day, every local elected leader is striving to find a way to fund the best possible services at the lowest possible cost. And in our little neck of Tennessee, they’re doing a great job. We benefit financially from both city and county services and their ability to cooperate for the betterment of all.

To understand the true value of living in Tennessee, you must look beyond the published tax rate and apply the math.