Thursday, September 30, 2010

Three Strikes - You’re Out (the SPLOST Trilogy Part 3)

For the nerdy among us (and we all know you’re out there*), here are the relevant O.C.G.A. sections governing the Unified Government’s proposed SPLOST 2011:

§ 48-8-111.1 Application of article to consolidated government
(b) The tax authorized by this article, if imposed by a consolidated government, shall not be subject to any maximum period of time for which the tax may be levied if general obligation debt is to be issued in conjunction with the imposition of the tax. In such case the resolution or ordinance calling for the imposition of the tax shall not be required to state a maximum period of time for which the tax is to be levied; and the language relating to the maximum period of time for which the tax is to be levied shall be omitted from the ballot. The resolution or ordinance calling for the imposition of the tax shall state the maximum amount of revenue to be raised by the tax, and the tax shall terminate as provided in paragraph (1) or (3) of subsection (b) of Code Section 48-8-112.


§ 48-8-112 Effective date of tax; termination of tax; limitation on taxation; continuation of tax
(b) The tax shall cease to be imposed on the earliest of the following dates:
(3) As of the end of the calendar quarter during which the commissioner determines that the tax will have raised revenues sufficient to provide to the county and qualified municipalities within the special district net proceeds equal to or greater than the amount specified as the estimated amount of net proceeds to be raised by the tax, unless the provisions in paragraph (1) of subsection (b) or subparagraph (b)(2)(A) of Code Section 48-8-115 are applicable, in which case the final day of the tax shall be based upon the length of time for which the tax was authorized to be levied by the referendum.

Now that we have dispensed with the legaleze, let us engage in a bit of analysis that necessarily flows from these statutes.

The various iterations of SPLOST imposed by the Unified Government in the past were all governed by other O.C.G.A. sections that denoted the levy would be applied until a fixed amount had been collected or for a fixed time period, whichever came first.  SPLOST 2011 will be the first time that the tax will be levied until it raises a specified amount, regardless of the amount of time required to reach that amount – as I read the statutes, this option that is not open to other governmental entities such as counties, cities, or school districts.  As noted below, since they began in the mid 1980s the Unified Government’s various SPLOST levies have steadily increased in duration and cost.

After months of telling us that they were working on ways to pare back projects for the upcoming SPLOST 2011 ballot resolution, the Mayor and Commission simply forewent any heavy lifting by tacking on another year and stuffing in another $25 million of additional spending, bringing the ballot resolution’s total up from an approximately $170 million to $195,272,000, an increase of about 15%.

According to a telephone conversation I had a (good) while back with John Culpepper, the Unified Government’s Finance Director, SPLOST collections in Athens-Clarke County have traditionally averaged about $21 million per year.  During the current economic downturn, however, that figure has dropped to about $19 million per year.  As noted above, the original proposal for SPLOST 2011 was to levy $170 million in taxes over eight years, for an average of $21.25 million per year.  The list of projects approve by the Mayor and Commission calls for a levy of more than $195 over nine years, which works out to $21.70 million per year.  So, we are going to spend even more per year over an even longer period of time, on the assumption that the tax will bring in 14.2% more money per year for almost an entire decade than it does currently ($21.70 million per year as opposed to approximately $19 million per year).  Such a projection impresses me as optimistic in the extreme – and how.  Strike one.

Several of its various projects (Rails-to-Trails, the Greenway, etc.), SPLOST 2011 will continue the unsustainable practice of taking more of the county’s taxable land off of the property tax base.  In this, the smallest county in the state by land area, in which a tremendous amount of what property exists is already exempt from property tax, the policy of using a tax levy to reduce the property tax base occurs to me as fiscally incoherent.  Strike two.

Like all of its predecessors, SPLOST 2011 is being sold to the voting public as a way of limiting property tax increases.  That being the case, how does one account for the anticipated increase in operating expenses, estimated at more than $3 million annually, that will accompany construction of its projects.  The obvious answer is, of course, by an increase in property taxes, which are typically local government’s single largest source of revenue.  This obvious paradox seems self-evident to me.  Strike three.

So how do we fix this?  First, the specific; vote down the current SPLOST 2011 proposal.  Let the Unified Government come back with a more reasonable package for the voters next year.  Second, the general; make a series of changes to the state laws governing SPLOST levies statewide.

