County officials pass homestead option sales tax >By Liane Levetan

DeKalb County, Ga., was facing a critical need for infrastructure improvements at the same time its citizens were demanding dramatic property tax relief. The county of half a million residents, located in the heart of the Atlanta metropolitan area, provides the same services and faces many of the same challenges that major cities and counties across the country must deal with.

For instance, county officials knew that DeKalb’s 29-year-old courthouse needed to be replaced with a facility that had a sprinkler system and complied with the Americans with Disabilities Act. New fire stations and police precincts were necessary to keep up with the demands of population growth, and local matching money was needed to help solve traffic gridlock in the county’s major employment centers and to upgrade old county roads that were suddenly surrounded by new subdivisions and flooded with commuters.

At the same time, DeKalb officials felt increasing pressure for property tax relief from politically active homeowners, many of whom had worked hard to defeat recent sales tax proposals (including two that featured property tax rollbacks). Additionally, DeKalb is one of only three counties (out of 159 in Georgia) that did not have any form of local option sales tax for county use. Georgia has a 4 percent state sales tax, and DeKalb adds an additional 1 percent dedicated to MARTA, the Atlanta region’s public transportation system.

In I994, State Representative Bart Ladd (R) introduced legislation into the state General Assembly that would enable counties to pass a Homestead Option Sales Tax (HOST), revenues from which would be used to fund a 100 percent homestead exemption on county (not school) property taxes.

While HOST generated some attention, the idea encountered resistance initially for three major reasons: it was such a new concept; it did not offer significant property tax relief to owners of businesses or rental properties; and its enactment would place DeKalb County at the state sales tax limit, preventing the county from using tax revenues in the future for capital improvements unless the state limit was increased.

County leaders solved the problem by agreeing to restrict a portion of the sales tax revenues each year to be used solely for capital improvements, using the remainder to fund the 100 percent homestead exemption.

The final HOST legislation, which would allow DeKalb County to place HOST on the ballot for a vote, had the unanimous support of the county board of commissioners and the DeKalb delegation to the general assembly and was signed by the governor.

Because the sales tax must be collected for a full calendar year before the 100 percent homestead option goes into effect, the county will collect an estimated $92 million between July 1, 1997 and Jan. 1, 1999, when the homeowners begin receiving property tax bills that reflect the legislation.

This initial collection will be used for long-delayed infrastructure improvements. (See page 6 for more tax details.) Beginning in 1999, DeKalb County homeowners will receive approximately a 40 percent reduction on their total county property taxes. The remaining 60 percent of DeKalb’s property tax supports schools and is not affected by HOST.

Another 1.33 mills of county property tax designated to repay bond indebtedness cannot be removed by law.

Any surplus from sales tax collections will be used to offset business and rental property taxes by lowering the millage rate. According to projections, for the first year of collections this will be about 1. 9 mills.

Liane Levetan is the CEO of DeKalb County.