Monday, September 15, 2014

Property tax scenarios for Medlock Park: it's complicated

As we all are well aware, our neighborhood sits in an area that is already seeing big changes. Commercial property development has really picked up in recent years (see our posts on Suburban Plaza, Scott Blvd Baptist Church and the Medline LCI study). We are made to understand that our unincorporated status likely will change as new cities are created or existing cities annex nearby areas.

We have been concerned about annexation plans for several years now, specifically about the lack of information about how annexations affect the County at large. Regardless of how many cities we have, the County is responsible for some services to cities, and for all services to unincorporated areas. When we think about a city having its own police force, we often forget that DeKalb County Police is still in the background, providing services such as aerial support, SWAT, and bomb units, among others. Local emergency planning may be in place, but the County Board of Health's comprehensive public health and emergency preparedness response infrastructure remains a necessity. New cities and annexations change all budgets but are discussed in terms of benefits to the smaller municipality: is this new city viable, does that existing city need this annexation to remain viable. We encourage DeKalb County to argue its case and explain how proposed cities and annexations impact the County's viability, too.

Property tax bills are of particular interest during periods of  incorporation and annexation activity.  When an area rescinds its unincorporated status (by annexing to an existing city or joining a newly formed city), there is a shift in which entities provide basic services. For unincorporated areas, all services are provided by the county. Cities, in turn, provide a subset of services and the formation of new cities is typically justified on those terms--the county is not doing well enough and local control will allow for better and more efficient services. When the responsibility for services shifts jurisdictions, the funds that support them must follow. Thus, when annexed, a property owner will go from having his or her property taxes levied by two entities (state and county) to three (state, county and city). If economies of scale apply, it may cost more for the smaller city to provide those services. However, if the quality of the services is (or is perceived to be) higher, the city may become more attractive relative to nearby unincorporated areas and property values will increase. Current and potential residents weigh the benefit of increased property values vs. increased property taxes (as well as other quality of life factors) to decide if the higher tax bill is worth it.

Change is the only constant when it comes to property taxes: home owners (who pay property taxes directly) and renters (who pay property taxes indirectly through their rents to landlords) must reconcile with this reality. Aggregate (total) property tax bills may change each year based on the interaction between
  • assessed property value and freezes, 
  • millage rates for different applicable jurisdictions (state, county and city millage rates are recalculated each year and may go up or down), 
  • applicable fees or service charges, 
  • tax credits (e.g. HOST) and 
  • potential exemptions that may vary by jurisdiction (e.g., owner occupancy, disability, senior, or veteran exemptions).  

Side-by-side comparisons of potential property tax scenarios are hard to come by.  The Medlock Park area faces three potential scenarios: remain unincorporated, join a new city or join an existing city. We cannot guess at the property tax scenario for a new city. Although the City of Briarcliff Vinson Feasibility study included Medlock Park and focused on whether the proposed city would be financially viable, it did not address what its millage rates or other fees might be.

We can, however, compare our unincorporated property tax bills to those for nearby Dekalb cities. Luckily for us, some helpful individuals have crunched Decatur and Atlanta numbers for us:
In trying to make sense of these comparisons, it is critical to understand that property tax bills are extremely specific to the individual. A commercial property is taxed differently from a residential property. Homestead exemptions are common and offer significant relief, but other individual exemptions can be difficult to calculate. Take for example senior exemptions: an individual may be eligible for several (county, city, sometimes both), individual income affects exemption eligibility, and each municipality calculates the exemption based on its own formulas (with exemptions applying to different parts of the municipality's budget). Individuals wishing to understand what senior exemption scenarios apply to them should first study applicable county/city websites. The next step would be to contact their property tax office, current tax bill AND projected income information in hand: property tax staff cannot provide an accurate estimate without this information.  In general, the older the person, the more individualized the calculation.

We are currently trying to refine the above information to share a side-by-side comparison using homestead exemptions (vs. none) across unincorporated DeKalb, City of Atlanta and City of Decatur.  Generally speaking, unincorporated DeKalb taxes are lowest, followed by City of Atlanta and then City of Decatur. We cannot know if these trends extend into the future without information from the County about how their millage rates may change due to proposed annexations and incorporations.