Restrict the collection period to a maximum of four years as in the original SPLOST legislation; you know, a period over which we may (emphasis on “may”) be able to reasonably project tax revenues - not the almost decade-long travesty with which we have been presented.  Such duration would have the additional benefit of corresponding to election cycles, rather than extending over multiple election cycles during which entire crops of elected official may cycle through office with no say in the development of the SPLOST project lists they are expected to implement.

In that same vein, limit SPLOST ballot resolutions to general election dates, when voter turnout is likely to be the highest.  This would result in such resolutions being voted on by a broader cross-section of the community, rather than being decided by the much smaller number of special interest (though admittedly more highly motivated) voters who turn out on special election dates.

Require the voters to approve specific projects by a majority vote as opposed to having to cast all-or-nothing ballots on a laundry list of projects. Of course, the pols would not like that, as they now load up such lists which pet projects for specific interest groups so as to get them all to vote for the entire list (see above).

In that same vein, require more specificity as to the project list.  I realize that current statutes and case law do not stipulate much in the manner of such specificity – and that is a problem, for which the years-long Tennis Center debacle serves as a prime example.  We are legally required to build the damned thing, but the political questions of where, when, or what “Tennis Center” really means precipitated years of teeth-gnashing and hand-wringing that needlessly divided the community.

Of course, none of these proposed changes is unique to me, as principled opposition to the SPLOST 2011 levy has sprung up across the political spectrum – something I am sure is not sitting well with the folks down at City Hall.

*Apologies to Red Rider.

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Tuesday, September 28, 2010

Clarke County Local Option Sales Taxes: A Brief History (the SPLOST Trilogy Part 2)

As noted in this post, counties may impose three additional 1% sales taxes in addition to the 4% charged by the State of Georgia.  As will be seen from the information below, the political powers that be here in Clarke County have institutionalized reliance on all three.

The first of these is the Local Option Sales Tax (LOST), the revenue from which is allocated between a county and the municipalities located therein.  Created by the General Assembly in 1975, Clarke County imposed this tax beginning 01 January, 1978 and its collection has continued without interruption ever since.  To the best of my knowledge, unlike SPLOST and ELOST, this levy is not for a limited duration and will be with us forever.

The Special Purpose Local Option Sales Tax (SPLOST), designed to assist counties in fulfilling their obligations as legal extensions of the State, followed in 1985.  Clarke County’s original levy ran for a single year, from 01 October, 1985 through 30 September, 1986.  Following a year and a half lull, that was followed by a second levy running the four years from 01 April, 1988 through 31 March, 1992.  Following a three year hiatus (see below), a pair of five-year levies ensued, spanning the periods from 01 April, 1995 through 31 March, 2000 and 01 April, 2000 through 31 March, 2005.  The current iteration of the levy is a six-year affair, running from 01 April 2005 through 31 March 2011.  The proposed SPLOST 2011 is slated to run for an astonishing nine years.  Note how these levies, which have run uninterrupted since 1995, have steadily increased in duration and, needless to say, cost to the taxpayer.

Finally came the Educational Local Option Sales Tax (ELOST), operating as a variation of SPLOST, which extended this method of funding to county and independent school districts in 1997, though ostensible control of the levy resides with the county government (by state law, a board of education is a “requesting authority,“ as opposed to a county commission, which is a “levying authority; a school board cannot impose taxes in and of itself; it must request its levy though the county government – not that a county commission has the legal authority to deny any lawful request – but that is another matter).  Clarke County’s trio of five-year ELOST levies has run uninterrupted from 01 July, 1997 through 30 June 2002, from 01 July 2002 through 30 June 2007, with the current version running from 01 July, 2007 through 30 June 2012.

All three local option sales taxes that Clarke County possesses the legal authority to levy have become, for all intents and purposes, permanent additions to the tax landscape.  Yes, I realize that these levies are ostensibly “optional” (though to my mind the ballot resolution process was stacked in favor of “pro” votes) and that (usually only a plurality of the county’s registered) voters have approved them.  And yet, the Unified Government and the Clarke County School District exist in a never-ending state of financial paucity – at least to hear them tell it – never missing the opportunity to call for more and higher taxes.

