Lee is also thinking about asking voters in November 2016 to approve a permanent 1-cent on the dollar homestead-option sales tax, which would apply to all consumer goods, including food, and replace a portion of the property-tax revenues.
The reason is to pay for an estimated $1.4 billion in capital expenses over the next 10 years, Lee said.
“We’re coming up at it from different directions to see what mix makes best sense to us,” he said.
Lee hopes to have a project list for the proposed 2016 SPLOST finalized with the Board of Commissioners this summer. A A six-year SPLOST is projected to collect about $750 million. Of that sum, 74 percent or $555 million would go to county projects and 26 percent or $195 million would go to Cobb’s six cities.
Not so fast, Ott says
Commissioner Bob Ott is waiting to see specific county needs before agreeing to another SPLOST cycle.
One concern is that 99 percent of the county’s transportation department is funded by SPLOST, he said.
“It’s one of the three major mandates that we have as a commission, and I’m concerned it appears to be that DOT expenses are basically passed off to a SPLOST, which means we’re using a special-purpose tax to fund normal DOT functions,” Ott said.
“What happens if it doesn’t pass? So I’m concerned about that.”
The existing SPLOST, which expires in December 2015, was originally planned as a six-year tax, but was chopped down to four.
“There were a lot of wants in there that were not needs, and I just have a lot of concerns that we go year after year with a SPLOST,” Ott said.
State Rep. Rich Golick (R-Smyrna) has used the term “SPLOST fatigue” to describe voters who are tired of a seemingly never-ending cycle of SPLOSTs.
“If it’s supposed to be a special purpose, but you do it continuously, it kind of loses the notion of special purpose,” Ott said.
During a board retreat Wednesday at the Powder Springs Street Senior Center, James Pehrson, the county’s finance director, also challenged the argument that SPLOST advocates have made during SPLOST campaigns, which is that 30 percent of the revenue collected for the sales tax program comes from people who live outside the county. Based on his calculations, Pehrson said the number was only 11.5 percent.
A campaign pledge made in Lee’s re-election bid was rolling out a homestead option sales tax, or HOST, although the timeline has been delayed.
In 2012, Lee said he wanted the Cobb legislative delegation to pass legislation this year that would allow for a November 2014 countywide HOST referendum.
“The conversation got shifted to trying to get a fractional penny for the SPLOST, and I felt that was more of an urgent issue to address with the public, and that deadline was coming apart, i.e. when we would have to have an election for the SPLOST versus the HOST conversation,” Lee said of the delay.
State Rep. John Carson (R-northeast Cobb) is trying to get a bill signed into law this year that would allow for a fractional SPLOST.
The current sales tax in Cobb is 6 percent: 4 percent goes to the state, 1 percent to the county’s SPLOST projects and another 1 percent SPLOST goes for the Cobb and Marietta school districts.
A HOST tax would be 1 percent, raising the sales tax to 7 percent. A voter-approved HOST would be collected indefinitely, unless the referendum included a sunset date, or until a separate referendum is approved to end it. Lee indicated he would rather not have a sunset date.
Cherokee County voters rejected a HOST referendum in 2012, which Lee blamed, at least in part, on confusing ballot language. Clint Mueller, legislative director for the Association of County Commissioners of Georgia, has said a HOST creates zero new revenue for the county, though counties can choose to use up to 20 percent of the HOST revenue for capital expenses. Lee said he would like to use 10 percent of the HOST to pay for capital maintenance costs, such as upgrading computers.
“The HOST concept is not necessarily a new tax,” Lee said. “It’s a different method for arriving at the same revenue numbers. It kind of does a good financial modeling where we spread out our risk by using multiple sources of revenue so that we don’t become dependent on any one too large of a portion.”
The residential digest makes up 52.4 percent of the countywide taxable digest, a percentage Lee said is too high from a single funding source.
“So that’s why when I first talked about the HOST, I thought it was a viable option to diversify our funding source in Cobb,” he said.
The owner of a home assessed at $200,000 in Cobb pays $500 a year in property tax toward Cobb County’s general fund. The HOST would eliminate that expense on homesteaded properties.
In Cherokee County, for example, officials had estimated the HOST would generate about $18 million a year. The county needed about $11 million to completely wipe out county property taxes on homesteaded property.
Lee said Cobb County generates $129 million a year through its 1 percent sales tax, and collects about $70 million a year in homesteaded property tax.
Lee hopes to have consensus from commissioners by this summer to move forward with a HOST proposal in order to ask Cobb’s legislation delegation to pass a bill allowing the county to hold a referendum in November 2016.
Promises may cause funding shortfall
Pehrson said the county faces a $32 million funding shortfall by 2024 it moves forward with reducing the millage to pre-recession levels, ends the controversial practice of transferring water revenues to the county’s general fund and implements the findings of a proposed pay-class study, all things commissioners have talked about doing.
But with a HOST and a renewed SPLOST, that gap can be closed, Lee said.
“It’s a win-win method to reduce taxes for the property owners of Cobb County while reducing the vulnerability of our current financing mix,” Lee said.
Yet Ott is skeptical about the benefits of a HOST, observing DeKalb County has one “and it doesn’t work there.”
“My concern is that you’re moving a sizable chunk of your revenue to a variable revenue source,” Ott said. “Back to my concern about DOT being in a SPLOST, are we going to put essential county services into a tax that is variable, basically a sales tax?”
With no sunset date on a HOST, if hard times hit the county again, the county would be stuck with the sales tax hike and have nowhere to go but raising property taxes again, he said.
“So I have a problem with that. I think essential county services need to be funded by a more stable revenue source. I’m concerned that it could be anti-competitive for business,” he said.