What’s it to Utz? – LaVista Hills voters deserve better information

Posted by Decaturish.com October 5, 2015
Hans Utz

Hans Utz

Editor’s note: Hans Utz has lived in and around Atlanta for 25 years and formerly served as the Deputy COO of the City of Atlanta. We asked him to give us his take on recent stories that have called into question the financial viability of a proposed city of LaVista Hills

By Hans Utz, contributor

Over the past few weeks we’ve seen an interesting brouhaha foment over whether LaVista Hills would be a viable city, fueled by two competing analyses of the proposed city’s finances.

The Carl Vinson Institute of Government routinely runs analyses to determine whether a proposed city would be capable of generating sufficient tax revenue to fund services. The Institute provides a respected and credible independent perspective.

DeKalb’s millage for the area of the proposed city of LaVista Hills at the time the CVI study was commissioned was 7.64 mills.

Now, it is important to note that a millage rate for a city and a millage rate for a county are not directly comparable even if they are set to the same rate. There are two primary reasons for this:

– First, the available exemptions between a county and a city may vary

– Second, because of the higher Homestead Option Sales Tax credit available to county rate payers.

We have discussed this in a previous column, but in effect taxpayers in the county receive a larger credit for the HOST collected by the county than city ratepayers do.

The difference can be substantial: on an average Decatur home in 2014, the HOST credit amounted to just over $850, whereas residents in unincorporated DeKalb received credits of over $1,670. In other words, the county gives back almost twice as much in credits to its average taxpayer as does Decatur.

So a county collects less tax per mill than a city because the county provides a larger credit for the HOST to their taxpayers. Or, put another way, for an equivalent millage rate, a city will collect more in tax revenue than a county.

All of this is normal. CVI used DeKalb’s millage rate of 7.64 to analyze the viability of LaVista Hills, and correctly calculated that LaVista Hills would collect more in revenue from that millage than DeKalb would.

Note to voters of LaVista Hills: that meant CVI assumed you would pay more in taxes to incorporate than you would remaining in unincorporated DeKalb because you would receive a smaller HOST credit.

Given these assumptions, it is perhaps not surprising that CVI determined LaVista Hills would run a surplus of approximately $1.7 million if LaVista Hills charged the same millage rate as unincorporated DeKalb.

But here’s the rub: LaVista Hills capped the millage rate at 5 mills in their charter, 2.64 mills lower than the rate used by CVI for the analysis.

Because the city can collect more tax per mill than the county, the city should be able to charge a lower millage rate and still generate the same amount of revenue.

But it does not appear that any official analysis was done to determine whether the 5 mill cap would generate enough revenue to cover the difference. Without the analysis, which is relatively simple to do, it is entirely possible the 5 mill cap would have left LaVista Hills in a deficit position.

A couple of points should be made here: first, the analysis by CVI is not flawed because of the difference in millage. The study is crystal clear that the analysis is not meant to be a replacement for a proper budget voted into effect by an elected body. Second, the 5 mill cap in the charter document is not set in stone, though adjusting it would require a charter referendum.

But it seems to me a glaring oversight that the feasibility report touted by LaVista Hills supporters does not agree with the initial cityhood charter. In effect, voters will be choosing to incorporate assuming a surplus that the charter explicitly curtails.

The worst case scenario is that LaVista Hills supporters have intentionally used the projected surplus to generate voter support knowing that the underlying analysis did not comply with the charter. At a minimum I would be concerned that LaVista Hills leadership has not been wholly transparent about the proper interpretation of the analysis.

In any case this is not an auspicious start.

Enter Mr. Russell Carleton, a baseball statistician and avowed supporter of DeKalb Strong. Unsurprisingly, DeKalb Strong takes a dim view of a potential LaVista Hills incorporation and has been quite vocal in opposition.

Mr. Carleton took it upon himself to recreate the CVI analysis, but this time using the charter millage rate of 5 mills. He determined that, rather than run a $1.7 million surplus, LaVista Hills would actually run a deficit of approximately $114,000. The AJC published the analysis in mid-September.

