Public Performance and Management Group The Fiscal Impact on DeKalb County with Possible Incorporation of Dunwoody, Georgia

Introduction This report assesses the revenue impact upon DeKalb County, Georgia from the possible incorporation of Dunwoody as defined geographically by the Georgia 2006 Legislative Session in Senate Bill 568.1 Specifically, this research provides best estimates of revenues lost by the County should Dunwoody incorporate; with estimates both including and not including the Perimeter Community Improvement District area (DeKalb portion), henceforth referred to as the CID. The CID is a quasi-governmental entity that can use additional property tax dollars to improve its district such as accelerating transportation and infrastructure improvement projects. The Perimeter CID is comprised of private commercial properties zoned as Office/Industrial and Retail properties. Residential and multi-family properties are not taxable by a CID (About PCIDs @ http://www.perimetercid.org/about_pcid.htm, December 15, 2006). This research compares the present DeKalb revenues with potential revenues lost by the County if the City of Dunwoody existed today in terms of residential and commercial tax and fee dollars. Data used for this research have been provided by the DeKalb County Department of Finance, the County s Tax Assessor s Office, the County s Geographic Information System (GIS) Department as well as from the Georgia Department of Community Affairs (e.g., the Local Government Financial Survey) and the United States Bureaus of Census and Economic Analysis. Past relevant reports and literature have been accessed as well, including the March 2006 report, Fiscal Analysis Phase One Estimated Revenues and Expenditures for a Proposed City of Dunwoody, Georgia by the Carl Vinson Institute of Government of the University of Georgia (hereafter referred to as the Vinson Report). The Vinson Report assessed the fiscal viability of an incorporated Dunwoody, but did not examine the effects of such incorporation on DeKalb County revenues.

Recent Incorporations in Georgia There are several bills that have been passed and others that are pending dealing with incorporation of communities in Georgia. These bills include those for Sandy Springs, in Fulton County (passed), John s Creek in Fulton (passed), Milton in Fulton (passed), Fairview in Henry County (pending) and Dunwoody in DeKalb County (SB 568 in 2006 and SB 82 in 2007).
1

Senate Bill 82 was introduced to replace SB 568 during the 2007 session of the General Assembly. SB 82 passed the Georgia Senate in February 2007. Calculations in this report, however, are based on the boundaries of Dunwoody outlined in SB 568, Appendix A.

House Bill 37 incorporating Sandy Springs passed on April 15, 2005 and stipulates that City s governmental structure. Sandy Springs began operations on December 1, 2005, contracting with a private company (CH2M Hill-OMI) to provide management and general service delivery. House Bill 1192, passed on May 1, 2006, created the City of Sandy Springs Public Facilities Authority. Additional bills passed by the Georgia General Assembly in 2006 provided Sandy Springs residents the ability to vote on a number of homestead exemptions on July 18th of that year.2 The bill incorporating Sandy Springs stipulates that the City provide the following services: taxation and business regulation, property condemnation, contracts, emergencies, environmental protection, ethics, fire regulations, garbage fees, general health, safety and welfare, sanitation, jail, regulation of vehicles, municipal debt, property ownership, utilities, planning and zoning, public improvements, and public transportation. This City now operates its own police and fire departments as well. Feedback as to the quality of services and costs thereof have yet to be determined.

Senate Bill 82 Senate Bill 82 was recently introduced in the 2007 session of the Georgia General Assembly to replace SB 568, a bill initiated in the 2006 session to incorporate Dunwoody. Like SB 568, SB 82 provides for an Act: To incorporate the City of Dunwoody in DeKalb County; to provide for a charter for the City of Dunwoody; to provide for incorporation, boundaries, and powers of the city; to provide for general powers and limitations on powers; to provide for a governing authority of such city and the powers, duties, authority, election, terms, method of filling vacancies, compensation, expenses, qualifications, prohibitions, and districts relative to members of such governing authority; to provide for inquiries and investigations; to provide for organization and procedures; to provide for ordinances; to provide for codes; to provide for a charter commission; to provide for the office of mayor and certain duties and powers relative to the office of mayor; to provide for administrative responsibilities; to provide for boards, commissions, and authorities; to provide for a city manager, a city attorney, a city clerk, a tax collector, a city accountant, and other personnel; to provide for a municipal court and the judge or judges thereof; to provide for practices and procedures; to provide for ethics and disclosures; to provide for taxation, licenses, and fees; to provide for franchises, service charges, and assessments; to provide for bonded and other indebtedness; to provide for accounting and budgeting; to provide for purchases; to provide for homestead exemptions; to provide for bonds for officials; to provide for other
2

