Legislators intend to fix the equalized HOST

In 2015, the General Assembly passed House Bill 215, which authorized a vote in 2016 for a new, "equalized" homestead option sales tax (HOST) and special purpose local option sales tax (SPLOST) that would alter the formula for a local sales tax for infrastructure improvements and property tax credit offsets. The legislature also approved HB 596, authorized a vote to extend the existing property tax "freeze," which locks in homeowner values for the purposes of county tax billing. HB 215 included language that said the freeze would be suspended if an equalized HOST were in effect. Realizing that this would increase homeowners' tax bills, officials have decided not to put the sales tax measure on the ballot. HB 596 will appear on November ballots as regularly scheduled to extend the freeze.

Members of the DeKalb legislative delegation is saying that they will work quickly in the 2017 session to correct HB 215 for a vote. Crossroads News has the details on the legislators' plans:

DeKalb delegation to change law hampering county SPLOST

The DeKalb delegation to the Georgia General Assembly is preparing to fix a state law that derailed a DeKalb County government Special Purpose Local Option Sales Tax in July.

The DeKalb Board of Commissioners was preparing to vote to place a 1 percent sales tax referendum on the Nov. 8 ballot to fund road paving and other infrastructure improvements when it discovered that House Bill 596 would have eliminated property tax relief for homeowners.

The SPLOST would have generated $551 million over five years with $377.7 million going to the county and the rest to the cities.

Now commissioners like Larry Johnson, who represents District 3 and is the BOC’s presiding officer, are pushing for the law to be amended. Johnson said more than $200 million will be spent in South DeKalb if voters approve the SPLOST.

“That is money that will fix our roads and improve our parks and libraries,” he said. “We need that money to make improvements.”

State Sen. Emanuel Jones, who attended a Sept. 20 SPLOST update meeting hosted by Johnson, said he is working to change the law in the early weeks of the 2017 legislative session so that the referendum can be on the March 2017 ballot. “It’s an accelerated time line but we can do it,” Jones told the meeting...

2 other property tax measures signed into law

In addition to House Bill 202 that modified some procedures for appealing property tax assessments, Gov. Nathan Deal signed two other pieces of legislation last week that affect property taxpayers.  First, HB 215 provides for a referendum on an “equalized HOST” that would increase sales taxes and provide some property tax relief to DeKalb homeowners.  Second, HB 234 provides that no tax payment deadline shall fall on a Federal Reserve bank holiday.  That law doesn’t have much of a practical effect since there are very few Federal Reserve holidays that aren’t already federal or state holidays, and the ones that are don’t fall on any of Decatur's tax due dates.

Equalized HOST and value freeze bills sent to Governor

Two bills supported by most state legislators representing DeKalb County were passed by both houses of the Georgia General Assembly and have been sent to Gov. Deal’s desk for his consideration.

House Bill 215 provides for an “equalized” homestead option sales tax (HOST) and an additional 1 percent sales tax in DeKalb County if approved by voters. The proceeds from the new tax would go toward infrastructure improvements in DeKalb County. The existing HOST credit would be modified to provide some more property tax relief. The equalized HOST could save Decatur residents about $20 a year compared to their last DeKalb County tax bill. HB 215 passed the state Senate unanimously, but received 32 nay votes in the House from fiscally conservative Republicans who regarded the measure as a tax increase.

HB 596 provides for an extension of the property assessment freeze in DeKalb County until 2021. The freeze is actually an exemption that offsets increases in property values for homeowners countywide. For Decatur residents, the freeze can help prevent increases in your DeKalb County tax bill but not your City of Decatur tax bill. HB 596 passed by a wider margin than HB 215. There were only four dissenting votes, which were cast by Democrats in the Senate including Sen. Gloria Butler of Stone Mountain and Sen. Steve Henson of Tucker.

Meanwhile, three bills to expand property tax relief for Decatur homeowners died in the state House before the session ended. HB 673 would have increased the existing GH1 basic homestead exemption by exempting $25,000 in assessed value rather than the current $20,000, which would have saved approximately $60 on resident homeowners’ tax bills when compared to current bills assuming no change in property value or in the millage rates. HB 670 would have added a new “GH3” exemption for homeowners over 62 with household income under $50,000 that would have saved them about $175 per year. Section 2A of HB 672 would have would have increased the existing GH2 (age 65) exemption amount of $1,000 to $10,000, which would be a savings of an additional $100 per eligible taxpayer.

Equalized HOST bill passes Georgia Senate

State lawmakers have approved House Bill 215 which would allow for a referendum on increasing the sales tax by 1 percent in DeKalb County. If approved by voters, the existing homestead option sales tax (HOST), which mostly provides property tax relief but also generates revenue for infrastructure improvements in DeKalb and its cities, would be reconfigured solely to provide property tax relief to homeowners. The new, additional penny sales tax would be dedicated to infrastructure improvements in DeKalb.

Contrary to an earlier report in the news that indicated that taxes for a home in Decatur would decrease by $625 under the proposal, the equalized HOST would probably save homeowners in Decatur about $20 in 2016 on their county property tax bill compared to 2014.

