When is tax rate hike not a tax increase? That was the question last week in an online debate at barrowjournal.com after the City of Statham announced it would be raising its millage rate by 11 percent. But was that move a tax hike?
There are several ways to look at that question.
From the city’s perspective, simply raising the millage rate doesn’t equate to a tax hike. The reason for that is the millage rate is just part of the picture. It is multiplied by the property assessment to get a final tax amount owed.
Statham’s problem isn’t higher tax rate, it’s higher spending
Friday, October 26. 2012
In Statham, as in the rest of Barrow County, property assessment values have declined dramatically. That means that even though the millage rate is going up, many people won’t pay more money in taxes this year because their property values went down.
The overall net assessed property value in the City of Statham went down 11 percent this year, so the millage rate hike of 11 percent is an offset. The city won’t take in any more money for its FY2013 budget than it took in this year. So from that view, the millage rate hike wasn’t an increase in total taxes to the city.
But from another perspective, one could argue that the millage hike was indeed a tax increase. The reason is that although many people will not pay more in direct tax dollars to Statham, they will be paying the same amount of money, but on less property value. The ratio of taxes paid to actual value will go up and one could argue that is tantamount to a tax increase.
Of course, all of that depends on individual situations. Not all property went down in value the same amount. Some people will pay the same as last year while others may pay more or less than they did in 2011.
Here are a few examples:
• A 1.02 acre residential lot and house on Noah Lane in Statham was valued at $109,824 last year; this year that property’s value fell by 11.2 percent to $97,542. That property owner will pay about the same in taxes this year as last year.
• A 1.77 acre commercial lot and building on the Atlanta Highway was valued at $409,751 last year and that went down 3.2 percent this year to $396,738. That property owner will pay more taxes this year since his property only went down 3.2 percent, but the millage rate is going up 11 percent.
• A 109.58 tract of raw commercial land owned by Barrow County’s largest landowner, Walton Georgia, was valued at $821,850 last year, but this year that valuation dropped by 30 percent to $575,295. Walton will pay far less in taxes this year than was paid last year because the value fell by 30 percent while the tax rate is going up only 11 percent.
So while the overall tax digest (total assessments) in Statham fell 11 percent, the city’s millage rate hike will affect different property owners in different ways depending on how their individual property was reassessed this year. A lot of people will pay the same or less, but some property owners will pay more.
But all of this discussion about revenue really misses the more important issue — city spending. It is how a government spends its money that is really more important than how it gets its money. Spending drives tax rates and the need for revenue. And it is often the lack of discipline in government spending that causes tax hikes.
That could be the real situation in Statham. For 2009, 2010 and 2011, Statham’s general fund was in the red. The town spent more money than it took in each of those years (the audit for FY2012 isn’t available yet.) Statham has been drawing down its reserves to balance its general fund overspending. And in its FY2013 general fund budget, Statham is planning to spend more than it did in FY2012.
So did Statham raise its millage rate to offset a drop in the tax digest, or was it because the town has lost control over its spending and bleeding red ink?
The main area that has gotten a lot of small towns in financial trouble has been expensive police departments. Many towns in Northeast Georgia have had their budgets drained because town officials have been cowered into funding a level of law enforcement that the community can’t afford.
Many small town police departments are overstaffed and overfunded. Most small towns don’t need a 24/7 police department. If a town has 40 percent or more of its budget going to fund a police department, the department is too big for that town.
For FY2013, Statham’s police department is 41 percent of the town’s general fund budget. That’s because while the town has done some cutbacks in other areas, it has increased its spending on police. In FY2010, the town spent $372,750 in public safety; for FY2013, that has jumped to $492,900, a 32 percent increase. No town government can thrive when a single department sucks away 40 percent or more of the town’s general fund revenues. The numbers just don’t work. (Auburn has the same problem, as do a number of other small towns in Northeast Georgia.)
So while Statham’s revenues have been hit by the decline in its tax digest, that’s only a small part of the picture. Property taxes make up only 22 percent of Statham’s $1.2 million in revenues, the rest of the town’s revenues come from sales taxes, fees, fines, etc. Property taxes are important, but not the only source of city income.
The bigger picture is that Statham has not disciplined its spending and has been hemorrhaging red ink in recent years. The city’s tax rate hike was a move to stop the bleeding of overspending, not to simply offset a lower tax digest.
The real test of this will come when the city’s digest begins to go back up. Will city leaders then lower the tax rate to offset a growing digest? Or when the economy begins to grow, will city officials keep the tax rate high and reap the windfall of higher assessments?
Mike Buffington is co-publisher of the Barrow Journal. He can be reached at mike@mainstreetnews.com.
The overall net assessed property value in the City of Statham went down 11 percent this year, so the millage rate hike of 11 percent is an offset. The city won’t take in any more money for its FY2013 budget than it took in this year. So from that view, the millage rate hike wasn’t an increase in total taxes to the city.
