Revenues from the Homestead Option Sales Tax, or HOST, are divided among DeKalb County and cities within the county. Here is how the money was split up in 2013.
As Brookhaven rounded out its first year as a city, officials happily announced plans to begin paving roads and building sidewalks.
“This is really, in my mind, one of the main reasons for cityhood,” said Mayor J. Max Davis. “Now you’re actually seeing the results of your city and your tax dollars at work. It really does hit home for me about what this city is all about.”
Brookhaven will complete the roadwork using a portion of approximately $5 million it received this year from a DeKalb County sales tax called HOST, which stands for Homestead Option Sales Tax. HOST funds make up nearly one-fifth of the city’s total budget of $26.3 million.
But as more cities look to incorporate in DeKalb County, it could reduce the amount of money each city receives, and even eliminate funding for capital projects in unincorporated DeKalb, officials say.
A recent study into the feasibility of the proposed city of Lakeside in central DeKalb County by the Carl Vinson Institute of Government at the University of Georgia noted that “incorporation of any other cities will decrease the amount of HOST proceeds received by the study area city by virtue of the HOST calculation.”
“Finally, there is a ‘tipping’ point after enough new territory is incorporated, where the amount due to the municipalities under the equalization calculation will exceed the amount of capital outlay proceeds available for distribution,” according to the study.
The 1-percent sales tax is used primarily to reduce property taxes for homeowners in the county. Eighty percent or more of the funds collected go toward property tax abatement. The remainder, up to 20 percent, may be designated for capital improvements.
The money allocated for capital improvements is divided between the cities and unincorporated areas of DeKalb County using a complicated formula that includes the value of the area’s tax base and the services it receives from DeKalb County, among other things.
DeKalb’s newest cities – Brookhaven and Dunwoody – receive a much larger portion of the HOST funds than existing cities. Each received more than $5 million in 2013. The next largest allocation went to the city of Decatur, which received $3.7 million. The other cities received much smaller payments,less than $1 million each. The rest of unincorporated DeKalb had about $6 million left over for capital improvements.
Dunwoody Finance Director Chris Pike said he’s aware that the incorporation of a new city would lower Dunwoody’s HOST payment, though he’s not too concerned because HOST payments have always varied from year to year.
“If other residents of the county want to take advantage of incorporation, we certainly can’t fault them for that,” Pike said.
DeKalb County Commissioner Jeff Rader said the high HOST payments to cities make it difficult to afford paving roads in the unincorporated areas of the county.
“Those funds have been allocated disproportionately to the new cities,” Rader said. “And as a consequence, the infrastructure needs of the county have suffered.”
Rader said the commissioners typically use HOST funds to pave roads. “We probably have a 30-year backlog at the pace we are able to expend funds paving our roads,” Rader said.
Chamblee Mayor Eric Clarkson said the structure of the HOST puts Chamblee at a disadvantage.
In 2013, Chamblee received about $697,000. Clarkson said the city’s low yearly payment isn’t enough to accomplish much in the way of capital projects. And the city doesn’t have many other options for funding improvements they’d like to make, such as repaving the road in front of Chamblee Charter High School. Part of the problem is that the value of all the city’s taxable, owner-occupied homes is relatively low – which translates to a smaller HOST payout.
“We have an older, smaller, housing stock,” Clarkson said. “We traditionally have a lower average assessed value on our homes… Plus we have a significant amount of rental property in the city of Chamblee.”
Clarkson said he feels the HOST tax penalizes the smaller, older cities in DeKalb, who don’t have a way to raise the money they need for capital improvements.
“I think it’s ridiculous when you go to other counties and see some of the projects they’re able to accomplish through sales tax revenue. And in DeKalb County, especially older cities in DeKalb County, we just don’t have that revenue source,” Clarkson said. “It’s very frustrating.”
DeKalb is one of just two counties in the state that levies a Homestead Option Sales Tax. The other is Rockdale County. Typically, counties collect a 1-percent sales tax called a Special Purpose Local Option Sales Tax, or SPLOST, to raise money needed for capital projects.
“Gwinnett and Cobb have used [SPLOSTs] to great effect, not only for local projects but to leverage state and federal funds,” Rader said.
The problem is, because of the HOST and the sales tax collected for MARTA, DeKalb already levies the maximum sales tax allowed under the law.
Under HOST, 20 percent is the maximum amount that can be spent on capital projects. Several factors are used to determine how that HOST pie is sliced up.
Pike, Dunwoody’s finance director, said one factor is how much residents pay to the county for services. All residents pay for county-wide services, such as the jail. But the county provides police services or park maintenance to unincorporated areas, while municipal governments provide those services in cities.
For example, Pike said, DeKalb County charged unincorporated residents 19.29 mills while the county tax bill for Dunwoody residents was 14.33 mills. The idea behind the HOST payments is that cities will receive money to make up for the services they are no longer getting form the county.
“The bigger that spread, the more the city will get,” Pike said. “That’s one part of the formula.”
Pike said another factor is the value of taxable property within the city limits.
“We’re somewhere in the range of 15 to 20 percent of [DeKalb County’s] overall property value in the city of Dunwoody,” Pike said. “A town like Lithonia or Pine Lake is going to have a much lower value.”
Pike said there are other calculations that go into the final payment that is made to each city. He said it’s an extremely complicated formula that can be difficult to predict.
“I estimate it for our council each year and there’re probably 10 tabs on an Excel spreadsheet,” Pike said. “I’m usually off a percentage or two with what the state publishes we’re going to get.”