County seeks balance with sales tax

On March 18, 71 percent of the voters of DeKalb County, Ga., who went to the polls approved a unique, 1 percent sales tax. Four times during the previous eight years, the same voters had turned down sales tax referenda by ratios of up to three-to-one.

This time around, the difference was that county commissioners of both political parties supported the tax, known as the Homestead Option Sales Tax (HOST).

Eighty percent of all the funds that the county will collect annually under this tax must be used, first, to provide for a homestead exemption of up to 100 percent on all owner-occupied residences. Any remaining funds must go to “roll back” the millage rates on all other classes of taxable real property.

County leaders supported the tax because it was designed to provide for both substantial homeowner property tax relief (estimated to be in excess of $62 million in 1999, the first year of tax relief) and a virtually guaranteed revenue stream for infrastructure improvements and repair (estimated in the 18-month start-up period to be $135 million, and in excess of $18 million annually thereafter).

The property tax reduction feature of HOST is an important step in the county’s effort to diversify its sources of revenue. The county’s 1997 general fund budget anticipates that property taxes will account for 53.2 percent of total general fund revenues, or $167.7 million. With full implementation of the homestead exemption increase in 1999, the property tax will account for approximately 30 percent of total anticipated revenues.

Each homestead residence should benefit by the equivalent of the county’s operating millage rate applied in a particular jurisdiction. For example, employing the anticipated 1997 county operating millage rate of 15.3 mills, the value of the exemption will be greatest in the unincorporated portion of the county. Approximately 86 percent of DeKalb’s 590,000 residents live in unincorporated areas.

By comparison, homeowners in the portion of Atlanta that lies within DeKalb County will be the group receiving the lowest benefit, based on the 100 percent homestead exemption. This discrepancy is purely the result of the varying levels of service the county provides in the 10 cities within the county.

However, to ensure county-wide equity in relation to homeowner/taxpayer benefit, DeKalb has offered to make annual payments to the respective city governments out of the 20 percent of annual HOST receipts set aside for capital outlay. When added to the total homeowner/taxpayer 100 percent exemption as a savings in millage, the payments would equal the highest level of homeowner millage savings benefit in any particular tax year.

Based on a local university’s forecasts of sales tax receipts within the county, a 10 to 15 percent cushion of revenue should be available for the 100 percent homestead exemption rollback in tax year 1999. Obviously, a recession would have a negative or leveling effect on the growth of sales tax revenues, but housing starts within the county would also likely flatten within this same economic environment.

DeKalb County’s sales tax compromise acknowledges both the sentiment that homeowners paying property taxes need relief from an increasing tax burden, as well as the need for aging and growing metro counties to find substantial and dependable revenue sources to address serious infrastructure requirements. The county’s HOST approach to property rights in consideration of government’s needs strikes a happy balance between the “rights” of the taxpaying public and its “duties” to the local government.