Tennessee Growth Could Cost Home Buyers by Broderick Perkins NASHVILLE -- Home buyers who've been making a move to Tennessee to enjoy the state's favorable economy and strategic location may begin to think twice if legislators saddle them with more of the higher cost of education. Twin bills working their way through the state's legislature, SB3147 and HB 3259, would authorize the state's 14 fastest-growing Tennessee counties to assess an additional tax of $.37 per $100 of value on the transfer of real estate. The money would be used to build more schools in high-growth metropolitan areas, primarily Nashville and Memphis, and perhaps Knoxville, Chattanooga and the Tri-Cities area in the state's northeast corner. On a $100,000 home, the new tax would bring the combined state-county tax rate to $.74 per $100 in value, increasing the tax from $370 to $740. On a $200,000 home, the tax would cost the buyer $1,480, compared to the current $740. Along with the existing property transfer tax, Tennesseans already pay annual property taxes, and a mortgage tax that's $0.115 on each $100 of the mortgage amount. The first $2,000 is exempt from the mortgage tax. Another real estate tax could exacerbate a recent home sales slow down blamed on higher mortgage rates. "There could not be a worse time to increase the real property transfer tax or any other tax that adds a burden to a potential home buyer," said Steve Harding, Executive Vice President of the Tennessee Association of Realtors. "This additional tax will cripple first-time home buyers trying to scrape together money for a down payment and normal closing costs," he added. Home sales were lower in April, at 2,212, than in the same month a year ago, when the Middle Tennessee Regional Multiple Listing Service (which includes the Nashville area) recorded 2,265 sales. The median price for a single-family house was down to $124,900 in April from $125,000 a year ago. In the Davidson County-Nashville area, median home prices were higher, $153,000 in April, up 3.2 percent from a year ago, according to Harding. Tennessee is a sliver of a state, but holds a geographically and economically strategic location in the South's heartland. "Part of our success is part of our problem, but the association has not advocated raising any taxes. We are looking at tax reform, but I would not want to continue to raise disproportionately the taxes home buyers pay," said Harding. Sharing borders with nine states, Tennessee is a natural for home buyers looking for the best all many worlds. The state does not levy state income taxes, unemployment is below 4 percent, wages are up nearly 4 percent and major Tennessee metropolitan areas, including Memphis and Nashville, are a short drive away from neighboring states where sales taxes are more favorable. A state lottery is not politically popular in Tennessee, but many nearby states offer Super Lotto. The Volunteer State's decade of growth has seen Nissan and Saturn auto plant openings and arena and stadium construction for professional sports franchises -- NHL's Nashville Predators and NFL's 1999 Super Bowl challengers Tennessee Titans. Dell Computer is also setting up shop near the Nashville Airport. Those are just a few of the state's economic pluses. With a population growth averaging 11.3 percent, Tennessee is among the nation's top 20 fastest growing states. It's decade old economic boom has cooled a bit in recent years, but shows little sign of letting up, according to a February economic report from the Center For Business and Economic Research at the University of Tennessee, Knoxville. "The state's economy remains on a solid foundation, and the current level of economic activity is exceptionally high. There are more jobs today in Tennessee than ever in its history and these jobs are increasingly of very high quality," according to the center's February report, "An Economic Report To the Governor Of Tennessee". The author of the State Senate's version of the bill, James F. Kyle, Jr., D-Memphis says the state's decade of growth has left large metropolitan areas short on schools and new funding from home buyers is a logical source. The bill's House version recently headed the Finance, Ways, and Means Committee to hash out the details. "It's a testament to our urban sprawl in Shelby County (Memphis). Other counties are facing much greater growth and we are starting to do impact fees. That's got your home builders up in arms. Doughnut counties around the capital county, Davidson, they don't have a tax base sufficient to handle this growth," said Kyle. | 