Bills passed by the 2006 Georgia General Assembly regarding homestead exemptions in Sandy Springs included: HB 1034: Freeze assessments with a three percent CPI annual increase; HB 1035: $10,000 for disabled and seniors with income limitations; HB 1036: Freeze assessments without CPI increase for seniors with annual income of less than $39,000; HB 1037: $8,000 for disabled and seniors with income limitations; HB 1038:$15,000 standard exemption; and HB 1039: Full Value exemption for disabled or seniors 70 years or older with income limitations.

matters relative to the foregoing; to provide for a referendum; to provide effective dates and transitional provisions governing the transfer of various functions and responsibilities from DeKalb County to the City of Dunwoody; to provide for severability; to repeal conflicting laws; and for other purposes. This research uses the geographic boundaries of a City of Dunwoody as specified in SB 568 and including the Fulton and Gwinnett County boundaries on the West, North, and East. The South boundary of the area includes I-285 and Doraville city limits (see Map 1 on next page). These boundaries are those stated in Section 1.02 and Appendix A of Senate Bill 568, and can be found in Appendix A of this report. Still, the geographic boundaries of a City of Dunwoody specified in this report coincide with the boundaries of a map entitled Proposed City of Dunwoody, DeKalb County, Georgia, January 2007 prepared by Keck and Wood, Inc. that indicates an area of 13.2 square miles, more or less, and a perimeter of 17 miles, more or less as stated in SB 82, Appendix A. While the substance and purpose of SB 82 does not differ substantially from the previously proposed SB 568, the bills differ significantly regarding the number and type of homestead exemptions proposed. SB 568 included language identical to that provided in HB 37 that incorporated Sandy Springs in 2005 and states that: Any homestead exemptions applicable to ad valorem taxes levied by the city shall be as provided by Act of the General Assembly pursuant to Article VII, Section II, Paragraph II of the Georgia Constitution (Section 5.06.) SB 82 outlines a number of specific homestead exemptions (Sections 5.08 to 5.13). These exemptions will be identified later in this report.

DeKalb County, Georgia The Atlanta Regional Commission s (ARC) 2006 population estimate for DeKalb County is 710,400; the sum of the estimates for cities within the County equals 90,269. The United States Bureau of Census estimates the 2005 population of DeKalb County, Georgia to be 677,959 and specifies the County as the third largest in population in Georgia, behind Fulton County with 915,623 and Gwinnett County with 726,273. According to the Census Bureau, the State of Georgia has realized a 10.8 percent increase in population since 2000 while DeKalb County realized a 6.7 percent increase in population for the same period (U.S. Bureau of Census, 2006; Atlanta Regional Commission, 2006). The ARC (2006) indicates that at 268 square miles, DeKalb ranks 113th (out of 159) in the state in area and sixth in the 10-county region. Given its relatively small size, DeKalb is the most densely-populated county in the state. DeKalb County operates with a Board of Commissioners (seven members, elected by districts) and a full-time Chief Executive Officer (elected countywide). All commissioners and the CEO serve four year, staggered terms. One commissioner is elected by members as the Presiding Officer. The responsibilities of the Board include adoption of the annual budget, balancing the budget through tax levy and service charge determinations, consideration of rezoning matters, and passage and amendment of local laws (DeKalb County Budget Document, Annual Budget 2006, p. 6). As agents of the State of Georgia, counties also oversee health and

Map 1: City of Dunwoody, Georgia as Proposed

Source: DeKalb County GIS Department

welfare services, court administration, roads and all revenue administration. Further, DeKalb County provides a substantial number of municipal type services to residents of its unincorporated areas, including police, fire, roads and drainage, parks and recreation, and arts and cultural events and activities. Presently, there exist residential property tax credits that reduce county tax charges for these types of services (for example, the Homestead Option Sales Tax (HOST) exemption and the HB 595 property assessment freeze). These tax credits will not apply to municipal tax charges for the same services. Additionally, the HOST exemption and the residential property assessment freeze do not reduce DeKalb County Board of Education tax charges.