HB 215 now returns to the Georgia House for final approval before heading to the governor’s desk for signature. The bill is almost certain to pass since an earlier version of the bill was already approved by the House earlier this month.

The bill passed the Senate unanimously including an aye vote from Sen. Elena Parent, who represents Decatur and large swaths of DeKalb County. However, Sen. Parent voted against an earlier motion to engross the bill, meaning that she supported the ability of senators to propose amendments from the floor before the final vote. It is not clear what amendments may have been proposed if amendments had been allowed.

Bill aims to have HOST in Cobb County

Cobb County officials are interested in offering some property tax relief to be offset by an increase in their sales tax. Their proposal would resemble DeKalb County’s existing homestead option sales tax which primarily provides for property tax relief but also allows for some of the sales tax revenue to go toward infrastructure improvements. Rep. John Carson (R-Marietta) is sponsoring the proposal, which is being called an "alternative HOST," through HB 548.  The bill, which was just introduced last week, probably faces an uphill climb to get passed this year given how late we are into this legislative session.

At this point it seems like the Cobb County proposal more closely resembles DeKalb’s older/existing HOST model, rather than the DeKalb legislators’ newly proposed “equalized HOST” model that’s being considered through HB 215. DeKalb County and Rockdale County are the only counties currently administering a HOST.

Equalized HOST passes State House

But take figures cited with a grain of salt

The Georgia House of Representatives has passed HB 215 on Monday by a vote of 128 to 35. HB 215 would increase sales taxes in DeKalb County by one percent to fund infrastructure improvements. The bill would adjust a portion of existing sales taxes to go toward property tax relief for homeowners (but not for commercial properties, rental properties, land lots, etc.) The nay votes were all from Republicans.

The Atlanta Journal reports:

“Residents in the cities will see a significant property tax reduction,” said the bill’s sponsor, Rep. Mike Jacobs, R-Brookhaven. “All of DeKalb’s legislators — Republican and Democrat; north, south, east and west — agreed this is how we’re going to address deficiencies of how HOST is allocated.”

For example, property taxes would decrease by $625 on a $300,000 home in Decatur, Jacobs said. On a $500,000 Decatur home, property taxes would drop $1,065. 

There may be some miscommunication about the jurisdictions and numbers cited. Decatur homeowners should be aware that the HOST will not affect your city property tax bill. The HOST would only affect the tax bill you pay to DeKalb County. In 2014, a $300,000 home in in Decatur with the homestead exemption and HOST credit on their county tax bill would have paid $458 in property taxes to DeKalb. A decrease of $625 on a $458 tax bill is not possible. The HOST credit on the county tax bill for a $300,000 home in Decatur was about $605 in 2014. Rep. Jacobs or the AJC may have meant to say that the new HOST credit amount would be would be $625 for a home in Decatur, which would be a savings of $20 compared to last year.

HB 215 approved by committee

Georgia House Bill 215, which would change sales tax rates and distributions in DeKalb County, has been approved by the House Ways & Means Committee. Next it will be considered by the House Rules committee which will probably schedule the bill for a floor vote. The bill would:

• Provide for a vote on whether to replace the existing HOST with a new “equalized HOST.” 
• In addition to the equalized HOST, an additional 1 percent county special purpose local option sales tax (SPLOST) would be put before voters countywide. 
• Both ballot questions would have to be approved in order for either to go into effect. 

The existing HOST credit saves homeowners a several hundred dollars a year depending on their property value and tax district. For example, a resident with a $200,000 home in unincorporated DeKalb saved about $790 on their county property taxes in 2014 because of HOST. A resident with a $200,000 home within Decatur’s city limits would have saved about $390 on their county property tax bill in 2014 because of HOST. The HOST tax credit does not alter municipal tax bills.

HB 215 stipulates that proceeds from the equalized HOST would continue benefiting all DeKalb County property taxpayers, whether their property is in unincorporated DeKalb or in DeKalb’s cities. The amount of HOST credit should increase somewhat under this proposal because all of the equalized HOST would go toward property tax relief rather than a portion of it going toward infrastructure improvements as the current formula dictates. Revenues from the new SPLOST would be disbursed per existing state law in accordance with intergovernmental agreements between DeKalb and cities.

From a high-level tax standpoint, what the proposal would do is essentially to take some of the local tax burden off of residential property taxpayers and shift it slightly toward sales taxpayers. However, DeKalb cities would still have the discretion to adjust their own millage rates to offset foregone HOST revenue under the old formula.

Property taxes including basic homestead exemptions in Decatur and DeKalb

To recap last week's post, a total year's property tax bill in Decatur in 2014 would be about 8 percent lower than for an equally valued property in DeKalb County if the property owner had no homestead exemptions (for example, commercial properties, rental properties, investment properties, second homes, etc).  When Decatur and DeKalb's bills within the City are added together, they would be about 14 percent higher than what the property would have been taxed in unincorporated DeKalb:

The differences are larger if the property owner resides on the property and has a basic homestead exemption with both the City and County.  The HOST credit on County bills is tricky to compute, but here are my estimates for 2014 factoring in owner occupancy:

Please note that these comparisons don't include fees for sanitation and stormwater drainage.  Tax scenarios for senior residents with additional homestead exemptions would vary significantly based on age, income, and in some cases the nature of the income (ie, retirement income versus non-retirement income), and jurisdiction.  There are additional differences across jurisdictions that could affect property insurance and flood insurance rates.

