Gwinnett Impact Fees

There is plenty of blame to go around for Gwinnett County’s current financial crisis. You can begin with Wayne Hill and the pro-growth Commissioners who, upon taking office in the early ’90s rescinded the county’s newly-enacted impact fee ordinance, thereby denying the county hundreds of millions in non-tax revenue. You can blame the current Commission Chairman for keeping the fees “off the table” solely to please the development community, despite a positive recommendation by a citizen advisory panel.

You can fault Gwinnett’s state legislators for ignorantly approving tax digest-depressing measures like the value offset exemption, never understanding how the politically-popular tax breaks will ultimately result in higher tax rates for everybody.

You can impute equal fault to the current Commission for failing to capture non-tax revenue sources like impact fees; for failing to aggressively respond to the ever-increasing drain on public services by ineligible recipients; and for continuing to adopt deficient tax rates despite the resultant depletion of the county’s financial resources.

But assigning blame serves no purpose unless the problems, once identified, are resolved. County leadership should immediately take the following steps:

Plug the holes in the bucket

It will be difficult to justify the inevitable tax increase if the county has not first cut expenses to the bone. While I trust our professional staff to manage the county’s finances frugally, it is not necessarily within the staff’s responsibility to make judgments on programs or services that have outlived their usefulness or, perhaps, had more political than actual value at the outset. Politicians often have a vested interest in maintaining an obsolete or unjustified expenditure.

A citizen panel should be created to analyze the budget, line-by-line, to identify areas ripe for cost-cutting. The panel’s recommendations should be implemented at the earliest opportunity.

Increase non-tax revenues

The money to pay for government can come from several sources– licenses, fees, fines and penalties, user fees and service charges, as well as interest on reserves and investments, borrowing or the sale of bonds. The shortfall, if any, must be covered by property taxes. The more non-tax revenue is collected, the fewer tax dollars must be collected from you and me. One proven source of non-tax revenue are impact fees on new development.

Impact fees are charged to pay for the new public facilities required to serve new growth. Had Gwinnett County charged an impact fee of $1,600 on every new single-family housing unit permitted in 2005, for example, and that money used to build public facilities which would normally be funded in the general budget, the county could have passed to the current homeowner a benefit in the form of a significant property tax cut (a 5.7% decrease for a $200,000 property, not considering exemptions).

The Commission’s delay in implementing an impact fee has already cost the county millions. Our leaders must drag their feet on impact fees no longer.

Adopt a sufficient tax rate

For the past several years, the Commission has failed to fully fund its budget by adopting an insufficient tax rate. It has done so for no financial reason, but to avoid the political consequences of “raising taxes.” In my opinion, that is just as irresponsible as if the Commission took more of your tax dollars than it actually needed.

A deficient tax rate has a hidden “cost.” Because the deficit must be covered by cash reserves, the interest on those reserves– cherished non-tax revenue– is lost for future years. That loss of revenue must then be replaced somehow. In a “slow-growth” period, the downward spiral of diminishing non-tax revenue continues to the point that only a massive tax increase can stop the hemorrhaging.

Is raising the millage rate to a mathematically-correct level a “tax increase”? Not if the Commission can justify every expense and has maximized the generation of non-tax revenue– in that case, the tax rate represents the true cost of our county government in relation to the value of all taxable property within the county.

The Politics

We have now entered an election cycle in which three Commissioners are seeking re-election; two are running against each other for Commission Chairman in what will likely be a very contentious race; and one Commission seat will be open with no incumbent.

The Commission will adopt the 2008 tax rate during the heat of the campaign, when it is unlikely that anyone will vote to increase the tax rate, even to its mathematically-correct level, although a tax increase would be the quickest way to avoid tapping the county’s reserves.

The quest for additional non-tax revenue is not likely to occur any time soon, either. Chairman Bannister is adamantly opposed to impact fees while Commissioner Lorraine Green, Bannister’s challenger for the Chairman’s seat, reportedly favors the fees. She has, however, failed to move the issue forward for fear of angering the development community, on whom she hopes to rely for the campaign dollars needed to defeat Bannister.

In other words, it will be 2009 before any substantial action will be taken to alleviate the financial crisis unless our Commission can put politics aside and do what is best for the county at this time.