DeKalb County Budget DeKalb County s total revenue from tax funds plus fund balance in 2005 equaled $534.6 million (DeKalb County Annual Budget, 2006, p. 41). Chart 1 below illustrates nominal and real growth in these revenues from 1996 to 2005. Nominal revenues (that have not been adjusted for inflation) grew by 74 percent in this ten year period; adjusting these dollars using an implicit price deflator for gross domestic product (state and local consumption expenditures and gross investment, 2000 = 100) indicates modest, real growth of 29 percent. DeKalb County s population grew by approximately 11 percent in the decade from 1995 to 2005.
Chart 1: DeKalb County Consolidated Operating Fund Revenues, Ten Year Trend
$550,000,000

$500,000,000

Nominal $ Adjusted IPD $

$450,000,000

$400,000,000

$350,000,000

$300,000,000

$250,000,000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Fiscal Year

DeKalb County expenditures supported by tax funds have grown similarly to revenues in the last decade. County expenditures (operating and other transfers from tax funds only) in 2005 equaled $492.9 million. Chart 2 below illustrates nominal and real growth in these expenditures from 1996 to 2005. Nominal expenditures (that have not been adjusted for inflation) grew by 75 percent in this ten year period. Adjusting these dollars using an implicit price deflator for state and local consumption and gross investment indicates real growth of 30 percent. Using the adjusted dollars and population trends from the U.S. Bureau of Census, per capita values confirm balance between operating fund revenues and expenditures. From 1996 to 2005, county tax fund revenues per capita increased by 15 percent (from $562 per person to $649 per person) while expenditures per person from tax funds increased by 16 percent for the same period (from $514 per person to $598 per person).

Chart 2: DeKalb County Consolidated Operating Fund Expenditures, Ten Year Trend
$550,000,000

$500,000,000 Nominal $ Adjusted IPD $ $450,000,000

$400,000,000

$350,000,000

$300,000,000

$250,000,000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Fiscal Year

Examination of DeKalb County s revenue sources indicates a predominant, though declining dependence upon property taxes.3 Property taxes comprised 66 percent of all tax fund sources in 1996, dropping to 49 percent by 2005. Chart 3 on the next page illustrates other changes in revenue source dependence excise taxes have increased from seven to 23 percent of the County s tax fund sources. Intergovernmental monies have increased as a proportion of total revenues as well; this source equals one percent of revenues in 1996, growing to four percent by 2005. Also on the following page, Chart 4 illustrates a breakdown of DeKalb County expenditures by function in 1996 and 2005.4 Perhaps most striking is the increased proportion of spending for capital outlays in 2005 compared to 1996. These expenditures comprise three percent of general government expenditures in 1996 and nine percent by 2005. DeKalb s Homestead Option Sales Tax (HOST) and the dedicated receipts from this revenue source help to explain growth in this category of spending. Chart 4 also shows just slightly greater proportions of expenditures for community development and the court system in 2005 than in 1996. In most of the other categories, the proportion of spending in 2005 has decreased from that in 1996.

All figures for Chart 3 are from the DeKalb County Annual Budget, Consolidated Operating Fund Balances, 1996 (p. 35) and 2005 (p. 41) and consider tax funds only. General capital projects, special revenue, enterprise and internal service funds are excluded from this comparison. 4 All figures for Chart 4 are from the 2005 DeKalb County Comprehensive Annual Financial Report, p. S3 and include general government expenditures only.

Chart 3: DeKalb County Revenue Sources, Ten Year Comparison

Fund Balance January 1 Other Financing Sources/Transfers Miscellaneous

Investment Income

Fines and Forfeitures

Charges for Services

Intergovernmental

Licenses and Permits

Excise Taxes

Property taxes 0% 2005 1996 10% 20% 30% 40% 50% 60% 70%

Proportion of Total Tax Fund Revenues

Chart 4: DeKalb County Expenditures by Function, Ten Year Comparison

Capital Outlays Debt Service Miscellaneous Health and Welfare Library Parks and Recreation Community Development Public Works Planning Civil and Criminal Court System Public Safety General Government 0% 2005 1996 5% 10% 15% 20% 25% 30% 35%

