Property taxes are set to rise across metro Atlanta for the near future due to inflation and declining revenue from commercial property, a continued effect from the COVID-19 pandemic.
Counties and cities have to decide every summer whether to raise or lower property tax rates, the primary funding source for local governments and school districts. In DeKalb County, nearly all residents will see their property tax bills increase next year with local governments collecting more revenue to balance ever-increasing budgets.
Government officials say a variety of factors justify the tax increases — from inflation making city services more expensive to COVID-19 stunting other revenue streams. While home values are through the roof here across metro Atlanta, the pandemic hasn’t been as kind to commercial property appraisals, and the imbalance has led some city leaders to wonder if taxes can be cut in this economy.
“Maybe this is not the time to be lowering (property taxes) when there appears to be some financial storms heading everybody’s way,” Clarkston Councilwoman Susan Hood said during a recent public hearing.
Other communities, like Dunwoody, are likely experiencing their first property tax increase since incorporation. It’s led some residents in the affluent suburban city to claim their government is growing at an unsustainable rate.
“How about biting the bullet and address expenses? Expenses have skyrocketed,” Dunwoody resident Bob Hickey said during a public hearing last week. “If you want to fix the structural deficit, fix it. Otherwise, roll (property tax rates) back to the level of last year.”
State law requires local governments to advertise property tax increases when they’ll receive more property tax revenue due to increasing appraisals. If cities or counties decide to roll back the rate, meaning they lower the property tax rate to account for the increase in home values, they don’t have to make that advertisement and don’t have to have three required public hearings.
Some cities have already set their property tax rates without much controversy, and they’re all on pace to finalize their rates before the Fourth of July holiday weekend.
Plugging budget gaps
On paper, DeKalb and its 12 cities will all get more property tax revenue from homeowners this year.
This is primarily thanks to the rapid growth in home prices, exemplified by the median price for metro Atlanta home sales surpassing the $400,000 mark for the first time. Property taxes are calculated using the approved millage rate, the amount homeowners must pay per $1,000 of appraised property value. The more a home is worth, the more residents pay in property taxes. Renters are not exempt; when property values increase, landlords pass the cost on to tenants.
According to Zillow, home prices soared across DeKalb over the past year. The average home in Brookhaven is worth nearly $700,000, and it’s uncommon to find a DeKalb city where the average home price is below $300,000. The areas with the most affordable homes, such as Clarkston and Lithonia, saw their home values increase at the fastest rates as homebuyers flooded cheaper markets.
Clarkston, with its reputation as an affordable area inside the Perimeter and a haven for immigrants, saw its home values increase by 26% since last year. At the same time, City Manager Shawanna Qawiy said commercial property values dropped nearly 3% and industrial parcels saw their values decline by more than 9%.
Even though the city is poised to collect an additional $169,000 in residential property taxes this year while keeping the millage rate the same, the other sectors’ decline leaves the city’s budget with a $200,000 shortfall. Qawiy said the city can make tweaks here and there to plug the gap.
“We have the money there,” she said during a Wednesday phone call. She said the city has $131,000 in unallocated funds plus some unfilled city staff positions that can remain unfilled. Qawiy added that the city can’t use pandemic relief funds to replace revenue losses from taxes.
Lithonia’s home values increased by 31%, one of the highest rates in the county. When asked about it, Mayor Shameka Reynolds told The Atlanta Journal-Constitution, “Isn’t that crazy?
“Even homes that are even not for sale like my own grandparents’ home, they’re calling every week trying to buy it,” she continued, referring to corporate investors. “With inflation like this, everything is just going up.”
Revenue losses hit harder during times of high inflation, since every dollar is worth a little less. In May, the Bureau of Labor statistics found Atlanta’s inflation rate was the second highest in the country at 10.8%. That puts a squeeze on homeowners and city budgets.
The squeeze applies to unincorporated DeKalb as well. The county plans to maintain its millage rate, which is higher than every city in the county, and it would lead to the county receiving about 7% more revenue from property taxes. The county’s school board, which maintains its own millage rate, has similar plans.
Lithonia is one of DeKalb’s least populous cities, and it relies heavily on residential property taxes to bolster its budget. The city is considering raising the millage rate, which would lead to an additional $130,000 in revenue, which Reynolds said would go towards the city’s underfunded police department, establishing a reserve fund and technology improvements at City Hall.
Police and parks
In Dunwoody, the property tax debate has been an easy one since the city was founded in 2009 — just don’t change anything.
The city boasts one of the lowest millage rates in DeKalb County due to the city’s bustling business community. Cities with larger corporate sectors tend to rely less on property taxes, leading them to generally have lower property tax rates.
In addition, the city charter includes a one-mil exemption and a homestead freeze for property owners, which protects homeowners from paying more property taxes as their homes appreciate in value.
Things will begin to change this year.
Assistant City Manager Jay Vinicki told the AJC that the council is pursuing increasing the millage rate to the cap allowed by the city charter to raise more revenue. He said the founders of the city underestimated how much police and parks would cost, with the latter now costing 10 times initial estimates.
“The study that created Dunwoody missed the mark on two major things, and they were police and park expenses,” he told the AJC. Dunwoody, along with multiple other cities, is offering police salary raises to try to attract new cops.
Since 2020, Dunwoody has expected to use reserve funds to combat a budget deficit, but Vinicki said this year will be the first time the city will actually spend more than it’s collected in revenue. Without the millage increase, the city would bleed about $2.2 million, but the increase in property taxes cuts that amount in half.
Vinicki estimates that Dunwoody will need to generate new revenue before 2025 or else they’ll deplete their reserve funds too quickly. Most revenue-generating options, such as increasing the millage rate beyond the cap or tweaking the homestead freeze, will require voter approval.
Residents critical of the millage rate hike hope the increase is temporary and ask for city leaders to make sure that the park improvements and police salary raises are truly necessary.
“The essence of this is this millage rate, once enacted, will probably never go back down,” Rob Weir said during the most recent public hearing. “That to me is a tax increase, and that’s not what we’re looking for.”
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