Atlanta Council split on tax-increase option

Shirley Franklin knows about tough times and hard decisions.

As mayor she’s had to lay off scores of employees. She’s taken back Atlanta’s water system from a private contractor and tackled a costly sewer repair project.

Still, she’s never faced anything quite like the city’s 2010 budget.

The challenges look like this:

• a $40 million-plus budget gap

• a possible tax increase during a recession

• falling credit ratings, property values and revenues

• little or no savings

• rising demand for services

• a wave of property crimes

• furloughs of police and firefighters

• waning political power in the mayor’s final year.

All that hits as the full council heads into re-election mode.

“It’s not just the taboo subject of a tax increase in an election year,” said Councilman Howard Shook, chairman of the city’s finance committee. “It’s a tax increase and service reductions in an election year. It’s starting to dawn on people that the math is not very good.”

Some version of the same story is playing out in cities, counties and school boards across the state and nation as officials have seen sales taxes, permit fees and property taxes decline.

They’ve countered with service cuts, layoffs and hiring freezes. More such measures are likely during the next few months as local governments begin setting 2010 budgets.

In Atlanta, all the possible complications have the council and administration officials nervous as the mayor’s advisers put the final touches on a spending plan that goes to the council in late April.

“When you hit times like this, it gives you the inspiration to do things that would not fly at more prosperous times,” said Councilman Lamar Willis. “For us as a city, we’ve got to go back to the basics. I don’t think we’ve yet cut to the bone.”

The city begins the budget process with revenue estimates for 2010 about $480 million.

Even with a series of layoffs and other cuts, CFO Jim Glass said he expects to finish this fiscal year spending about $523 million. He noted that gap is there even with furloughs for virtually every city employee through the entire fiscal year — including police officers and firefighters.

Eliminating public safety furloughs as the council has asked, Glass said, will cost the city an additional $17 million or $18 million, pushing the gap closer to $60 million.

Glass said virtually any revenue-generating idea or cost-cutting move is on the table. One idea being floated is to close, sell or lease out the city’s jail.

“We are trying to keep basic city operations in place,” Glass said.

The dire situation has council members already talking tax increase — an idea they rejected so harshly last year that they actually cut the tax rate instead. At a recent retreat, several council members said they would consider raising property tax rates this fall.

“We have to keep property taxes as an option,” Willis said.

Members are divided on how to close the gap. Shook, the finance chairman, said he will not vote to raise taxes this year because his Buckhead constituency simply won’t stand for it. He’s eager to see how Franklin’s final budget shapes up.

“If I voted for a tax increase under these circumstances, I would resign so I could run against myself,” Shook said.

Glass said everything’s on the table as the city looks to bridge that gap.