In March, I warned you of the Commission’s plan to raise the tax rate for general operations by almost one-quarter of a mill, yet maintain the same rate as last year. They proposed to “re-align” an expiring bond (debt) millage and add it to the Maintenance & Operations (M&O) rate. I called the proposal what it was– a back-door tax increase.

One day after my article was published, soon-to-be Chairman Charlotte Nash agreed during a candidate forum that the debt millage should lapse and no longer be collected. Her position, which she still holds to this day, put her at odds with the other Commissioners who had tentatively approved the tax hike…. excuse me, “re-alignment.”

Tonight, we will see just how persuasive Chairman Nash can be. She will reportedly ask the Commission to adopt a tax rate of 13.02 mills, which is the same rate as the previous year minus the .23-mill rate for the paid-off bond debt. She will face at least two Commissioners who still support the millage “re-alignment” and one, District 2 Commissioner Lynette Howard, who pushed for a tax increase this year.

(Don’t worry– the county advertised a proposed rate of 13.25 mills. They can adopt a lower rate tonight, but not a higher one.)

“Re-alignment 2.0″

The Commissioners have discussed a millage shuffling of a different sort– continuing to collect the .23 mills (by adopting a rate of 13.25 mills tonight) but using it to pay off another debt, the bonds for the jail, a little quicker. (In recent years, the county has collected a millage for two bonds; last year, it was .23 for the now-retired debt and .24 for the jail, for a total of .47-mills.)

I can understand why the Commissioners would consider the idea. According to Moody’s, a ratings firm, Gwinnett has the third-highest debt load among Georgia counties at nearly $160 million. Paying off the jail bond early could save hundreds of thousands in interest.

I believe, however, that the taxpayers of Gwinnett would rather pay a lower tax rate this year and worry about paying off debt a little faster when the economy is better. Thousands of Gwinnett homeowners, one out of every 256, faced foreclosure in the first half of this year which, sadly, is only about 15% less than in 2010. Our unemployment rate is hovering around 9 per cent and showing no sign of improvement.

Now is the time to reduce the tax burden on Gwinnett property owners. The county has done an admirable job of cutting expenses to make even the consideration of a tax cut possible. The Commissioners should pass the benefit of a lower cost of government to the taxpayers in the form of a reduced tax rate.

If you agree with me that the Commission should lower the tax rate to 13.02 mills tonight, send them an email now at commishes@talkgwinnett.com (it will be auto-magically forwarded to all). You can also use the form here.

More…

• County millage rates, 5-year history

The Commissioners who voted for the millage “re-alignment”—Shirley Lasseter, Lynette Howard, Mike Beaudreau and John Heard—now find themselves in a quandary: when the newly-elected Chairman honors his or her commitment, they will be forced either to reverse their position on the tax hike or override the Chairman’s wishes to keep it.

Chief Financial Officer Aaron Bovos, the likely author of the “re-alignment” proposal, will now be forced to find an additional $4.8 million in budget reductions, which probably isn’t a bad thing:

A recording of the forum will air on Gwinnett County’s government access cable television channel at 8 p.m. Monday, 9 p.m. Wednesday, 8:30 p.m. Thursday and 8 p.m. March 13. The recording will also be available on demand at www.tvgwinnett.com.

Candidates weigh in on property tax

The History

In 1986, Gwinnett voters essentially agreed to tax themselves an additional fraction of a mill* to pay off a loan of sorts… bonds that were issued to generate up-front cash for libraries and road improvements. The debt was refinanced in 2002.

The additional tax has been itemized on your tax bill ever since, separate from the general, M&O millage. It is listed separately for a reason; the additional millage was not only dedicated to debt reduction, but it was temporary… it was to drop off your tax bill as soon as the bond debt was retired. It was with that understanding that voters initially approved the debt in 1986.

The Con

Or, at least that’s the way it was supposed to work. In January, the debt was paid in full. The 2002 bond fund was closed with the dollars remaining shifted to the 2003 bond fund; probably the only option because revenue generated by a bond millage must be used for debt reduction.

