Mount Paran Northside Citizens Association

RATEPAYERS WILL GET HELP FROM PENNY SALES TAX by Clair Muller

Oct 22, 2004

I am sure everyone is aware that the City of Atlanta raised the rates for water/sewer service in January of this year. The increased rates were necessary to pay for a huge sewer upgrade mandated by the Federal courts after Atlanta was sued for violation of the Clean Water Act. The Clean Water Atlanta plan, estimated to cost over $3 Billion, must be completed by 2014.

The rates approved in January estimated increases of 45% in 2004, 45% in 2005, 11% in 2006, 11% in 2007 and 11% in 2008.

These increases are huge. Atlanta has been lobbying diligently for Federal grants to help offset them. Boston, San Diego and other cities have received Federal funds for sewer fixes and we are hoping Atlanta can also receive grants. Unfortunately, as of January, we had only received about $2 Million in Federal grants and rates had to be put in place to continue the program and avoid delays and fines such as the fines placed on Atlanta in the 1990s.

Atlanta lobbyists were told many times in Washington that our Georgia delegation expected the City of Atlanta to increase rates prior to consideration of Federal grants. We also heard many times that our Georgian delegation expected the passage of a sales tax like the SPLOST (Special Purpose Local Option Sales Tax) that Columbus, Georgia passed to pay for their sewer upgrades in the 1990s.

Unfortunately, a SPLOST must be put on the ballot by a county (Columbus-Muscogee is a consolidated government so did not have this problem) and Fulton County refused to allow the question to be put on the ballot for the voters. Atlanta, with bipartisan help, was able to get the General Assembly to approve a new kind of sales tax, a MOST (Municipal Option Sales Tax), which could be put on the ballot by a city for the voters to approve.

The MOST legislation from the General Assembly specified that Atlanta could put the question on the ballot to add a penny to the sales tax for a period of four years?—but it could be renewed by the voters. Only two additional four-year periods could be authorized by referendum under this new law, for a total of twelve years. (NOTE?—the school sales tax will expire June 30, 2006 so the City of Atlanta will be at the 8 cent sales tax level for only 21 months. The Atlanta Public School administration says that they will not try to get their penny renewed by the voters.)

It was estimated that if Atlanta could levy a penny sales tax for sewers, that approximately 40% of the tax collected would come from visitors or workers who do not live in Atlanta. On July 20, 2004, the question of adding a penny sales tax was approved by the voters of Atlanta by 75% to 25%.

The increase in the sales tax goes into effect in October, 2004. The City will not receive its first check from the State of Georgia until mid-December. The new rates for 2005 will be adopted by the Council in early December, which means that we will not have any sales tax history upon which to rely. The sales tax will be factored into a rate adjustment using conservative forecasts performed for us by Georgia State University?’s Fiscal Research Center. What this means is that we don?’t know right now how much we can reduce the next increase?—but it will be reduced.
Due to the tiered rate structure, the 2004 rate represented a weighted average increase of 38.7% over 2003. When we first started pursuing the sales tax, it was estimated that the next increase of 37% in 2005 could be reduced to a 10% increase with the implementation of the sales tax. Now we are hearing even better news. Based upon the sales tax revenue forecasts from Georgia State and the projections of a consulting engineer who conducted a financial feasibility study of the system, the 2005 rate increase could actually be cut to around 3.5%.

The rates adopted earlier this year also included increases programmed for 2006, 2007 and 2008, although these rate increases were substantially lower than those for 2004 and 2005. The actual rates needed for those years will be determined later, but clearly the sales tax will reduce the need for these increases substantially; how much will depend on actual tax collections.

Grants that Atlanta might receive from Washington would also be used in future years to take down the increases. So hopefully increases like the 2004 increase will not be seen again.

Although we will be able to give substantial rate increase relief in 2005, there are several proposals pending that may be factored into the rate for 2005. We are studying the issue of whether residential buildings on single meters are treated fairly with the new rates because individual units do not have the opportunity to get a lower rate by conservation. There is another proposal held in committee that would give a greater discount to low-income seniors. There is also a proposal to remove the minimum charge for water. Any of these proposals, if approved, could influence? the manner in which the rate increase will affect individual water system customers.

Editor's Note: Clair Muller is the Atlanta City Council Member, District 8