Expenditure as a Proportion of Total

Perimeter Center As noted earlier, the DeKalb Perimeter CID is a quasi-governmental entity; its purpose is to advance access, mobility, diversification and modernization throughout the area to promote its economic vitality (About PCIDs @ http://www.perimetercid.org/about_pcid.htm, December 15, 2006). This CID has been developed with revenues that are managed by a board of directors. Revenue sources include property taxes levied against the commercial properties within its boundaries. The entire Perimeter CID taxes itself three mills in Fulton County and four mills in DeKalb County, generating an annual levy of about $4.4 million. Given that development within the area could not be sustained otherwise, the CID is also supported by investments from a number of partners, including the Federal Highway Administration, a variety of State of Georgia departments and authorities, the Atlanta Regional Commission and now the City of Sandy Springs. In a recent report, Perimeter Chairs claim a $500 million portfolio of transportation projects as well as major budget commitments in the last six years of over $20 million from DeKalb County alone (Partners Projects Results, State of Perimeter, 2005-2006). Such monetary commitments are discretionary on the part of DeKalb s Board of Commissioners. Together with Fulton s Perimeter CID, these districts are Georgia s largest employer area and offer 16 million square feet of Class A office space. Fortune 500 companies, 125 companies with more than 100 employees and the state s largest concentration of medical facilities call Perimeter home. With more than 115,000 jobs in the corridor and 213,000 jobs expected between 2008 and 2013, Perimeter s population is estimated to be the largest in the region by 2025 (Partners Projects Results, State of Perimeter, 2005-2006). The office market area of the Perimeter CID (including both Fulton and DeKalb) draws substantially from the ten county market area as well as regionally from within and outside of the State of Georgia. The CID s retail market has three components: ? 20 percent residents of the Perimeter Center area ? 34 percent patrons from elsewhere ? 46 percent office and other workers Clearly, the residential part of this area (Dunwoody in DeKalb and Sandy Springs in Fulton) accounts for a minor portion of overall market area. A September 2006 market report regarding the Perimeter CID (both Fulton and DeKalb) recommends (1) the creation of a better jobs and housing balance in this area, stipulating 7,000 more housing units in the area over the next ten years. This would be high density housing (40 to 50 units per acre), integrated into the commercial/retail areas, as opposed to single family home areas. There is also a recommendation for mixed use buildings; (2) 5.4 million square feet additional office space; and (3) almost one million additional square feet of retail space. [T]he Perimeter CID must [also] implement an array of transportation improvements, including new pedestrian, mass transit and roadway improvements...future development must continue to foster a walkable environment to ensure continued interest in the core, which, if not addressed, limits future retail, residential and investment opportunities. In addition, [this] area lacks sufficient parks and open space within the core, resulting in a lack of anchors for new residential development and a real sense of place or location in the core" (Robert Charles Lesser & Co.,

LLC, Macro Demand Analysis for PCIDS, prepared for Perimeter Community Improvement Districts, Atlanta, GA, September 29, 2006). Population and Revenue Estimates This section focuses on revenue implications should Dunwoody incorporate. First, we look at the population of Dunwoody relative to that of the remainder of unincorporated DeKalb County; this ratio is a major tool for estimating revenue impact. Second, we estimate the relative size of tax bases for DeKalb with and without an incorporated Dunwoody. Finally, we estimate revenue implications for DeKalb if Dunwoody incorporates and if it either includes or excludes the CID. Dunwoody is a Census Designated Place (CDP).5 The 2000 United States Census counted a population of 32,808 persons for this CDP. The Census Bureau also indicates that there were 8,637 owner occupied single family homes in Dunwoody in 2000. Census results state that 65 percent of the population 25 years and older had at least a Bachelor s degree, and the median family income (1999 dollars) was $100,796. Census tracts (CTs) making up the Dunwoody CDP include: a) b) c) d) e) f) 212.07 212.10 212.11 212.12 212.13 212.14