The .23-mill assessment should not be assessed this year– the debt is paid. Your county tax bill should drop by .23 mills to 13.02 mills**, barring another millage rate increase.

On Tuesday, however, the Commissioners essentially voted, unanimously, to continue collecting the extra tax but now use the revenue for general expenses. Technically, the vote was to increase the M&O millage by .23 mills, from 11.780 to 12.010. And they did it with no fanfare and no public hearing.

The Setup

Actually, the vote served no real purpose except to provide a setup for the official adoption of the millage rate later this year. At that time, when the millage rate is officially adopted, the Commission will be forced to formally advertise and approve the tax increase, even though the combined county rate is expected to remain the same as 2010, 13.25 mills. However, here’s what you’ll hear:

“No, this isn’t a tax increase! Your total millage rate will be the same as last year. We just ‘realigned’ the tax rate after we paid off that debt, remember?”

The shell game that the Commission is working right now is the quintessential “back door tax increase”… an increase in M&O property tax revenue generated by a mechanism other than a public vote to increase the tax rate.

In other words, the Commission has indicated its plan to withhold from Gwinnett taxpayers the benefit of retiring a 26-year-old debt. Rather than return the money to your pocket as promised, the Commission has quietly decided to use it to reduce this year’s $18 million deficit. By doing it this way, they hope to avoid awakening the public to the second tax hike in three years.

Let me repeat: The County Commission proposes to increase the M&O millage by .23-mills to help pay the county’s 2010 general expenses.

The Lie

At the risk of boring you with repetition– the debt millage rate CANNOT be “re-aligned,” as the Commissioners and Finance staff have claimed.. There is no statutory mechanism by which a millage charged for bond debt can be “re-aligned” and reallocated to another purpose. It can only be eliminated.The Commission proposes to eliminate the bond millage but INCREASE the general fund tax rate by .23-mills, rather than work harder to cut the cost of county government or maximize non-tax revenue sources.

What You Can Do

Remember the outrage in 2009 when former Chairman Charles Bannister proposed a 25% tax hike? At least he had the testicular fortitude to announce it and defend it in public. You should be equally outraged by this Commission’s attempt to sneak a smaller tax hike—excuse me, “realignment”– by you.

You can contact every Commissioner at once by sending a single email tocommishes@talkgwinnett.com. Your message will be automatically forwarded to each one.

Tell them that you are not a fool and that you know what they are doing. Tell them that, with the bond debt is paid, you expect them to honor the promise made in 1986 by reducing the total 2011 county millage rate by at least .23 mills. Tell them that if they need to raise taxes to balance the budget, at least have the cahonas to do it on top of the table, face-to-face.

Finally, tell them that you will hold them responsible for anything less.

[3/3/11 15:00 - This article updated with numerous changes.]

In the News

Gwinnett on track to eliminate $18 million deficit | ajc.com
BOC intends to realign property tax rate | gdp

Footnotes

* A “mill” represents one dollar of tax on every $1,000 of taxable value.

** In 2010, your county tax millage rate consisted of four separate rates: 11.780 M&O, .23 2002 bond debt, .24 2003 bond debt (jail) and 1 mill for parks and recreation; total county tax millage 13.25.

Additional Resources

2010 tax rates
What is the millage rate?

1. Since 2005, the year that the economic downturn really kicked in for Gwinnett, the Commission has not presented a budget without either a draw on reserves or a tax increase;

2. The Commission trimmed only 3.2% from two-thirds of the budget (operating expenses), but 39% of the last third, capital expenses. In other words, the county put off building stuff but cut little from the actual daily cost of government;

3. The county must keep a certain amount in reserves or risk losing its Triple-A bond rating, which affects the cost of borrowing. The plan to use $18 million from reserves to balance the budget apparently puts the rating at risk. Oh yeah, and another factor that the bond raters use—the government’s ability and willingness to raise taxes;

4. The tax digest (the total value of taxable property) is projected to decline by about 9% this year, although it could be worse. This will not be the last year of declining property values;

