Questions About Those SPLOST 3 Bonds

The voters of Athens-Clarke County approved a continuation of the SPLOST, or ELOST if you prefer, collected on behalf of the Clarke County School District (the District) in a referendum held in November 2006. The referendum included a provision that the District could issue short-term bonds to be repaid using revenue generated by the short-term sales tax. So far, so good.

Even so, two aspects of the District’s bond resolution, approved by the Athens-Clarke County Commission (the Commission) on 05 June 2007, caused me concern: the fact that the District’s portion of the local property tax millage rate was already at the 20 mills limit imposed by the Constitution of the State of Georgia and the legal basis of a potential transference of bonded indebtedness from sales tax revenue to property tax.

My first concern, since satisfied, was the question of why bonded indebtedness would not count against the 20 mills limit imposed by the Constitution on the District’s portion of the local property tax millage rate. No one I contacted at the District, the Clarke County Tax Commissioner’s office, the Department of Education, or the Department of Revenue could give me an answer as to how the 20 mills limit could be exceeded without a referendum - other than conspicuously vague references to unspecified “state law,” that is. Similarly, my own searching of the Constitution, O.C.G.A., and the administrative regulations for the appropriate state Departments yielded nothing useful. Eventually, I contacted the Attorney General’s office by telephone, which provided me with the relevant Georgia Supreme Court case law, Seaboard Air-Line Railway Company v. Wright, comptroller-general, et al., from way back in 1927, that exempted bond debt service from the constitutional limit. Fair enough.

Regarding my second concern, the District’s bond resolution cited a general provision contained in the Constitution as permitting this arrangement. The District’s resolution read, in part (see pages 4-5 of the PDF):

Whereas, The Commission of the Unified Government of Athens-Clarke County, Georgia has been advised and acknowledges that under the laws of the State of Georgia providing for the calling of a referendum to determine the imposition, levy and collection of a one percent sales and use tax for educational purposes, any bonds authorized to be issued as a part of such referendum will constitute general obligation bonds for which the full faith and credit of the School District is pledged; and

Whereas, Article IX, Section V, Paragraph VI of the Constitution of the State of Georgia requires that prior to the issuance of general obligation bonds, a tax must be levied in amounts sufficient to pay the principal of and the interest on the Bonds as the same become due and payable, to the extent that the revenues from the Sales Tax are not sufficient thereof;

Now therefore, be it resolved by The Commission of the Unified Government of Athens-Clarke County, Georgia, in a meeting duly assembled and open to the public, and it hereby is resolved by authority of same, that The Commission of the Unified Government of Athens-Clarke County, Georgia hereby reaffirms the Original Resolution, providing for the levy and collection of the Direct Tax, in order to pay the principal of and interest on the Bonds, as the same become due and payable, to the extent that revenues from the Sales Tax are not sufficient to pay the same.

Be it further resolved, by The Commission of the Unified Government of Athens-Clarke County, Georgia by authority of the same that there be and is hereby levied and collected an additional direct tax for the years 2007 through 2011 upon all property, including real property, subject to taxation for school bond purposes and located in the School District, which embraces all the territory comprising the Unified Government of Athens-Clarke County, in order to pay the principal of and interest on the Bonds, as the same become due and payable, to the extent that revenues from the Sales Tax are not sufficient to pay the same, which tax shall be an amount sufficient to raise the sums in each of the years as more fully set forth in “Exhibit A” attached hereto and made a part hereof. The sums hereby levied are irrevocably pledged and apportioned to the payment of the principal of and interest on the Bonds, as the same become due and payable.

However, the actual text of Article IX, Section V, Paragraph VI of the Constitution plainly reads:

Levy of taxes to pay bonds; sinking fund required. Any county, municipality, or other political subdivision of this state shall at or before the time of incurring bonded indebtedness provide for the assessment and collection of an annual tax sufficient in amount to pay the principal and interest of said debt within 30 years from the incurring of such bonded indebtedness. The proceeds of this tax, together with any other moneys collected for this purpose, shall be placed in a sinking fund to be used exclusively for paying the principal and interest on such bonded debt. Such moneys shall be held and kept separate and apart from all other revenues collected and may be invested and reinvested as provided by law.

As can be clearly seen, there is no mention whatsoever of transferring bonded indebtedness from a sales tax to property tax, just a general provision that a sinking fund to repay bonds be in place before the bonds are issued. Explicitly contrary to my reading of the District’s resolution, the Constitution is mute on the subject of transferring any shortfall in sales tax collections to property tax “to the extent that revenues from the Sales Tax are not sufficient therefore.”

Further, I found no mention of transferring bonded indebtedness from sales tax to property tax in either the administrative regulations of the Department of Revenue’s Property Tax Division (Chapter 560-11) or Sales and Use Tax Division (Chapter 560-12), or the Revenue and Taxation section of O.C.G.A. (Title 48 Chapter 5: Ad Valorum Taxation of Property and Title 48 Chapter 8: Sales and Use Tax). Also, in response to a later written inquiry from me, the Attorney General’s office clammed up, saying that it could not provide legal advice to a private citizen (for which I did not ask, by the way).

So, I am left with a series of question to which I have no discernible answers (inquiring minds and all). What legal basis, if any, exists for transferring bonded indebtedness from the revenue generated by a limited duration sales tax to property tax? How would such a transfer be implemented? How would such a transfer square with the “sinking fund” required to repay bonds specified by the Constitution?

Admittedly, the questions are rhetorical, as I expect no one to provide me with anything remotely resembling definitive answers. But . . . I could be wrong.

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