However, I am seeing signs that the great unwashed are finally beginning to wise up about how this racket works.  At least, I certainly hope so.  Defeating a SPLOST resolution can be done, even in Clarke County; local voters defeated a one-year SPLOST ballot resolution back in 1993 by the margin of about 3 to 2, a levy that would have retired general obligation bond debt for the Clarke County Jail and general obligation intergovernmental debt for the ADDA parking deck (my thanks to Gail Schrader at the Board of Elections for helping me track down the details on this, of which I had but a vague recollection).

For those interested, the types and durations of the various local option sales taxes levied by Clarke County can be verified using the Department of Revenue’s Historical Rate Chart (see page 6 of the PDF).

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Monday, September 27, 2010

Legislative and Judicial Aspects of Georgia's SPLOST Law (the SPLOST Trilogy Part 1)

As either side gears up for the Unified Government’s SPLOST 2011 ballot resolution, two web sites have sprung up devoted to the issue.  The first is Rebuild SPLOST by local progressive Michael Smith and the other is Georgia SPLOST by local conservative John Marsh – and no, they are not necessarily on opposing sides.  Being the ever helpful sort that I am, I penned this bit for John concerning laws here in the Peach State; it appears on his site under the heading “Current SPLOST Laws & Practices:


In addition to the 4% sales tax collected by the State of Georgia, three other sales taxes may be collected at the county level.  The first of these is the Local Option Sales Tax (LOST) dating from 1978, the revenue from which is allocated between a county and the municipalities located therein.  This was followed in 1985 by the Special Purpose Local Option Sales Tax (SPLOST), designed to assist counties in fulfilling their obligations as legal extensions of the State.  Finally, the Educational Local Option Sales Tax (ELOST), operating as a variation of SPLOST, extended this method of funding to county and independent school districts in 1997, though control of the levy resides with the county government.


SPLOST levies are authorized under the “special districts” provision of the Constitution of the State of Georgia (see Article IX, Section II, Paragraph VI).  The SPLOST legislation itself is found in the Official Code of Georgia Annotated (see Title 48, Chapter 8, Article 3, Part 1, commonly referred to as section 48-8-110 et seq.).  As indicated above, Georgia’s original SPLOST law dates from 1985.  Over the last quarter of a century, though, that legislation has been amended any number of times.  Rather than take readers through the myriad changes and additions that have been made to the law, the pertinent aspects of the legislation are summarized below.


At first, the SPLOST law pertained only to projects undertaken by county governments in their capacities as legal extensions of the State, such as the construction of courthouses and jails.  “Qualified” municipalities followed, becoming eligible to receive funding through SPLOST levies in 2004.  A municipality is considered to be qualified if it offers any three of the twelve services specified in the law, such as fire protection and solid waste management, either directly or by contract.  It is important to note that SPLOST levies are enacted countywide by county governments; they cannot be levied by school districts, which lack the authority to levy taxes, or municipalities.  Unlike Local Option Sales Tax (LOST) levies, SPLOST levies are not joint county-municipal levies.  Insofar as a SPLOST is concerned, it is only counties that can constitute “special districts” in a legal sense.  Also, contrary to the state sales tax, SPLOST levies are applicable to food and beverage purchases.


In order to implement a SPLOST levy, state law requires approval of a resolution establishing the levy via a countywide referendum.  The levy can only be for specified capital improvement projects and must include a defined end date.  By law, maintenance and operations expenses cannot be paid through SPLOST funding, nor can any other county or municipal facilities or services.  The resolution must include a list of the county and municipal projects for which the levy is to be used, the estimated cost of each project, and (normally) the time period of the levy stated in either calendar years or calendar quarters.  If the resolution calls for the issuance of general obligation debt in the form of bonds, it must also include the principal amount of the debt, the purpose for which the debt is being issued, the identity of the local government issuing the debt, the maximum interest rate or rates applicable to the debt, and the amount of principal to be paid during each year over the life of the debt.


Counties and qualified municipalities may use SPLOST revenues to retire existing general obligation debt.  They may also issue general obligation debt in conjunction with SPLOST levies if that debt is used for the purposes of those capital projects specified in the SPLOST resolution.  However, if general obligation debt is issued in this manner, a separate ballot resolution permitting such debt must also be approved via a countywide referendum.


The duration of a specific SPLOST levy can vary according to a number of factors.  The original iteration of the law, applicable to county governments only, limited collection of SPLOST taxes to a period of four years.  Later, that duration was extended to five years.