However, visual inspection of the maps provided by the DeKalb County GIS Department assuming the proposed boundaries of the City of Dunwoody as stated in SB 568 yields an area larger that the Census Bureau s CDP for Dunwoody. Specifically, the City of Dunwoody, as proposed, appears to include about one third of the area of CT 213.04. We have therefore added one third the population of CT 213.04 to the Dunwoody CDP to generate estimates of revenue lost to the County should Dunwoody incorporate. As noted earlier, the ARC provides a 2006 population estimate for DeKalb County and the governments within its borders; the estimate for DeKalb County is 710,400; the sum of the estimates for cities within the County equals 90,269. Therefore, an estimate for the unincorporated portion of the County equals 620,131. Using ARC estimates, the population of the proposed City of Dunwoody equals 37,154. We conclude from this data that Dunwoody (including a third of the population of the CT 213.04) has grown more slowly than DeKalb County as a whole in the last six years. The County population increased by 6.7 percent from 2000 to 2006; the population of the unincorporated portion of the County grew by 7.2 percent for the same period. Dunwoody s population grew by just 2.1 percent from 2000 to 2006. In fact, according the ARC s estimates, three of the census tracts in Dunwoody lost from three and a half to four percent in population during this period. We use the population estimate of 37,154 for the City of Dunwoody in many of the revenue calculations below. Also, we use the ratio of Dunwoody s population to the population
5

A Census Designated Place is defined as a statistical area that is equivalent to an incorporated place, consisting of a locally recognized, unincorporated concentration of population that is identified by name. Accessed on January 17, 2007 at: www.gadata.org/information_services/Census_Info/KEY%20TERMS%20MSA.htm

of the unincorporated portion of the County (5.99 percent). These figures (the Dunwoody population estimate and the Dunwoody population proportion compared to DeKalb County s unincorporated population) differ from the estimates used in the Vinson Report. Specifically, the Vinson Report s Dunwoody population estimate incorporates the same level of growth as the County overall (6.7 percent) versus the growth rate for Dunwoody used in this study of 2.1 percent. The Dunwoody population estimate used in the present research is approximately 1,591 less than that used by the Vinson Report. Table 1 illustrates changes to property tax burdens (when measured by assessed value per capita and per housing unit) if Dunwoody is incorporated, both with and without the Perimeter CID.6 Should Dunwoody incorporate and the City of Dunwoody not include the CID, the Table 1: Alternative Incorporation Schemes and the Impact on DeKalb County Assessment Value/ Housing Units
$ $ $ $ $ $ 75,884 72,918 72,361 69,215 134,031 185,957

Jurisdiction
Unincorporated DeKalb Uninc DeKalb less CID Uninc DeKalb less Dunwoody Uninc DeKalb less CID and Dunwoody Dunwoody Dunwoody and CID

Assessment
$ 19,392,778,830 $ 18,634,705,321 $ 17,436,058,798 $ 16,677,985,298 $ $ 1,956,720,032 2,714,793,541

Population
620,131 620,131 582,977 582,977 37,154 37,154

Housing Units
255,558 255,558 240,959 240,959 14,599 14,599

Assessment Value/ Capita

$ $ $ $ $ $ 31,272 30,050 29,909 28,397 52,665 73,069

average assessment value in the remainder of the unincorporated portion of DeKalb County would decrease by just over four percent. Consequently, this would increase the property tax burden to residents of the remaining unincorporated portion of DeKalb County. Should Dunwoody incorporate and include the CID, the burden for taxpayers in the remaining part of unincorporated DeKalb would increase by almost ten percent, assuming the same number, cost, and level of services currently offered to residents of unincorporated DeKalb County. The above stated changes to property tax burdens do not consider the substantial shift of business activity related revenue which will take place should Dunwoody incorporate and include the CID. While a City of Dunwoody represents about six percent of the population of unincorporated DeKalb County, Table 1 indicates that such incorporation would reduce the assessment value of unincorporated DeKalb by 10 percent if the CID were not included in a new city and by 14 percent if the CID were included in a new city. Table 2 on the following page provides estimates of revenue loss to the County should Dunwoody, including the CID, incorporate. The table compares estimates from the Vinson Report (March 2006) with the present research noted as the DeKalb Study. DeKalb Study
6

Assessment data presented in Table 1 and elsewhere in this study are derived from a digital copy of the 2005 DeKalb County tax assessment file provided by the DeKalb County GIS Department on October 23, 2006.

