Atlanta property taxes: Budgets sink as values fall

An investigation by The Atlanta Journal-Constitution has found the five largest metro counties cut property values that help determine tax bills by $24.3 billion dollars, or 6 percent, in 2010. But in many cases, it wasn’t enough. Residential values in many areas remain too high.

As county appraisers continue to lower values, property owners might save money on their tax bills. But the savings might come at the expense of services they take for granted.

It’s already happening.

Libraries are closing on weekends. Class sizes are getting bigger. School years are getting shorter. And this may be just the beginning.

Government officials, public finance experts and other observers say local governments and schools face a new era of austerity as property tax revenue wanes. Services the public has taken for granted — parks, libraries, swimming pools — may be reduced, eliminated or privatized as governments focus on core services like public safety.

Some welcome that new era. They say the public has become too dependent on government.

“We’ve lost sight of what is the appropriate role of government in a free society,” said Lance Lamberton, president of the Cobb County Taxpayers Association.

But one person’s extravagance is another’s necessity. And the decisions that lie ahead — spending cuts vs. tax increases, parks vs. police — won’t be easy.

“Because government does so many things for us, we’re going to feel it,” said Katherine Willoughby, professor of public management and policy at Georgia State University. “You really can’t get up in the morning without feeling the effects of government.”

Once-stable income

Billion-dollar operations seldom rely on a single source of revenue, and counties, cities and schools are no different.

Schools get state and federal money. Counties and cities get the same, plus income from fees and fines and other taxes.

But property taxes have been the primary source of local revenue for local governments and schools for a century, Willoughby said.

Clint Mueller, legislative director for the Association County Commissioners of Georgia, said it makes sense for local governments and schools to tax property. They provide services — schools, roads, water, zoning, police and fire protection — that directly affect property.

“When you’re looking to buy a property, those are the things you look at,” Mueller said.

Until recently, property taxes have been a stable source of government income.

The building boom of recent decades meant metro Atlanta governments could depend on steady growth in property taxes that could be used to offer services to growing populations. As recently as 2008 local tax digests — the value of all taxable property in a given county — were growing.

Then the real estate bubble burst.

Last year, tax digests fell slightly in four of the five largest metro Atlanta counties. This year they took a bigger hit: The total value of residential, commercial and other property in those counties fell $24.3 billion — or 6 percent — in 2010.

Property tax revenue has fallen apace.

Clayton County has budgeted a decline of about $8.7 million — or nearly 10 percent — in general fund property tax revenue this year. Gwinnett schools expect general fund property tax revenue to be down $44 million, or 7.6 percent, this year. Other governments also are projecting decreases.

Cuts hurt services

As a result, many elected officials are cutting costs.

Cobb County commissioners in September approved a 2011 budget that reduced weekday library hours and closed all branches except the central library on Sundays. They also reduced bus service, left 70 vacant positions unfunded and raised a variety of fees and fines.

DeKalb County recently unveiled a budget that would close the cooperative extension office, satellite tax offices and some parks. Clayton County outsourced planning services and closed its police academy this year.

Clayton County Commission Chairman Eldrin Bell said elected officials must look for efficiencies and focus core responsibilities.

“What are the things under Georgia law that counties and cities are required to do?” Bell said. “What other things have we taken on just because?”

Schools also are struggling. This year, some local districts eliminated teaching jobs, increased class sizes and shortened the school year.

Cobb schools Chief Financial Officer Mike Addison said the district has tried to ensure budget cuts don’t affect the classroom. But the cuts have taken a toll.

“It’s obviously more difficult to teach a larger class,” Addison said.

Compounding the schools’ financial problems: Federal stimulus money that has buoyed budgets this year will soon be gone.

“It’s like the moon and the stars are coming together for difficult times,” said Jim Puckett of the Georgia School Boards Association.

Local officials have tried various ways to avoid cuts. For example, Fulton County’s proposed 2011 budget would tap $72.4 million in reserve funds to offset declining revenue. And in DeKalb, CEO Burrell Ellis has proposed a 2.32-mill property tax increase.

But fund balances don’t last forever. And tax increases might not solve budget problems.

Gwinnett County commissioners raised property tax rates by 21 percent last December. Commissioners said it was needed to prevent big cuts to public safety, parks and libraries.

But the tax increase didn’t generate enough revenue to offset a continuing erosion of property values. Gwinnett’s general fund property tax receipts for 2011 are projected to be below 2009 levels.

Under its proposed budget, the county will still start 2011 with an $18 million general fund deficit.

Angry residents?

That tax increase angered many Gwinnett residents.

Sabrina Smith, chairwoman of Gwinnett Citizens for Responsible Government, said commissioners used the threat of cuts to public safety to justify the tax increase. But she thinks they can make other cuts.

One example: public aquatic centers. Gwinnett County operates 17 swimming pools.

“Some people would be outraged to even consider closing those down,” Smith said. “But user fees might be a way to maintain those.”

Lamberton, of the Cobb County Taxpayers Association, also cited aquatic centers as an example of government overspending. He said pools, skate parks and bicycle trails aren’t essential needs like public safety, roads and bridges. He said facilities like aquatic centers would be better left to the private sector.

“You’re forcing one person to pay for the recreational activity of the other,” he said. “Those things should be supported by the user.”

Willoughby, the Georgia State professor, agreed local governments should consider looking for private partners for parks and recreation facilities. “That’s not something we have to do, that people will live or die by,” she said.

Faced with choices like that, some elected officials are consulting citizens groups to help them balance budgets. Cobb County will convene a citizens committee early next year to help review its organization to find savings and efficiencies.

“Should we close our libraries? Should we close our parks? Should we close our pools?” said Cobb County Commission Chairman Tim Lee. “Having input from the community is going to be critical.”

Feeling the effects

At a public hearing earlier this month, advocates for various programs pleaded with Gwinnett County commissioners to spare their budgets. They testified for more than an hour.

The county plans to cut library spending by 15 percent. It also plans to reduce subsidies for various social service agencies by 50 percent in 2011 and eliminate the subsidies altogether in 2012.

Robert Byars of Norcross urged the commission to spare $55,000 in funding for the Gwinnett Coalition for Health and Human Services, which operates a help line for people seeking emergency assistance, trains neighborhood leaders and provides other services.

“We cannot compromise the future of our citizens for the excessive spending practices of the past,” Byars told the commission, a comment typical of many that night.

At the conclusion of the hearing, Commissioner Shirley Lasseter told dozens of people in the audience that nobody wants to cut their funding. But she cited the $18 million deficit that already looms.

“We can’t come up with $18 million by twinkling our nose on Jan. 4 when this comes up for a vote,” Lasseter said. “Don’t think this hasn’t been serious to us. A lot of us have lost sleep over this.”

“We’re in a hard spot, y’all,” Lasseter concluded. “We’re trying to do the very best we can for everybody out there.”

Expect exchanges like this to become more common. It may be years before property values and tax revenue recover. That likely means years of budget cutting for local governments and schools.

“Our country, our citizens need to be a little more forgiving. We’ve all got to get real,” Willoughby said. “We are going to feel the effects of this recession for a decade. There’s not an easy fix.”