Local leaders brace for pandemic’s impact on sales tax-funded projects

Wearing a medical mask, H.E.H. Paving roller operator Charles Barker works with crews as they lay asphalt on Gwendon Terrace in Decatur. The paving project is part of the DeKalb County Special Purpose Local Option Sales Tax. (ALYSSA POINTER / ALYSSA.POINTER@AJC.COM)
Wearing a medical mask, H.E.H. Paving roller operator Charles Barker works with crews as they lay asphalt on Gwendon Terrace in Decatur. The paving project is part of the DeKalb County Special Purpose Local Option Sales Tax. (ALYSSA POINTER / ALYSSA.POINTER@AJC.COM)

Next week, Stonecrest's ambitious 2020 road resurfacing project will begin. Residents of the southeastern DeKalb County city will see more than 15 miles of bumpy thoroughfares smoothed out and paved over.

It’s the type of project that could soon be imperiled across metro Atlanta and the state of Georgia because of the coronavirus pandemic.

Stonecrest’s $5-million effort is funded largely by SPLOST money, the 1% sales tax that many local counties, cities and school systems rely on to fund some of their least sexy but most important projects.

The extra pennies from folks’ daily purchases add up to hundreds of millions of dollars that fund road paving, bridge building and new construction of all sorts — from schools and fire stations to libraries and community centers.

An H.E.H. Paving crew works to lay asphalt on Gwendon Terrace in Decatur, Thursday, April 16, 2020. The paving project is part of the DeKalb County Special Purpose Local Option Sales Tax. (ALYSSA POINTER / ALYSSA.POINTER@AJC.COM)
An H.E.H. Paving crew works to lay asphalt on Gwendon Terrace in Decatur, Thursday, April 16, 2020. The paving project is part of the DeKalb County Special Purpose Local Option Sales Tax. (ALYSSA POINTER / ALYSSA.POINTER@AJC.COM)

That river of cash could slow to a trickle because the pandemic has caused widespread business closures in an attempt to thwart its spread.

With Georgia’s coronavirus caseload projected to peak next month and the possibility of a longer term economic recession looming, local governments find themselves in the difficult and unusual position of considering how they might do more with less from what is typically a rock-solid revenue stream.

A new analysis by fiscal researchers at Georgia State University found that state and local governments could see up to a $1.27 billion loss in sales tax revenue this year. While much of that will be felt at the state level, a dip in SPLOST funds could manifest itself in neighborhoods, with local officials forced to limit or defer projects like patching potholes and repairing sidewalks.

“If those revenues go down … you just might not make it all the way to the bottom of the project list,” said Ted Baggett, who manages local government assistance services at the University of Georgia’s Carl Vinson Institute of Government. “You’d have to prioritize.”

Local governments are required to tell voters in advance how their pennies will be used, and those project lists must be identified in writing before a SPLOST appears on ballots.

Tucker Mayor Frank Auman holds a socially distant ribbon-cutting ceremony last week to mark the city's 2020 SPLOST-funded road resurfacing campaign.
Tucker Mayor Frank Auman holds a socially distant ribbon-cutting ceremony last week to mark the city's 2020 SPLOST-funded road resurfacing campaign.

Credit: City of Tucker

Credit: City of Tucker

In Stonecrest, Mayor Jason Lary said this year’s road projects are safe, largely because his relatively new city had a stockpile of unspent SPLOST dollars in the bank. But Stonecrest is already planning for a 10-15% decline in 2020 SPLOST collections, Lary said.

And it could be worse.

Lary and other local leaders are waiting for data on recent collections that likely won’t come until next month. But even that may not provide much insight into the coming months and years.

“There has been no determination when this ends,” Fayette County Commission Chairman Randy Ognio said. “If we resume life as normal next month, all it takes is a new case of infections and we’re back to where we started.”

‘How long will this continue?’

In terms of the percentage of their overall revenues, metro Atlanta counties are generally less dependent on SPLOST collections than their more rural counterparts. But even around Atlanta, SPLOSTs still often account for 10-15% of counties’ annual revenue — and fund tens of millions of dollars worth of projects.

While local governments and school districts are fully aware that a hit is coming, many said they don’t yet have a firm grasp on the scope of the pandemic’s potential impact.

Representatives from the Atlanta, DeKalb and Gwinnett school districts all said roughly the same thing: they’re monitoring the situation but haven’t stopped work or made adjustments to their respective SPLOST project lists yet.

Josh Rowan, the leader of the city of Atlanta’s newly formed Transportation Department, said there were “too many unknowns” to forecast sales tax collections — but added that light traffic has helped the department nearly double productivity on existing projects.

DeKalb County, meanwhile, announced Wednesday the start of SPLOST-funded work to pave 25 miles of roads.

DeKalb County contractors deploy  crews to fix roads through the SPLOST paving program. AJC file photo
DeKalb County contractors deploy crews to fix roads through the SPLOST paving program. AJC file photo

“The challenge,” DeKalb CEO Michael Thurmond said, “is that no one knows how long this economic downturn is going to last.”

In Cobb County, finance director Bill Volckmann said he anticipates the county’s SPLOST revenue will “drop significantly.” But he said the big-picture outlook is relatively positive, with collections from the county’s current SPLOST program — which started in 2016 and runs until January 2022 — having exceeded expectations.

The current economic downturn has, however, raised concerns that voters may be adverse to approving Cobb’s next SPLOST, which is set for the ballot this November.

“Where do you place the budget for the next SPLOST, and how long will this continue?” Volckmann said. “If anyone knew that, that would be extremely helpful.”

A similar situation is playing out on the southside of metro Atlanta.

Collections for Clayton County’s current SPLOST, which sunsets at the end of the year, is already down $18 million from original projections because of the closure of businesses and the suspension of fees, chief operating officer Detrick Stanford said. Projects could be affected if things don’t turn around.

Clayton also has a new five-year SPLOST proposal set to be voted on by residents in June.

Neighboring Henry County is in a different situation altogether.

The county started collections just this month on a new $204-million SPLOST program, with projects that include a $22 million aquatic center and three new fire stations.

Henry officials won’t have numbers until sometime in May, but they expect their original projections to take a hit.

“You can weather a couple of months of any storm, but the longer an event goes on, the bigger impact it will have,” spokeswoman Melissa Robinson said.

Painful choices

SPLOST is generally collected on a county level, but the impact could be most directly felt inside cities. Though SPLOST collections can’t be used to pad general operating budgets, many municipalities rely heavily on the money to fund capital projects they wouldn’t otherwise be able to afford.

In Stonecrest, for example, SPLOST revenue was projected to account for about 36% of this year’s budget. The city of Roswell’s transportation SPLOST collections were estimated to account for about 27% of its total 2020 revenue.

In Dunwoody, typical annual collections of around $6.8 million make up about 16% of the city’s annual budget. The city has begun looking at possible scenarios and identifying which projects may have to be deferred.

“No one has a good feel for how much it will go down,” assistant City Manager Jay Vinicki said.

At the moment, that’s the problem. It will be at least a few weeks before local governments start getting a real sense of the damage the coronavirus has already wrought.

Even then, the future will only be slightly more clear. And SPLOST is just one part of the financial puzzle.

“The uncertainty on the length of the pandemic makes it challenging at this stage,” said Larry Hanson, executive director of the Georgia Municipal Association. “Expenses will have to be reduced … and that will result in painful choices for many.”

— Staff writers Arlinda Smith Broady, Amanda C. Coyne, Stephen Deere, Arielle Kass, Meris Lutz, Vanessa McCray, Jennifer Peebles, Leon Stafford and Marlon A. Walker contributed to this article.