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Budget times tough for Walker County

By: Mike O'Neal
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Bebe Heiskell

Local governments say the sputtering economy and rising fuel and insurance costs have made drafting annual budgets more and more difficult — but now they face a new challenge.

As a way to deal with the state government’s revenue shortfall, Gov. Sonny Perdue has postponed indefinitely the payment to cities across Georgia of homeowner tax relief grants — totaling $428 million statewide.

“We’ve already balanced our budget counting on that revenue,” Rossville Mayor Johnny Baker said.

“We were caught blind side by this,” he said. “If the governor chooses not to allow the homestead exemption, it will mean about $45,000 in lost revenue for Rossville.”

About $600 million of reserves were used to balance the fiscal year 2008 state budget that ended June 30, and the state faces a projected deficit of at least $1.6 billion this year.

Georgia’s counties and municipalities operate on fiscal years that vary. Some coincide with the calendar year, some their date of incorporation, unlike Tennessee where the fiscal year begins July 1 for all state and local governments.

Walker County’s city of Chickamauga — like Trenton, in Dade County — has a budget year that runs from Jan. 1 through Dec. 31, but the fiscal year for the county’s two largest cities, LaFayette and Rossville, begins Oct. 1.

Whenever their budget year begins, local officials say there is plenty of pain to go around for fiscal year 2009 without the loss of homestead tax credits.

“It’s been tough,” LaFayette, Ga., City Manager Johnnie Arnold said. “Everything — fuel prices and everything related to fuel costs, liability and health insurance, workers compensation — has gone up, but we are trying to toe the line.”

The LaFayette City Council will hold a public hearing Monday before voting on next year’s budget.

The city’s overall budget will be 0.75 percent lower than the current year, Mr. Arnold said.

“Revenues have dropped; we’ve cut expenses,” he said.

The Rossville budget, also set for approval on second reading Monday night, shows no increase in taxes, according to city clerk Sherry Foster.

“It was tough,” she said. “But we always anticipate increased expenses.”

As an example, Ms. Foster said revenue has not been down for 2008 but increased fuel costs have made all city-provided services more costly.

“Last year we budgeted high for fuel but still did not think we would pay $4 a gallon,” she said. “We have been able to stay within the overall budget, but last month we hit 100 percent of what was budgeted for fuel.”

If the homestead tax relief grants are done away with entirely, a worst case scenario would find the city borrowing money to meet the 2009 budget and repaying that loan next year by raising taxes, Mr. Baker said.

“The governor says it doesn’t help, but who is he kidding?” the mayor said about the exemption. “This money goes directly to the homeowners.”

There is hope these funds, currently being used to narrow the state’s projected budgetary shortfall, will be freed when the legislature convenes in January, according to Amy Henderson, spokeswoman for the Georgia Municipal Association.

“The governor is asking that the tax credits not be released, but the legislators seem committed to not, in effect, raise local taxes,” she said.

If the General Assembly goes along with the governor’s plan to eliminate the grants this year, local governments might be forced to re-bill taxpayers to make up the difference, according to a statement issued by Jim Higdon, the Georgia Municipal Association’s executive director.

“Cities are service providers. They provide citizens with the security of knowing that the water they’re drinking is safe; that when they call 911, police will respond or firefighters will arrive shortly; that at least once a week, their trash will be taken away and disposed of according to environmental standards and that their children have clean, safe parks to play in,” Mr. Higdon said.

Claims that local governments have not been cutting back on spending are not true, he said.

“Every year when they adopt their budgets, and then throughout the year, cities evaluate their budgets, weighing demands for services against tremendous political pressure to keep taxes low,” Mr. Higdon wrote. “Since 2002, when city residents were first afforded the tax relief credits, municipal property taxes have actually decreased nearly 3 percent when adjusted for inflation and population growth.”

Local officials said it was unfair to withhold the money without warning.

“It means about $500,000 for our county,” Walker County Commissioner Bebe Heiskell said. “We already had our millage rate (property tax rate) set. I honestly believe it (the credits) will come in after the first of the year. I don’t believe for one minute the legislature will allow the governor to keep that money.”

The commissioner said she if she had known a month earlier that the funds would be withheld, it would have been possible to plan for it. Now, if the funds that are being held in escrow are not released, there will be a reduction in services or other cuts — taxes will not be rebilled, she said.

The Georgia Municipal Association has determined property taxes could increase by as much as $300 per year if homestead exemptions are withheld, as local governments would either raise taxes or cut services.

“I hope the governor will give us plenty of time to plan if this will become a permanent thing,” Mr. Baker said. “We have to provide first-class services to the citizens and can’t do it on the cheap. We are not going bear hunting with a switch.”

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