When municipal governments became eligible for SPLOST funding, two other possibilities emerged.  The duration of the levy would be five years under the three conditions that the county and its qualified municipalities did not enter into an intergovernmental agreement (IGA) concerning the allocation of the revenue generated by the levy, a “Level One” project was included, defined as a project intended to benefit the county acting in its capacity as a legal extension of the State of Georgia, and the estimated costs of all Level One projects was less than 24 months of anticipated revenues; the duration of the levy would be six years if the estimated costs of all Level One projects was equal or more than 24 months of anticipated revenues.

Consolidated city-county governments form yet another special case.  If general obligation debt is to be issued in conjunction with the imposition of the tax, consolidated city-county governments need only to specify the maximum dollar amount to be raised by the SPLOST levy.  No maximum duration for the levy, either in terms of calendar years or calendar quarters, need be specified.


Just as is the case with state sales tax levies, the Georgia Department of Revenue collects SPLOST levies.  The Department of Revenue retains 1% of the revenue collected to defray its expenses.  The remainder of the revenue collected is allocated among a county and its qualified municipalities according to either of two methods; by an intergovernmental agreement reached by the county and those municipalities or, absent such an intergovernmental agreement, by a population-based formula.


The Georgia Attorney General’s office issued an unofficial opinion in 1990 (U90-18) that said the list of projects that appears on a SPLOST resolution need not give the voters a high level of specificity, as the statue governing SPLOST resolution does not require it .  According to the unofficial opinion, “There is no necessity that the description of the purpose or purposes for the tax be in exacting detail.  Rather . . . the description and the purposes must be only so specific as to place the electorate on fair notice of the projects to which the tax will be devoted.”  Merely noting the types of projects to be funded, assuming that they are in accord with the types of projects specified by state Code, is sufficient.

In September 1992, the Georgia Supreme Court decided the landmark case Dickey et al v. Storey et al.  The Court ruled that the Floyd County Board of Commissioners erred by deviating from the specific list of projects included in the SPLOST resolution and by abandoning projects before their completions.  According to the official opinion, “Construing these Code sections, we hold that the Board is not authorized to use proceeds from the SPLOST tax for a purpose entirely different from that contained in the SPLOST budget and account reports.  We further hold that the Board is bound by the SPLOST budget and account reports to complete all projects listed therein unless circumstances arise which dictate that projects which initially seemed feasible are no longer so.  In this regard the governing authority has discretion to make adjustments in the plans for these projects, but may not abandon the projects altogether.”  The definition of “feasible” is conspicuous by its absence in the state law governing SPLOST and therefore remains open to interpretation.  Even so, the Court’s decision clearly requires some condition outside the control of the county or municipality to render a project infeasible.

The Georgia Attorney General’s office issued an official opinion in March 1997 (97-7) concerning the ELOST variation of SPLOST.  At issue was the definition of “capital outlay projects for educational purposes.”  The Attorney General opined that expenditures for things such as school buses and equipment that have an extended useful life, and not just school buildings, did indeed qualify for ELSOT funding.  According to the official opinion, “Therefore the term ‘capital outlay projects’ as used in the educational sales tax purpose amendment should be read as well to refer to major, permanent, or long-lived improvements or betterments, such as would be properly chargeable to a capital asset account and as distinguished from current expenditures and ordinary maintenance expenses.”  Even so, such expenditures could only be paid through ELOST revenues directly and not through the issuance of general obligation debt.

Later that same year, in October 1997, the Attorney General’s office issued another official opinion (97-30) concerning ELOST.  According to the official opinion, “. . . a referendum is required before a school board may borrow money for a term longer than twelve calendar months even if the borrowing is to be repaid from expected STEP collections.  It is also my opinion, however, that a school may, without such referendum, engage in certain short-term borrowing for less than twelve calendar months, against the expectation of receipt of STEP collections, subject to certain constitutional and statutory constraints.”  It appears that STEP is an acronym for “special purpose local option sales tax for educational purposes,” a precursor to the current ELOST terminology.