But from another perspective, one could argue that the millage hike was indeed a tax increase. The reason is that although many people will not pay more in direct tax dollars to Statham, they will be paying the same amount of money, but on less property value. The ratio of taxes paid to actual value will go up and one could argue that is tantamount to a tax increase.
Of course, all of that depends on individual situations. Not all property went down in value the same amount. Some people will pay the same as last year while others may pay more or less than they did in 2011.
Here are a few examples:
• A 1.02 acre residential lot and house on Noah Lane in Statham was valued at $109,824 last year; this year that property’s value fell by 11.2 percent to $97,542. That property owner will pay about the same in taxes this year as last year.
• A 1.77 acre commercial lot and building on the Atlanta Highway was valued at $409,751 last year and that went down 3.2 percent this year to $396,738. That property owner will pay more taxes this year since his property only went down 3.2 percent, but the millage rate is going up 11 percent.
• A 109.58 tract of raw commercial land owned by Barrow County’s largest landowner, Walton Georgia, was valued at $821,850 last year, but this year that valuation dropped by 30 percent to $575,295. Walton will pay far less in taxes this year than was paid last year because the value fell by 30 percent while the tax rate is going up only 11 percent.
So while the overall tax digest (total assessments) in Statham fell 11 percent, the city’s millage rate hike will affect different property owners in different ways depending on how their individual property was reassessed this year. A lot of people will pay the same or less, but some property owners will pay more.
But all of this discussion about revenue really misses the more important issue — city spending. It is how a government spends its money that is really more important than how it gets its money. Spending drives tax rates and the need for revenue. And it is often the lack of discipline in government spending that causes tax hikes.
That could be the real situation in Statham. For 2009, 2010 and 2011, Statham’s general fund was in the red. The town spent more money than it took in each of those years (the audit for FY2012 isn’t available yet.) Statham has been drawing down its reserves to balance its general fund overspending. And in its FY2013 general fund budget, Statham is planning to spend more than it did in FY2012.
So did Statham raise its millage rate to offset a drop in the tax digest, or was it because the town has lost control over its spending and bleeding red ink?
The main area that has gotten a lot of small towns in financial trouble has been expensive police departments. Many towns in Northeast Georgia have had their budgets drained because town officials have been cowered into funding a level of law enforcement that the community can’t afford.
Many small town police departments are overstaffed and overfunded. Most small towns don’t need a 24/7 police department. If a town has 40 percent or more of its budget going to fund a police department, the department is too big for that town.
For FY2013, Statham’s police department is 41 percent of the town’s general fund budget. That’s because while the town has done some cutbacks in other areas, it has increased its spending on police. In FY2010, the town spent $372,750 in public safety; for FY2013, that has jumped to $492,900, a 32 percent increase. No town government can thrive when a single department sucks away 40 percent or more of the town’s general fund revenues. The numbers just don’t work. (Auburn has the same problem, as do a number of other small towns in Northeast Georgia.)
So while Statham’s revenues have been hit by the decline in its tax digest, that’s only a small part of the picture. Property taxes make up only 22 percent of Statham’s $1.2 million in revenues, the rest of the town’s revenues come from sales taxes, fees, fines, etc. Property taxes are important, but not the only source of city income.
The bigger picture is that Statham has not disciplined its spending and has been hemorrhaging red ink in recent years. The city’s tax rate hike was a move to stop the bleeding of overspending, not to simply offset a lower tax digest.
The real test of this will come when the city’s digest begins to go back up. Will city leaders then lower the tax rate to offset a growing digest? Or when the economy begins to grow, will city officials keep the tax rate high and reap the windfall of higher assessments?
Mike Buffington is co-publisher of the Barrow Journal. He can be reached at mike@mainstreetnews.com.
The answers are there in the Tenets of the Republican party.
The issue is that that GOP party tenets:
Less taxes
Less Government regulation
Free Markets - Letting the market determine the winners and losers
is lost on long time politicians and professional bureaucrats. They are only concerned with welding their power to fund petty grievances, inside deals and their positions.
Ask your self, Why can I use the very same arguments against the GOB(Not GOP) party and the Barrow County Connected that are being used against Obama and the Democratic party?
Several years ago, we surveyed over 100 cities, counties and school boards to identify the jurisdictions that calculated the millage rate correctly. We did not find a single one! There is no law that requires politicians to adopt a mathematically-correct rate and they are not trained to do so. Consequently, they adopt whatever rate has worked (politically) in the past or whatever increase they can get away with.
If done correctly, the millage rate should be nothing more than the answer to a simple math problem. When calculated correctly, all focus is placed on the one component of the calculation that is left in the hands of the politicians-- which is spending.
I invite you and your readers to visit www.millagerate.com for an explanation of the millage rate calculation process.