It is important to note that Mr. Carleton is not a municipal expert and has no background in municipal finance or city planning. However I have expertise in both, and I find his analysis credible. His math is correct, and where he makes assumptions I find them to be credible and defensible.

Rather than acknowledge what is (or was until a few weeks ago) a defensible set of assumptions, the LaVista Hills supporters have taken great pains to discredit Mr. Carleton and the AJC analysis. Ms. Mary Kay Woodworth, a member of the LaVista Hills Alliance, in written comments to this site actually said:

Mr. Carleton is a technical writer in the psychology profession and baseball statistician who apparently believes that his background makes him more of an expert than the actual experts at the Carl Vinson Institute of Government at the University of Georgia.

I find this commentary deeply disturbing. CVI ran an analysis on a reasonable set of assumptions at the time. Those underlying assumptions changed as the city neared incorporation, which is also entirely expected and reasonable. The changing assumptions would by their nature necessitate updating the analysis. In effect, Mr. Carleton did exactly that.

I find it informative that instead of clearly pointing all this out, Ms. Woodworth has attempted to discredit Mr. Carleton. Perhaps Ms. Woodworth needs to revisit her high-school math, since that is the maximum level of mathematical proficiency required to understand these basic numbers.

In lieu of that I might instead recommend that rather than attempting to disparage an unassailable set of mathematical facts, she should instead strive for a shred of credibility and explain to voters how the city will be managed to achieve the efficiencies that will balance the very small deficit.

I say “very small” deliberately. Both CVI and Mr. Carleton assumed LaVista Hills would require a $34.5 million budget annually. A deficit of $114,000 would thus be approximately 0.3 percent of the budget.

DeKalb Strong and other anti-incorporation supporters suggest that this should be used as a reason to vote against incorporation because the city would not be financially viable.

They are also utterly wrong.

It is vitally important to understand the limitations of this sort of analysis. This is, at best, an educated guess about the potential income of the city. It is not the same thing as a budget passed by an elected body and managed by professionals. A projected deficit of 0.3 percent is completely normal in any budget process and would be easily remedied by any competent city manager without impacting taxes or services.

For example, hire one less aide to the Mayor. Though, in this case, I would perhaps suggest ensuring the new leadership has a competent analyst on board. And while they are at it, they probably want to invest in improved communications.

Contrary to DeKalb Strong’s perspective, I would read Mr. Carleton’s analysis to suggest that LaVista Hills is financially viable and would achieve a balanced budget with relative ease.

Furthermore, the DeKalb Strong president Marjorie Snook has made the claim that the cityhood plan brings, among other things, increased taxes, increased traffic and fewer police.

This is patently false. The whole point of the study was to determine whether the city could afford the current service levels, including police, to which the answer appears to be a qualified ‘yes’ by Mr. Carleton himself.  So by DeKalb Strong’s own numbers it does not appear that the proposed city will need to reduce services or raise taxes.

Traffic has many sources, but this is the first time I’ve seen incorporation put to blame. It is true that people tend to want to live where there is quality governance, which explains much about why areas in the region with good governance are seeing an increase in residents and areas with bad governance are seeing declining populations. But let’s not conflate cause and effect: incorporation does not increase traffic. Good governance likely attracts residents, which can impact traffic.

Note that DeKalb Strong’s intent to fix county governance would have the same effect on the desirability to live in DeKalb County, and would thus potentially increase traffic. Is it then their view that maintaining a corrupt or bad government is a preferred solution to traffic? That seems insane.

In summary, DeKalb Strong hyperbolically overstates the drawbacks of incorporation. LaVista Hills looks to be a financially viable city with a balanced budget as long as there is competent leadership in place to manage it. LaVista Hills supporters’ inability to convey that competence and the reflexive attempts to kill the messenger give the distinct impression that the necessary leadership is in short supply.

The voters deserve better than what they’ve received to date.

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