In May 2001, the Attorney General’s office issued a third official opinion dealing with ELOST and by extension SPLOST (2001-3).  According to the official opinion, “Under the ‘interest follows principal’ rule, interest earned on public funds is an incident of principal and becomes a part of the account fund. . . Consequently, interest earned on educational taxes and on special county taxes becomes part of the tax proceeds in the account fund, which fund is required to be used exclusively for the purposes or purposes specified in the resolution or ordinance calling for the imposition of the respective tax.”  Thus, any interest earned on ELOST or SPLOS tax revenues is considered to be the same as the revenue generated by the tax itself and may not be used for other, unrelated purposes.

Finally, the Attorney General’s office issued another official opinion (2007-5) in October 2007 concerning the interest earned on SPLOST revenue.  According to the official opinion, “I have previously opined that the statuary restrictions . . . require that all accrued interest on the separately maintained SPLOST account also be used exclusively for the approved projects and likewise kept in the separate account maintained for SPLOST revenues. . . The plain language of the statute as well as prior construction of statutory language regarding the use of SPLOST funds requires that the SPLOST funds be kept in an account separate from other count funds and withdrawn only for the payment of expenses incurred with regard to the projects approved in the resolution or ordinance calling for the imposition for the tax.

In addition to the Dickey v. Storey decision noted above, other Georgia Supreme Court case law has bearing on the implementation of ELOST and SPLOST.  For example, see Haugen v. Henry County (2004), a decision that says an “excess” of SPLOST funds cannot be declared until all projects identified in the SPLOST resolution have been completed, and Johnston v. Thompson (2006), a decision that that says counties cannot use SPLOST levies intended to fund school system-wide technology to fund the purchase of laptop computers for students.

Though care has been taken to be accurate, the information provided above is neither comprehensive nor exhaustive.  Those readers desiring further information concerning the various qualifications, requirements, and technicalities of SPLOST levies are referred to publications from the Association County Commissioners of Georgia (2008) and the Georgia Municipal Association (2004).

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Wednesday, September 22, 2010

SCHS Pigskin Update

Last Friday evening, my alma mater Indians (3-1, 0-0) rolled over the West Hall Spartans by the score of 45-17.

For what it may be worth, SCHS has increased its offensive output each game.  After starting the season by tallying 14 points against Elbert County, the Indians posted 21 points against Hart County, 29 points against Oconee County, and 45 points versus West Hall.

Following a bye week the Friday, the Indians travel to Carnesville on 01 October to face traditional rival Franklin County in what will be the first 8-AAA (Division A) contest for both squads. In the meantime, the Lions (2-0-1, 0-0) will take on he Red Elephants up in Gainesville.

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Wednesday, September 8, 2010

SCHS Pigskin Update

My alma mater Indians (1-1, 0-0) split their first two games of the season, losing 14-20 to 8-AA Elbert County at The Reservation and winning 21-20 over 8-AA Hart County at Hartwell.

The Indians’ next contest is against Oconee County, an 8-AAA (Division B) opponent, at Watkinsville this coming Friday evening.

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Wednesday, September 1, 2010

A Milestone Of Sorts

The first of September marks a year and a half to the day since that snowstorm closed Fire Station No. 6 (549 days by my calculation, based on a quick glance at the calendar). It also marks five weeks to the day (35 days) since the J&J Chemical Company fire resulted in runoff contaminating Trail Creek and the Oconee River (and the inevitable lawsuit). And yes, I still think that a good argument that the two events are related. No, not in a causal sense, but related nonetheless.

After almost fifteen months of bureaucratic delay, demolition of the station's original engine bay commenced during the last week of May. The exterior walls of the new engine bay are now complete (structurally at least, some needless decorative work remains) and the metal supports for the new roof are in place. Even so, much remains to be done for the station to become operational again.

To my mind, this debacle has been a case study in progressive government at both the local and federal levels. By that I mean rather than simply rebuilding Fire Station No. 6 in a functional, utilitarian manner using the insurance settlement and the Unified Government’s own money, City Hall sought to construct a needlessly elaborate structure using “free” dollars dispensed Washington. Of course, the “stimulus fund,” ostensibly intended for “shovel ready” projects proved nothing of the sort. It was (and since more than half of the money has yet to be spent, remains) nothing more than an Obama Administration political slush fund. Once the grant was denied, City Hall began reconstruction of the station using the insurance settlement and its own money – just like it should have done in the first place – but only after some fifteen months of needless delay.

The Unified Government’s strategy failed all the way around – but such is the nature of “progressive” government. Get used to it.

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