Dear Decaturish – LaVista Hills and the very flawed charter

Posted by Dan Whisenhunt October 31, 2015
DeKalb County Georgia. Source: Google Maps.

DeKalb County Georgia. Source: Google Maps.

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Dear Decaturish,

LaVista Hills cityhood advocates have stated that because the city charter caps the city property tax millage at 5.00 – a rate below the current Dekalb millage of 6.14 for the affected services – that this means lower taxes after incorporation.

This is demonstrably false.

To show how this works, let’s set up a side-by-side comparison of the city and county systems, using a house that has an appraised value of $300,000. In both systems, 40 percent of the house’s appraised value is taxable for the purposes of property taxes. So, we begin with our taxable values:

Dekalb County LaVista Hills
$120,000 $120,000

For residential properties, both the county and the proposed city exempt some of that value from taxation. The proposed city provides an exemption of $10,000, plus the value of 1 mill (see Sections 5.08 and 5.10 of the charter). If the millage rate is 5.00, we divide the assessed value above ($120,000) by 5 and get $24,000. Add $10,000 to that, and you get a total exemption of $34,000, which means that $86,000 remains taxable.

The county provides a flat $10,000 exemption, leaving $110,000 taxable. So, comparing the amount of house value that is subject to taxation after exemptions, we get:

Dekalb County LaVista Hills
$110,000 $86,000

We now apply the each government’s millage rate. For LaVista Hills, we multiply $86,000 by .005 and get $430.00. In Dekalb County, the rate is 6.14, so we multiply $110,000 by .00614 and get a tax bill of $675.40. It seems like Dekalb County is much more expensive. But Dekalb County taxes come with HOST credits that can’t be used on the city portion of the tax bill.

In 2015, Dekalb County taxpayers get to take 44 percent of their tax bill off as a credit, thanks to HOST. Since 44 percent of $675.40 is $297.18, we subtract that out and our final scores are:

Dekalb County LaVista Hills
$378.22 $430.00

Despite Dekalb County having a higher “sticker price” millage rate, they have a lower final tax bill for homeowners.

The reduction in millage is a tax cut for owners of commercial properties and people who rent out their homes, but if you own your own home, a millage rate of 5.00 would be a significant tax increase. And we haven’t yet gotten to the increased franchise fees paid by city residents.

The most dangerous thing in the world is the correct answer to the wrong question. It’s a true statement that the millage rate in the proposed city would be lower than Dekalb County, but the millage rate is not the same thing as the tax bill. It is disingenuous to represent it as such.

***

I can’t blame people for shopping around for a new government. We’ve all read the corruption stories out of Dekalb County. But the question that’s worth asking isn’t “Is the county corrupt?” (Answer: Yes.) The real question is whether this charter is a good idea.

We have seen previously that LaVista Hills would need to tax at its maximum rate (5.00) just to get close to the amount of money that the Carl Vinson Institute said it would need to run the city, meaning that there is no surplus. Appeals to Dunwoody and Brookhaven’s tax rate (both charge a millage of 2.74) are hollow. Those arguments ignore that those cities have very different tax bases than LaVista Hills would and they are providing services to 15,000 – 20,000 fewer people than the proposed city. The argument that the city would be more efficient than the county is questionable, but even then, the city’s estimated expenses were mostly based on data from (presumably more efficient?) Dunwoody and Smyrna, but used numbers from 2012 and 2013. Prices have gone up since then.

In addition to taxing at its max rate, the city would also have to deal with a charter that includes a residential property tax assessment freeze until 2020. If the city is counting on home values to rise and tax receipts to increase that way, it would only be able to capitalize on the houses that are sold or undergo major renovations. That places some serious restrictions on how much the city can expect its revenues to grow organically.

With the city bumped up against its tax cap, there’s little room in the budget to handle any increases in the cost of government. Even something as predictable as inflation, generally about 2 percent annually, would add about $700,000 to the city budget each year. If the city couldn’t match that growth in some other revenue source (for example, raising fees), it would have to go to a referendum just to deal with a basic force of economics. Or it could cut services.

Starting a city with no margin for error is a very risky move. These are, after all, the people who would be paying the police. If you’d like to punish Dekalb County for bad behavior, be my guest. Investigate everything and everyone. Anyone who did something illegal can go to jail and watch the soccer team practice. Unfortunately, we’re not leaving Dekalb County and all the unfortunate baggage that goes with that. The only thing that would change is that you’d be living under a city that is handcuffed to a very flawed charter with no financial breathing room.

And you would pay more for the privilege.

–  Russell A. Carleton

About Dan Whisenhunt

Dan Whisenhunt is editor and publisher of Decaturish.com. https://www.linkedin.com/in/danwhisenhunt

View all posts by Dan Whisenhunt

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