Fresh Loaf

Some early-morning speculation on my part, fueled by caffeine and a post from InsiderAdvantage’s Dick Pettys. The George Harrison doppelganger tapped his sources who attended a business community fundraiser yesterday for House Speaker Glenn Richardson:

Richardson told the group he intends to focus on transportation, water and the state’s budget problems if re-elected as presiding officer.

Maybe the state’s current economic woes convinced Richardson he shouldn’t tackle his greatest nemesis, property taxes, as he promised he would during an April press conference he held with Gov. Sonny Perdue and Lt. Gov. Casey Cagle?

Speculate! It’s just like daydreamin’, only it leeches off reality and you’re doing it out loud!

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The budgetary back-and-forth between Shirley Franklin and the Atlanta City Council took on the feel of a cut-throat, high-stakes poker match this past Friday, with the mayor effectively calling their bet – and raising.

When the Council adopted a $571 million city budget for 2009 at the end of June, it sidestepped a proposed tax increase by tasking Franklin to trim $14.6 million from city expenses – on top of more than $57 million in cuts she’d already undertaken to avoid a projected budget shortfall.

On Friday, the mayor upped the ante, instead slashing $21.6 million – nearly 50 percent more than requested – from the budget, at the cost of a West End fire station, a streetlight maintenance contract, vacant police jobs and 78 city employees, including 34 firefighters. That’s in addition to the more than 400 staffers laid off in May.

Franklin didn’t maintain a good poker face; clearly angry, she blamed the Council for forcing her hand. “Their actions will affect the city for a long time to come,” she said.

Minutes later, Council President Lisa Borders countered that the choices were Franklin’s and would be reviewed – and possibly reversed – by the Council. “To indicate that the Council mandated cuts to police and fire is disingenuous,” she said. “We’re not done yet with these cuts.”

Unfortunately, that isn’t all they’re not done with.

On Monday, a judge ordered that, for now, Atlanta and other municipalities within Fulton County could only collect taxes based on 2007 values for most commercial properties – not the 2008 reassessments, which were about 20 percent higher.

No one at City Hall yet knows the full impact of the ruling, but it could mean city revenue would be tens of millions less than anticipated in coming months. Under the judge’s decision, additional taxes cannot be collected on assessments under appeal until more than half of the 15,000 appeals are resolved by the county, a process that likely will take months.

In fact, Robert Proctor, the attorney challenging the county’s assessments, has filed a new lawsuit challenging the certification of tax officials hearing appeals. If his suit succeeds, the appeals process would grind to a halt, adding more months to the delay in tax collections.

Borders said she hopes to learn the scope of the damage by early next week. She also is waiting to hear from city attorneys on the legality of re-opening the budget process, if that step becomes necessary. When it approved the city budget in June, the Council likewise set the tax rate for the coming year. It’s unknown whether the city can revisit that decision so soon.

Said Borders: “This situation is unprecedented.”

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An Atlanta City Council member complained to me recently that the capitol city was taking a drubbing in the media over Mayor Franklin’s proposed tax increase, while other tax-hiking entities were getting off scot-free.

After a bit of research, I determined she’s right – depending on your definition of tax increase.

At the risk of boring the tax-savvy, I’ll explain that the amount you pay in property taxes is determined by two variables – your property assessment and the millage rate – and one constant, your total exemptions. If your assessment doesn’t change, but the millage rate is increased, you pay more. If the millage rate stays the same, but your assessment goes up, you also pay more – what is commonly called a “back-door” tax increase.

A few weeks ago, Fulton County, which oversees the assessment process, announced that property valuations had risen a whopping 19 percent, mostly due to higher assessments for commercial property. This means that Fulton, its 12 cities and two school systems, can all expect a tax-revenue windfall even without raising millage rates.

For Franklin, that’s not good enough. In order to erase a projected $40 million city budget shortfall, she initially proposed a tax hike of about 1.7 mills, then dropped that to .43 mills, based on the county’s assessment estimates. This would mean the owner of a $200,000 house would pay an extra $24.50 a year in property taxes, assuming a standard homestead exemption.

That’s fairly meager compared to the $2,400 total tax bill for the example we’re describing, but it still represents a tax hike. The Atlanta Board of Education, on the other hand, plans to keep its tax rate – at 22.65 mills, more than twice the city’s proposed rate of 9.35 mills – the same as last year.

But just by virtue of the higher assessments, the school board expects to collect an extra $88 million in property taxes next year, more than twice the $40 million the city wants to raise by increasing its tax rate.

In other words, the schools’ back-door increase would bring in far more additional tax revenue than the city’s proposed up-front tax hike. And the Council member was certainly right about there being no public outcry over the back-door increase. Should there be?

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