A quirk in a 12-year-old state law allows counties, cities and schools to raise property taxes without informing residents ahead of time -- and Fulton County is considering doing just that.
Under Georgia's Taxpayer Bill of Rights, passed in better economic times, a board looking to take in the same revenues as the previous year can shrug off the normal procedure for raising taxes, though many homeowners would see bigger bills. The government is not required to advertise the increase. Instead of holding three public hearings, it can hold just one, right before the board votes.
Any taxing jurisdiction across the state can use the tactic, and with property values plunging, it's an attractive option as the time draws near for setting tax rates. The City of Snellville might do it. Gwinnett County hasn't ruled anything out. Cobb County has looked at the option, but may need so much extra money that it can't get away with not broadcasting an increase.
But Georgia's largest county, facing a decline of at least 5 percent in the value of the county's taxable properties and a projected $100 million budget shortfall, might do it, according to a memo obtained by The Atlanta Journal-Constitution.
"We currently anticipate recommending a revenue neutral millage rate," Fulton County Finance Director Patrick O'Connor said in a memo to commissioners, referencing the tax boost. "This is an upward adjustment to the existing millage rate of 10.281 to offset an overall decline in property values from 2010. Per state law, this adjustment is not advertised as a property tax increase."
Regardless of the terminology, tens of thousands of Fulton property owners could face higher taxes if the rate is raised to counter the overall drop in home and business values. Others could have the benefits of a higher homestead exemption -- a tax reduction for owners who live in their homes -- wiped out. Those whose home values have nosedived would see fewer tax savings.
At least two Fulton County commissioners said they would oppose a quiet adjustment to the tax rate. The commission will likely vote to set it later this month.
Passed in 1999, the Taxpayer Bill of Rights prevents governments from reaping higher revenues by increasing property assessments, which are viewed as backdoor tax increases. When overall property values rise, county and city governments and school systems are subject to an automatic tax rate reduction, determined through a complex calculation designed to keep revenues the same as in the previous year.
But with property values plummeting, which lawmakers didn't foresee in the past, the same set of rules has the system working in reverse.
"It's still, under the law, called a rollback rate, even though it's a roll-up rate," said Michael Bell, a public finance professor for Georgia State University's Andrew Young School of Policy Studies.
Millage rates, set by county commissions, city councils and school boards, are multiplied against taxable property values, determining the bottom line on individual bills and how much revenue a government can expect in property taxes. If a county with property values on the rise wants to keep its millage the same and take in more revenue, it must treat that as a tax increase, running ads and holding three public hearings to let residents sound off.
Those requirements disappear if the rollback rate is used.
State Senate Majority Leader Chip Rogers, R-Woodstock, who has sponsored legislation to change counties' tax collections and appeals processes, said the 1999 law needs to be updated so that any tax rate increase requires advertisements and the three hearings.
"There will be taxpayers who will see a tax increase at a time when values are going down, and for someone to see a higher tax bill, it's just wrong," Rogers said.
The higher tax might seem negligible in Fulton County -- about $45 extra for a home valued at $200,000 with no homestead exemptions -- but any increase could stir acrimony, particularly in Fulton. Taxpayer advocates regularly accuse the county government of setting property assessments too high, and state legislators have chided the county for overseeing a bloated budget that doesn't reflect it has direct governance over fewer than 10 percent of county residents.
Although the tax rate increase is under consideration, some Fulton commissioners don't want to take that step. Commissioner Liz Hausmann said she opposes raising the rate and taking advantage of the public hearing loophole. The county has six community sessions on the budget scheduled, and three separate hearings on raising taxes should be held, she said.
"In my opinion, we just need to take a break from spending, unless it's critical, before we start considering raising the millage rate on anyone," Hausmann said.
Commissioner Tom Lowe said he would vote with Hausmann in favor of holding hearings and announcing an increase, though they might be in the minority. Lowe has spoken in favor of a slight tax increase in the past, but he said now isn't the time for it.
"That hurts everybody, and we've got people who can't afford to be hurt at all," he said. "I think it'd be better to tighten our belt and reduce the number of employees if we have to."
Commissioner William "Bill" Edwards said going beyond what the law requires to notify taxpayers is "worth discussion," but he'll be getting word out in his district either way through emails and community meetings.
The finance department warns of a looming shortfall every year, Edwards said, but then the county ends up with a surplus. He said he's not convinced a tax increase will be needed.
"For me, it's a last resort," he said. "Before we do that, there's a lot of other things we can do."
Other counties and cities also are weighing how to cope with falling digests. The Snellville City Council will vote on a tax roll-up on July 11 to help make up for a 7.4-percent drop in property values over the past year. By staying within the allowable rollback rate, Snellville will hold just one public hearing, on July 11, when the rate is voted on, City Manager Russell Treadway said.
Cobb County, whose fiscal year begins Oct. 1, is weighing a straight-up tax increase that would exceed what the law provides for a "rollback," Commission Chairman Tim Lee said. With a 5-percent decline in its digest, the county faces at least a $15 million shortfall for 2012. One plan on the table would impose a 16-percent hike in the tax rate -- enough to trigger the need for advertisements and hearings.
Gwinnett County anticipates an 8- to 9-percent tax digest decline. Aaron Bovos, CFO and deputy county administrator, said commissioners will be briefed soon on what is needed to set a 2011 property tax rate.
O'Connor, the Fulton County finance director, said the rollback calculation raises the millage rate to 10.851, a 0.57 increase. That shouldn't hit taxpayers, he said, because not only have taxable home values dropped, but the homestead exemption rose from $25,000 to $30,000 this year.
"Nobody's getting any tax increase here," O'Connor said.
That's not the case for everyone, though, because almost half of Fulton property owners saw no decrease in their assessed values and more than half have no homestead exemptions.
Kate Siegel falls into both categories. The assessors office kept the value of her Castleberry Hill loft at $140,000 this year, which has her fuming since she's been unable to sell it for the $85,000 she paid in 1997. She finally gave up, pulling it off the market and renting it.
The proposed new millage rate would cause her bill to go up by $32, an amount she isn't willing to pay.
"It's a matter of principle," Siegel said. "Of all the hassles I've had with this property, now you want me to pay another $32 for the privilege of you screwing it up again."
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