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Table 2: Estimates of Revenues Lost by DeKalb County if Dunwoody Incorporates, including Perimeter CID Compared to Vinson Report Estimates of City of Dunwoody Revenues Generated7
From Vinson Report: Table 7.2 DeKalb Study Estimate

Revenue Source Real Property Taxes Property Taxes - Penalties Personal Property Taxes Utility Taxes Heavy Equipment Tax Motor Vehicles Motor Vehicles - Penalties Intangibles Taxes Beverage Excise Taxes Hotel/Motel Taxes Insurance Premiums Bank Shares Taxes Business License - Beverages Business License - General Business License - Police Community Development Licenses, Permits, Charges Charges for Services: Copies, Recreation, Public Works, Finger Printing State Homestead Tax Credit Fines and Forfeitures Miscellaneous Investment Income Stormwater Fees Other: Sale of Printed Material, Grants, Confiscated Property Total Revenue Estimate

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

3,703,612 140,432 772,184 22,584 142 438,101 92,606 180,430 308,836 796,475 1,593,548 37,064 94,035 2,547,187 28,494 725,040 47,276 213,973 1,067,032 94,608 15,713 126,719

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

4,629,607 198,475 882,283 2,318 147 362,765 76,668 219,073 224,704 525,776 1,425,933 34,877 90,469 3,936,939 204,026 530,413 188,921 190,944 863,389 7,622 198,164 1,257,816

13,046,091

$ 16,051,329

Counties cannot impose franchise fees and so these revenues are not included as lost to DeKalb should Dunwoody incorporate. These fees are noted in the Vinson Report as available to a City of Dunwoody. Also, all DeKalb Study estimates of revenues lost assume that an incorporated Dunwoody remains in the County fire district.

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figures do not attempt to verify the costs of operating a City of Dunwoody; such cost estimates are provided in the Vinson Report and are not included in the scope of research for the DeKalb Study. Figures differ across the two reports for a number of reasons. Primarily, the Vinson Report regards revenues estimated to be generated by a City of Dunwoody, not revenues lost by the County should Dunwoody incorporate. Also, the Vinson Report estimates are based on 2004 tax data (2004 is cited throughout the Vinson report, e.g. p. 14 bottom paragraph); the present research uses 2005 tax data. More importantly, the DeKalb Study examined individual land parcels identified using tax parcel maps provided by DeKalb s GIS Department. It is not clear whether the Vinson Report was able to disaggregate the County s tax base data similarly. Also, Dunwoody, as a city, will be able to charge franchise fees; these fees are not available to counties. Finally, the DeKalb Study provides an estimate of stormwater fees lost should Dunwoody incorporate. These fees are not included as revenues generated by a City of Dunwoody in the Vinson Report. Table 2 shows the DeKalb Study estimate of revenues lost to DeKalb County of $16.1 million should Dunwoody incorporate and include the CID. Based upon state statute8, charges for specific services provided by the County within the cities are based upon annual budget amounts and changing digest values. These values (as modified under state statute) produce specific millage rates charged by the County within each city. Therefore, budget and millage rates differ among cities as recorded in DeKalb s budget and financial documents. All revenues and expenditures associated with these cities are recorded in DeKalb s budget documents within a special tax district designated services fund. This fund includes revenues collected for contracted services for each of the cities in DeKalb as well as the unincorporated area of the County. Should Dunwoody incorporate, it may elect to negotiate with the County regarding service provision to the new city.

Calculations Many of the estimates for the DeKalb Study in Table 2 on the previous page and Table 3 that follows employ a ratio of the population of Dunwoody to the population of unincorporated DeKalb against revenues indicated in the 2005 DeKalb County Budget Report. Other estimates require more extensive calculations. For example, real property tax revenue estimates use the tax database received from the DeKalb County GIS Department. Parcels within Dunwoody boundaries (specified in SB 568) were identified in this database and then millage rates were applied to the identified parcels. The parcels in the CID were indicated in this database and so allow this area to be included or excluded from the analysis. The final data used for calculations included parcels under the database s municipality field indicated as unincorporated (but identified as being in Dunwoody) or CID. Manual accounting of parcels provides a very close approximation to actual land lots associated with an incorporated Dunwoody. Property tax penalty calculations use a commonly accepted ratio of three percent of property taxes. Calculation of personal property taxes engages a ratio of commercial property in Dunwoody to unincorporated DeKalb County against assessed values of personal property available from the Georgia Department of Revenue website. It is assumed that all taxed personal property is associated with real commercial property, that is, furniture, fixtures, equipment and inventory that would be associated with both commercial and industrial properties. Given the absence of industrial property in the Dunwoody area, commercial property is used for this
8

