Because Cherokee County’s tax base is mostly residential, county government services that derive a large part of their income from county property taxes took a big hit as a result of the recession. Recovery will be slow, officials predict.
“In a lot of areas, property values went down 30 and 40 percent; some areas went down 50 percent,” said County Chief Tax Assessor John Adams.
County Manager Jerry Cooper recently said he doesn’t predict an “easy recovery” for the tax digest.
In February, county officials predicted the county will finish out the year in a $4 million shortfall for 2014 budget revenue. Cooper said he has a hard time right now making a prediction as to whether ongoing operating expenses that would come with a new Lathemtown library (about $300,000) can be funded for 2014.
The county’s revenues, as a whole, are down, because the tax digest is down due to the loss of appraised value of real estate over the past several years.
The school district has taken an additional hit of $121 million in state educational funding because of “austerity cuts,” which are Qualified Basic Education (QBE)-mandated funds the county is owed but does not receive.
Cherokee County government has not issued cost of living adjustments to its employees since 2008, and has the lowest personnel headcount per capita of any county in the metro-Atlanta, Cooper said.
“The millage rate of 9.999 is the 53rd lowest of the 159 counties in the state,” he said.
The Cherokee County School District, over the past five years, has lost around $30 million in local educational revenues.
The current school year’s budget reflects an 8.15 percent decrease in last year’s local property tax revenue and marks the fourth consecutive year of lower tax collection, although the district has 4,000 more students than it did four years ago.
“In Cherokee, most of those who have lost their homes to foreclosure do not move away,” said School Superintendent Dr. Frank Petruzielo. “They stay, and rent, because of the quality of the educational system.”
The school district millage rate for maintenance and operation is 19.45 mills.
The tax digest, which consists of all the commercial and residential real property in the county, along with personal property, should be up slightly this year for the first time in several years, Adams said.
“New construction is up,” Adams said. “There were 800 housing starts in 2012 compared to 400 in 2011.”
Additionally, he said, the value of homes is rising slightly because the foreclosures sitting on the market are being sold and the rate of foreclosure has declined. Also, abnormally low bank property sell-offs are not dragging property values down to the extent that they were a year ago.
“A special report I saw on metro-area real estate values showed Cherokee up about 10 percent, and I think that’s right,” Adams said. “The digest has gone from a negative 8 percent to a plus one- or two-percent, so that’s about a 10 percent jump.”
Adams said the school district’s gross digest will be up this year, but after senior exemptions and the like are taken out, the net digest will be flat.
One factor that will affect this year’s county digest, he explained, is that many properties’ 10-year conservation easements are running out. Depending on how many owners reapply for the easements, in which owners pledge farm use in exchange for a lower tax rate, it could make the digest vary by $20 to $25 million.
Tax bills for 2013 go out the second week in May, and property owners have 45 days after that to appeal valuations; Adam said about half the property appraisals on the roles may go up a little this year.
County Planning Director Jeff Watkins pointed out, though, that it takes a year for increases in county revenues to be realized.
“If we issue a permit today, it won’t show up on the tax digest till next year,” he said.
One major thing that has caused property values to slip as much as they have is that large-scale real estate investors come in and buy up properties en masse, sitting on them until they can make a profit.
Big banks, Adams explained, have sold and resold foreclosed properties at well under what they are worth, taking an initial loss but later being reimbursed by federal government programs.
“There have been give-aways from the banks for the last several years, with conglomerates speculating to buy them dirt cheap and flip them,” he said.
Mitch Hamilton, planning and forecasting director for Cherokee County School District, said land companies come in and buy everything up, planning to hold onto to them until the market returns. They remain on the digest at a reduced rate, since they are valued as unimproved property.
Hamilton said homes being built in Cherokee are generally at a lower price point than they were before the recession.
“We were seeing homes around $350,000 being built; now those new homes are in the $150,000 to $250,000 range,” Hamilton said. “The upper end of the digest is lower.”
Hamilton also said the school district doesn’t predict a great deal of growth in the near future. It tracks the birth rate, which has slowed down. Less expensive homes also attract younger buyers, who either haven’t started families or have children too young for school. There will be a major influx of students into the school system after the lull of the next three to five years, the school district predicts.
However, the school district, between state austerity cuts and dwindling property values, has lost so much revenue that officials say it would take $65 million to return local schools to their pre-recession state — eliminating furlough days, getting class sizes back to where they were and increasing the school calendar five days so that kids are back to school for the full 180 days they attended before the recession hit.
Petruzielo said over the past several years, state legislation has steered cities, counties and school systems away from property taxation and more toward sales tax.
Special Purpose Local Option Sales Taxes can be used for capital improvements and building programs but not for operating expenses.
“What’s been missing over the past several years is a long-term strategic view of how tax models interact,” Petruzielo said. “To maintain a decent quality of life, that strategic vision needs to be developed.”