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Tuesday, June 17, 2008

Tax increase looking likelier for Atlanta

The chance that Atlanta residents can avoid a property tax increase next year seems to diminish with every new conversation we have with a Council member.

You'll recall that Mayor Shirley Franklin called for a tax hike about a month ago in order to erase the last $40 million of a projected $140 million shortfall in the 2009 budget. The suggestion didn't go over well with Council members, who vowed to find new revenue sources and/or other budget items to cut, in order to sidestep higher taxes.

A couple of weeks back, the Franklin administration announced that, because of higher-than-expected tax collections, the tax increase could be much smaller than first proposed. That may have softened the will of some Council members, although publicly they continued to push for more cuts.

Then, last week, the Council learned that its two leading prospects for generating new revenues have fallen through. The first was refinancing employee pensions to stretch out the payment schedule, a move that would free up $20 million in the coming year. The result, however, would be huge balloon payments in future years; the Council dismissed that possibility as irresponsible. Another $10 million or so might be raised through selling tax delinquencies, but the city would have to coordinate that with Fulton County, which has so far been unreceptive.

The Council is still looking at cutting some vacant staff positions, but nearly any other potential action would merely be nickel-and-diming a $40 million hole in the budget. Reading between the lines of what Council members are saying, it sure seems as if they privately believe there's no way around a tax increase.

"The question is, are you willing to lay off police and fire personnel or absorb a tax increase?" says Council President Lisa Borders, who nonetheless says: "If we can avoid raising taxes, we will."

Council Member Anne Fauver now expresses some regret at having said at a public meeting that the city would raise taxes "over my dead body."

"We've found some things to cut, but I can't say it's $40 million worth," Fauver says.

And Howard Shook, who chairs the Council's Finance Committee, describes the quandary this way: "Which is worse – your constituents blaming you for a modest tax increase or them blaming you for the unprecedented failure to approve a balanced budget, and all the catastrophic financial fallout that would have?"

If the city were to miss its June 30 deadline to adopt a new budget, Shook says, Atlanta would officially be in default of tens of millions of dollars in municipal bonds, a move that would send our bond ratings crashing down.

Even though the Franklin administration has estimated that it cost the owner of a $200,000 house an additional $24 a year, Shook still says he hopes a tax increase can be avoided.

The Council has only a few more days to make it happen. Public meetings are scheduled for Wednesday and Thursday of this week, and Monday and Wednesday of next week before a final vote next Friday.

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