1982 Georgia Act, p. 4396 and 1995 Georgia Act, as amended, p. 3527.

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Table 3: Estimates of Revenues Lost by DeKalb County if Dunwoody Incorporates, Including and Not Including Perimeter CID DeKalb Study Estimate with CID $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 4,629,607 198,475 882,283 2,318 147 362,765 76,668 219,073 224,704 525,776 1,425,933 34,877 90,469 3,936,939 204,026 530,413 188,921 190,944 863,389 7,622 198,164 1,257,816 DeKalb Study Estimate without CID $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2,973,665 137,154 285,815 2,318 143 362,865 76,668 219,073 72,793 170,325 1,425,933 34,877 90,469 1,275,372 66,094 32,606 130,552 190,944 863,389 7,622 114,343 937,378 9,470,398

Revenue Source
Real Property Taxes Property Taxes - Penalties Personal Property Taxes Utility Taxes Heavy Equipment Tax Motor Vehicles Motor Vehicles - Penalties Intangibles Taxes Beverage Excise Taxes Hotel/Motel Taxes Insurance Premiums Bank Shares Taxes Business License - Beverages Business License - General Business License - Police
Community Development Licenses, Building Permits, Charges Charges for Services: Copies, Recreation, Public Works, Finger Printing

State Homestead Tax Credit Fines and Forfeitures Miscellaneous Investment Income Stormwater Fees

Total Revenue Estimate

$ 16,051,329

calculation. Utilities assessments are identified in the DeKalb County tax database and support utility tax revenue estimates. The heavy equipment revenue estimate is based on the value provided by the Georgia Department of Revenue website and multiplied by the ratio of industrial property in Dunwoody to such property in unincorporated DeKalb. Motor vehicle revenues are calculated using the ratio of residential property base in Dunwoody to that in unincorporated DeKalb. This ratio is applied to the value of vehicles in unincorporated DeKalb as provided by the Georgia Department of Revenue website and then

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multiplied by the tax rate, 2.55 mills.9 Motor vehicle penalties revenue estimates use a current statistic applied to the County for these receipts. The intangibles tax revenues are estimated using actual 2005 intangibles taxes multiplied by the ratio of total property values in Dunwoody to total property values in unincorporated DeKalb County. We use the Georgia Department of Community Affairs (DCA) Financial Report (2005) to generate estimates of community development fees. In the DCA survey, DeKalb reported building permits and other fees of $8.6 million or $13.10 per capita. Using the population ratio of 5.99 percent of unicorporated DeKalb s population in Dunwoody, an estimate of these revenues for the City of Dunwoody equals $530,413. This could be higher if the CID remains in Dunwoody and one or more significant commercial projects are approved. However, this would not be an annual occurrence. It is unclear whether an incorporated Dunwoody with the CID would contract out review and inspection services, given the large, sophisticated reviews necessary regarding possible projects in the CID. Investment income has been applied at an interest rate of five percent. Stormwater revenue estimates are 2005 actual billings and were provided directly from the County s Tax Commissioner s Office. Results in Table 3 distinguish revenues lost if Dunwoody incorporates and does or does not include the CID. The County stands to lose $16.1 million in revenues should Dunwoody incorporate and include the CID. Lost revenues are estimated at approximately $9.5 million should Dunwoody incorporate and not include the CID. Inclusion of the CID with incorporation increases the loss to the County by two thirds or $6.5 million.

Homestead Exemptions in SB 82 It was noted earlier in this study that the substance and purpose of SB 82 does not differ significantly from the previously proposed SB 568, yet these bills do vary regarding number and type of homestead exemptions proposed. SB 568 included three lines of text identical to that provided in HB 37 (Sandy Springs incorporation law, 2005) with both bills providing for standard homestead exemptions applicable to ad valorem taxes as provided in the Georgia Constitution.10 SB 82 outlines a number of homestead exemptions for Dunwoody citizens; each exemption is noted below: ? Section 5.08. stipulates a homestead exemption through freeze, indicating that each resident of the City of Dunwoody is granted an exemption on that persons homestead from City of Dunwoody ad valorem taxes for municipal purposes in an amount equal to the amount by which the current year assessed value of that homestead exceeds the base year assessed value of that homestead. The exemption shall be automatically renewed from year to year as long as the owner occupies the residence as a homestead. This

This millage rate is not static and does change under state statute, with tax digest changes, and considering annual revenue and budget estimates. 10 Sandy Springs residents voted in July of 2006 to initiate a number of homestead exemptions, including a $15,000 basic exemption; a $10,000 exemption for those 65 and older or disabled who meet certain income limitations; a 100 percent exemption for those 70 years and older or disabled with income limitations; and an assessment growth freeze not to exceed three percent or the CPI, whichever is less.

