DeKalb assessors dropped the county's tax digest an average 6 percent Thursday, the first official slide in appraisals for what is expected to be another bad year of home and commercial values in metro Atlanta.
The county's board of tax assessors said while there were some good spots of new development and increases in commercial values, the lumbering economy and high foreclosure rates in Georgia kept the county from digging out. DeKalb CEO Burrell Ellis had projected a 5 percent drop in the tax digest in the current $559 million budget.
"I expected a higher percentage," board member Vivian Ingersoll said before approving the assessors' report. "I thought it was going to be about 10 percent."
While DeKalb is the first to make it official, several counties and cities have already expressed concern that tax digests will be down in 2012. Tax digests, made up mostly of homes and commercial property values, are used by local officials to help estimate revenue and determine budgets.
Fayette County officials are expecting a 10 percent dip in the tax digest while Cobb County's tax assessors office estimated in early April that its 2012 digest might be down 3.9 percent.
Sandy Springs officials anticipate they could see a 7.5 percent decline in property values this year while East Point, which has seen its tax digest plummet 36 percent since 2008, is bracing itself for a dip of 16 percent.
Fulton and Gwinnett are expected to release their digests later this month.
The drops in appraisal ran the gamut, from a modest 3 percent in residential values of Decatur homes to a whopping 31 percent for Doraville houses. Much of the commercial and industrial dips were in the 1 percent and 2 percent range.
In DeKalb, the dip in the tax digest could mean either more service cuts or another tax increase. If so, they would come a year after the county slashed spending but also raised the tax rate 26 percent to pay its bills.
But Burke Brennan, a spokesman for Ellis, said the county might have some wiggle room.
Since the drop in the tax digest was not as large as feared, finance officials think they will have to make up "slightly less than $2 million," Brennan said. That money could be reconciled when the county does its midyear budget adjustment in July.
"The reality is the decline in the budget shows improvement over the declines we have faced over the years," Brennan said. "It shows the local economy recovering somewhat."
Lee May, chairman of the DeKalb County Commission's budget committee, said the smaller-than-expected dip was good overall, but that challenges remain. May has repeatedly insisted the only way the county could save money long term would be to restructure its entire operation.
“All things being equal, I am pleased to see only a 6 percent decline in the county's digest as a whole," he said. "It is also important to note that the unincorporated digest for the county is at an 8 percent decline, which is of great concern. The budget committee, however, will continue to review these numbers and the subsequent calculations to ensure that there are no unexpected and further reductions in the digest."
County Commissioner Elaine Boyer, who has advocated for deeper cuts, suggested the challenges could have been avoided.
“I have been warning all along that we are not being realistic,” she said. “Our mistakes always wind up on the back of taxpayers.”
Forecasting digests is the wild card when metro counties such as Fulton, Gwinnett and DeKalb ready their budgets. Their fiscal years begin in January, but the counties don’t know how much tax money they can expect until the digests are ready in May or June.
Each county commonly adopts a midyear budget in summer to account for that difference. In good times, midyear adjustments funnel extra money to pet projects or popular services.
But the recession and accompanying sagging home prices have decimated county budgets for years. Officials have balanced budgets by furloughing employees, freezing hiring, dipping into savings and raising taxes.
Last month, Ellis ordered a hiring freeze and asked departments to immediately shave 2 percent from their spending. He has asked the departments to identify an additional 3 percent in cuts during the course of the year, Brennan said.
Some counties have offset their losses by working on longer-range plans. For instance, Cobb County, which had projected a 2.5 percent drop in its digest, plans to absorb the difference with reserves and an account set aside for uncontrollable costs, such as fuel and energy. Cobb will approve its digest in mid-summer.
DeKalb doesn’t quite have that option. The county started 2011 without a cent in reserves, having used all of its savings to fill budget gaps for years.
Ratings agencies highlighted the loss of reserve accounts in repeatedly downgrading DeKalb’s bond ratings. The current budget calls for the reserve to reach $30 million, two-thirds of the goal of one month’s expenses.
Sucking money from that fund, then, could endanger the county’s bond rating, basically its credit score when it tries to borrow for long-term projects such as the $1.34 billion overhaul of its water and sewer systems.
Staff writers Janel Davis and Patrick Fox contributed to this article.
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