5. A Superior Court judge is expected to rule any day on the service delivery strategies dispute between the county and the cities. I anticipate that the county will lose revenue (mostly tax receipts) as a result of the decision. It will not be possible for the county to absorb the loss without a tax increase. The only question is whether the judge’s decision will affect this year’s budget or the next;

6. The Commission Chairman must be the driving force behind meaningful cost cuts; however, we will not fill that position until late March. By that time, the non-tax options available to the Chairman will be severely limited;

7. The Commission is responsible for funding the budgets of the constitutional officers – the Sheriff, the District Attorney, the courts and judges, the Tax Commissioner, for example—but the Commissioners have been hesitant to include them in the belt-tightening.

Finally, the Commission is apparently not willing to make meaningful cuts to one of its largest expenses, personnel. In my dissent to the Engage Gwinnett final report, I suggested graduated reductions in salaries and changes to county benefits. You know that that hasn’t happened when the headlines are about deficits and reserves, and cuts to libraries and non-profit subsidies, and not disgruntled county employees.

From the AJC:

The new budget does not include another property tax increase. To offset declining revenue, it trims total operating expenses by 3.2 percent to $977.5 million. Total capital spending will decline about 39 percent to $337.2 million.

Gwinnett trims spending, but deficit looms  | ajc.com

The U.S. has a progressive income tax system. That means that lower-income taxpayers pay a lower percentage of their income than do higher-income taxpayers. Those with income up to $100,000 might pay 15% of their income; those with income from $100,001 to $250,000 might pay 28%; and those with income over $250,000 pay 35%. Those reporting under $30,000 might not pay any tax at all (not the correct rates and income brackets… just for illustration).

Early in his term, President Bush and the Congress voted to reduce the tax percentage rates from those of a previous administration. Taxpayers from top to bottom have paid a lower income tax rate for about 10 years. That the Bush administration changed the income tax rates was not unusual; income tax rates have moved up and down numerous times for various reasons under both Democrat and Republican Presidents.

To secure the votes required to pass the tax rate reduction, the Bush administration agreed to a time limit; the rates would remain at the lower level for a specific time period, subject to renewal. The law establishing the lower rates is set to expire at the end of this year. Unless an agreement is reached, the tax rates will return to the levels at which they were prior to the reduction.

(Incidentally, the “Bush tax cuts” are not the only tax benefits expiring on December 31. Unless extended, the so-called “death tax” (a tax on the value of your estate at your death) will return to the prior level of 55% from the current 0%.)

You should now understand that many of the arguments by the Democrats against extending the tax rates are not valid at all. In fact, some rise to the level of outright deception:

1. Extending the current tax rates is not a “tax cut for the rich.” It is not “giving more money to millionaires.” It is simply extending the current tax rates– for everybody– for longer than the 10 years that they have been in place.
2. Extending the current tax rates does not “give more money to the millionaires.” It allows them to keep more of what they have earned. There’s a difference.
3. There is no definitive, permanent, “official” or even optimal tax rate. For that reason alone, extending the current rates cannot be called a “cut.”
4. Failing to extend the rates will result in a tax increase; an individual earning $47,000 will see his income tax increase in 2011 by $2,600.
5. Regardless of whether or not the current tax rates are extended, those with a higher income will continue to pay a higher tax rate than do those earning less. As long as we have a progressive tax system, “the rich” will always pay more (for the same services… unless you include tax credits, welfare and other entitlements. Then “the rich” pay more for less return from the government!).
6. Republicans want to do nothing more at this moment than maintain the status quo. Democrats want to raise the tax rate for one segment of the population, if not for all.
7. Extending the current tax rates will not “cost” the government $700 billion. There is no definitive or “official” tax revenue level. The government does not have a right to your money.  It is not first the government’s to “spend,” so there cannot be a “cost.”  Finally, if the tax rates are extended, the government will not receive any less tax revenue than it has in the previous ten years (as a result of the extension).
8. Extending the current tax rates will not “add $700 billion to the deficit.” As just noted, extending the current rates will not result in any less income tax revenue to the government than was received last year or in any year of the previous decade.