Governments left in a bind by tax delays

Revenue accounts for two-thirds of the money schools bring in.

The state’s rejection of Fulton County’s tax digest won’t cause immediate harm to most local governments, which said they had reserves to cover the cost of doing business for anywhere from three to six months.

But property taxes account for 70 percent of Fulton County’s revenue, and nearly two-thirds of the money the county’s two school districts bring in. When the state Department of Revenue decided this week to stop Fulton County from sending its tax bills this month, it created a cash-flow problem for those governments and others.

But consider the plight of the new city of South Fulton.

Mayor Bill Edwards said his government is already living on borrowed time...and borrowed money.

Since the government formed May 1, “we have not collected not one dollar of property taxes,” Edwards said. The government has a $13 million loan that has to be paid back at the end of the year, and Edwards said he plans to go to the bank to see if they can help him find a solution.

“This is a disaster,” Edwards said. “We can’t secure another tax anticipation note without a digest. We don’t have a money problem, we have a cash-flow problem.”

The continued delay is affecting all the county’s cities, Edwards said, which need to do “some belt-tightening” as they figure out what the implications will be for their governments.

“Nervous ain’t the word,” Edwards said. “I’m just overwhelmed, I’m flabbergasted, I’m just knocked off my feet.”

Fulton County spokeswoman Jessica Corbitt said the county hasn’t yet finalized plans for how it will deal with its own expenses. Chief Financial Officer Sharon Whitmore was not available for comment Friday, but said previously that the county was on a strict timeline to pay back its own $200 million loan. She said the time frame was “tighter than I would have liked” and that tax bills would have to be sent by the end of October to pay everything on time.

But they will not go out until November at t he earliest. The county has requested a court hearing to get a temporary collection order, which would allow Fulton to collect taxes while it responds to the issues the Department of Revenue found in its digest.

The Department of Revenue’s seven-page letter to Fulton Tax Commissioner Arthur Ferdinand had a laundry list of errors in the digest that was submitted earlier this month.

In the letter, Local Government Services Director Ellen Mills said the county assessed properties far below the fair market value. Mills also questioned county leaders’ decision to send a second batch of assessment notices, and she wrote that their declaration that any appeals that had already been filed were null and void truncated property owners’ rights and likely ensured that not all appeals were properly accounted for.

A hearing to determine whether the county can still collect money is scheduled for Friday, and will be heard by a DeKalb County judge after judges from Fulton recused themselves.

In a petition to the court, Fulton County said without the collection order, the county would not be able to pay its debts, pay appropriate salaries or “maintain an orderly and normal function of county business,” among other concerns.

If the judge allows Fulton to collect taxes under the order, it will still be several days before bills are sent, Corbitt said. In Atlanta, taxes are due 45 days after tax bills are mailed, while the deadline is 60 days after they are sent in the rest of Fulton County. In its petition, Fulton asked the court to shorten the due date to 45 days county-wide, though interest wouldn’t be charged outside of Atlanta until day 61.

Many cities said they cover around a third of their budgets with property tax revenue. But the Atlanta and Fulton school systems each get about 62 percent of their money from property taxes. They’re particularly affected by the delay.

Atlanta Public Schools took out a $100 million loan to solve immediate cash-flow problems, and Chief Financial Officer Lisa Bracken said borrowing the money will cost the district an estimated $329,000 in interest plus $80,000 in various fees. APS will begin to run into cash flow problems as soon as Nov. 15 unless it makes some changes, Bracken said.

District officials have drawn repeated attention in recent months to what Superintendent Meria Carstarphen has called a “volatile revenue situation.”

“It’s just a zinger for the district the entire time — the push and pull, the sometimes-we-have-it, sometimeswe-don’t,” Carstarphen said at a school board meeting a few weeks ago. “People perceive it as APS can’t manage the budget. It’s not true.”

Tax bills normally go out over the summer, but Fulton leaders delayed the process after residents complained that they were shocked by a huge jump in their property values. The county’s chief appraiser said his predecessor had failed to keep up with rising values as the county’s housing market improved following the recession. Nearly a quarter of homeowners in the county received assessments that were up 50 percent or more, while half of the county’s nearly 320,000 parcels saw assessments that were at least 20 percent higher.

Because the med i an increase was 13 percent, county commissioners decided it would be insufficient to simply lower the county tax rate. For too many people, they concluded, taxes would still rise.

So they used an obscure law from the 1880s to take control of the property assessments, and froze property values at 2016 levels. They re-sent assessments with the lower rates, and told residents who had already appealed their increases that their appeals were no longer relevant.

In its letter rejecting the tax digest, the Department of Revenue questioned the legality of those actions. John Eaves, the Fulton County chairman who resigned to run for mayor of Atlanta, said in a statement that his goal in pushing the freeze was to “provide immediate relief ” to residents “who were dangerously close to losing their homes.”

“The Georgia Department of Revenue was well aware of this effort and gave the County the ‘green light’ for Fulton County to find a solution,” he said.

State Senator John Albers, R-Alpharetta, said he planned to introduce legislation in the jurisdictions he represents that would cap property value increases at 3 percent a year, beginning with 2016 values. Albers shared draft legislation for Roswell, Milton, Alpharetta, Johns Creek, Mountain Park and the Fulton County schools. Fulton County and Sandy Springs already have caps that limit the tax increases for residents.

Albers said he had “very high confidence” that the measures would pass, and he sent the template for the legislation to his colleagues in the Fulton delegation.

In the meantime, Fulton Chief Appraiser Dwight Robinson said, the county has to work through the current issues to ensure money comes in.

“I have no idea what’s going to happen now. We’re kind of in uncharted territory,” he said. “It has never gotten to this stage before. I wish it hadn’t come to this.”