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? ? ? ?

exemption is applied to Dunwoody homeowners from 2008 through 2011 and then would need to be renewed by the Georgia General Assembly. Section 5.09. provides a homestead exemption for senior citizens and the disabled of $14,000 of the assessed value of the home Section 5.10. stipulates a general homestead exemption of $10,000 of the assessed value of an owner occupied Dunwoody home. Section 5.11 provides another 25 percent homestead exemption (not less than $5,000 and no more than $8,000) for owner occupied homes. Section 5.13 provides every Dunwoody resident an exemption on that person s homestead from City of Dunwoody ad valorem taxes for municipal purposes in an amount that will yield the equivalent of a one mill reduction of the millage rate applicable to the homestead property with respect to ad valorem taxes for municipal purposes for the taxable year.

According to SB 82, each exemption above, shall be in addition to and not in lieu of any other homestead exemption applicable to municipal ad valorem taxes for municipal purposes. SB 82 (Section 5.12) also provides a homestead exemption to surviving spouses equal to $32,500.00 or the maximum amount which may be granted to a disabled veteran under Section 2102 of Title 38 of the United States Code, as amended. As of January 1, 2006, the maximum amount which may be granted to a disabled veteran under Section 2102 of Title 38 of the United States Code, as amended, is $50,000.00. Unlike all previously noted exemptions above, this one shall be in lieu of and not in addition to any other exemption from ad valorem taxation for municipal purposes which is equal to or lower in amount than such exemption granted by this section.

Conclusion DeKalb County, the third most populous county in Georgia, realized an 11 percent population increase from 1995 to 2005. The County s budget sustained real growth of about 30 percent in this ten year period. Still, in the last decade DeKalb has reduced its dependence on the property tax revenues from this tax comprised 66 percent of all tax fund sources in 1996, dropping to 49 percent by 2005. Alternatively, dependence on sales taxes has increased during this same period, now making up 23 percent of the County s tax fund sources. An examination of DeKalb s expenditures illustrates moderate changes in spending that include the effects of implementation of the County s HOST. Capital outlays comprised three percent of general government expenditures in 1996, increasing to nine percent by 2005. Except for community development and court system spending, most other categories of expenditures realized a decrease as a proportion of total spending in the decade from 1996 to 2005. Findings from this study indicate a number of effects on DeKalb County tax base and revenues should Dunwoody incorporate. Results show significant loss of revenues to the County should a City of Dunwoody exist; this loss increases by two thirds if the CID is included in a City of Dunwoody. Findings about tax burdens are more explicit of the effects of including the CID in a City of Dunwoody. By pulling Dunwoody properties out of the unincorporated DeKalb tax base, average assessment values per capita in unincorporated DeKalb would decrease by more than four percent should Dunwoody incorporate without the CID and would decrease by

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almost ten percent if a Dunwoody incorporation includes the CID. On the other hand, Dunwoody residentsaverage assessment values per capita would increase by 68 percent with incorporation; if a City of Dunwoody includes the CID, such value would increase by over 133 percent. This means, all else being equal, Dunwoody homeowners only would receive the entire benefit of the CID tax base for revenues collected to support current special service district type services; these benefits currently accrue to all of unincorporated DeKalb. The additional homestead exemptions to Dunwoody residents outlined in SB 82 further exacerbate the burden on the CID taxpayers to generate lost revenues. DeKalb County has been the principal supporter of the CID, along with a number of other partners. While much of the infrastructure supporting the Perimeter area has been financed by the CID s special taxes, much has been supported by all of unincorporated DeKalb s taxpayers. Just a fifth of the CID s retail market is made up of the residents of the Perimeter Center area (including the Dunwoody CDP and other parts of unincorporated DeKalb and Fulton counties) while 80 percent of the retail market comes from outside of the Perimeter Center area. Although it is difficult to argue for a City of Dunwoody that would support a 68 percent increase in assessment value per capita for residents of the new city, it is unreasonable to argue that Dunwoody residents alone should benefit additionally and significantly by including the CID with incorporation.

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APPENDIX A
Boundaries of Possible City of Dunwoody as specified in SB 568, Section 1.02 and Appendix A

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