City may defer senior tax freeze

A tax freeze program for residents over 65 will be a topic of discussion for Shelbyville City Council next month.

However, a review by an intern with the Tennessee Municipal League and Municipal Technical Advisory Service says it may be better if Shelbyville defers adopting this program.

In 2007, the Tennessee's General Assembly enacted the Property Tax Freeze Act, which allows any county or city to adopt the program for those 65 and older.

The program is geared to protect qualified low-income seniors on a fixed income from the burden of future tax rate hikes or higher reassessment.

Under the program, eligible homeowners would only see an increase in their property tax if they make improvements to their property or sell it.

As of February of this year, 20 counties and 19 towns have adopted the program.

The program works by freezing the total taxes owed at the amount paid in the base year, which is the first year the program is implemented. In the base year, property tax bills are paid as usual.

However, in the following year, relief should be realized as the eligible homeowners' tax bills remain unchanged. The exact amount of savings would vary depending on each person's property assessment and the size in the change of the tax rate.

Homeowners who would be eligible for the program must be 65 or older at the end of the year in which the application is submitted, own residential property, earn a combined income of below $28,870, and the residential property can not exceed more than five acres.

According to figures from the state comptroller's office, nearly 12 percent of Bedford County citizens are 65 or older and within the income limits. For fiscal 2009, the property tax freeze income limit for the county increased from $28,220 to $28,870 and the state anticipates that claims for the program will increase as the number of those reaching age 65 increases.

But this also means that the program "will continually consume an increasing portion of property tax revenue and administrative resources," the review said.

The freeze would have a negative impact of 4.15 percent on local tax collections.

If the freeze were adopted, according to the report, the property tax would need to be increased by 4.2 percent on the non-protected taxpayers to offset the loss of revenue.

"While it will provide relief to the target population, low-income elderly homeowners, the Property Tax Freeze will result in higher burdens for all other non-eligible homeowners," stated the review, advising the city to defer implementing it.

Bedford County government has never formally considered adopting the freeze, although officials have discussed it informally.