As always, this blog is not intended to give legal, political, financial, or tax advice, but to give information and answer questions generally about Decatur property tax issues. Please contact my office to discuss the specifics of your account; for tax advice please contact an independent tax professional.

Good explanation of HOST

Even for a tax collector like me, the Homestead Option Sales Tax (HOST) can be tricky to understand, much less explain to the public. That’s why I was impressed by this straightforward, recent explanation of the SPLOST, LOST, ELOST and HOST by state Sen. Bill Heath, with a little of my own commentary in italics mixed in:

In addition to Georgia's state sales tax rate of 4%, there are four different types of local-option sales and use taxes that may be levied by local governments. They are most commonly known by their acronyms-SPLOST, LOST, ELOST and HOST. In addition to showing up on your sales receipts, you've likely also seen one of them show up on your ballot as a voter referendum.

Note: DeKalb County has the ELOST, HOST, and MARTA sales taxes. Last year the DeKalb County Board of Commissioners considered replacing the MARTA tax with a SPLOST.

A Special Purpose Local Option Sales Tax (SPLOST) is normally a one percent county sales and use tax that is enacted by the direct vote of the constituents. Used to fund specific capital outlay projects, a SPLOST is first initiated by a county government for approval by the voters. To increase accountability, this voter referendum must state the purpose of the tax, the length of time it will be imposed and the amount of revenue it will raise. This method of enacting a SPLOST is a sure way for constituents to have a direct voice over projects and the money they give to the local or state government...

Another type of local sales and use tax is the Local Option Sales Tax (LOST). A LOST also requires voter approval, but rather than being devoted to a specific project like a SPLOST, a LOST is intended to be used as replacement revenue for the local property tax. Revenues from this tax must go to reducing the millage rate and that reduction must be reflected in local property tax bills. 154 of Georgia's 159 counties utilize a LOST. The total revenue from this type of local sales and use tax topped $1.3 billion in 2009.

An Education Local Options Sales Tax (ELOST) allows county schools to propose their own capital improvement programs to voters. Unlike the SPLOST, the revenues from this optional 1% sales tax are not distributed to the county government but are instead levied by boards of education and must used for capital projects for educational purposes or may contribute to the retirement of the system's existing general obligation debt. Excess proceeds from an ELOST must be used to retire school-system debt, or if there is none, to roll back the millage rate. The total revenue from this type of local sales and use tax topped $1.3 billion in 2009.

The majority of Georgia counties have a 7 percent sales tax, that is, the 4 percent state sales tax plus a LOST, SPLOST, and ELOST. DeKalb is somewhat unusual in this regard by neither having a LOST (like Fulton County) nor a SPLOST (like Cobb or Gwinnett County). And DeKalb is distinctive in another way…

The final type of local sales and use tax is the lesser-known Homestead Option Sales Tax (HOST) which may be collected by counties that do not levy a LOST. A HOST is a sales and use tax option that must devote at least 80 percent of its proceeds to provide for an increased homestead exemption from county ad valorem taxes. The remaining 20 percent may be used for capital outlay projects and excess revenues must be used to adjust the millage rate. Only DeKalb and Rockdale counties currently utilize a HOST.

There’s a little more to read from Sen. Heath at this link, but it’s mostly about his home district which is on the other side of Atlanta.

Different counties, different sales tax rates

The Atlanta Journal-Constitution ran a lengthy piece on sales tax collections yesterday. They concluded with this handy rundown on sales tax rates in the metro Atlanta area and what they’re based on:

Paying the pennies

Here are the 1-cent state and local sales taxes charged in five metro Atlanta counties, plus Atlanta. Everyone pays 4 percent to the state, and local governments may add sales taxes of their own. A LOST is a local-option sales tax, and a SPLOST is a special local-option sales tax, which may be used for specific purposes such as building schools or roads. SPLOSTs may end or be replaced by other SPLOSTs, so these figures may change over time. Bear in mind that each county or city tax will go up another penny if voters approve the transportation tax in 2012.

Atlanta — 8 percent

4 percent local (the same three taxes as DeKalb or Fulton, plus a 1 percent sewer tax) and 4 percent state

Sales tax on $50 pair of shoes: $4

DeKalb County – 7 percent

3 percent local (education tax, a homestead tax and MARTA) and 4 percent state

Total sales tax on $50 pair of shoes: $3.50

Fulton County – 7 percent

3 percent local (education tax, LOST and MARTA) and 4 percent state

Total sales tax on $50 pair of shoes: $3.50

Clayton County – 7 percent

3 percent local (education tax, SPLOST and LOST) and 4 percent state

Total sales tax on a $50 pair of shoes: $3.50

Cobb County – 6 percent

2 percent local (education tax and SPLOST) and 4 percent state

Total sales tax on $50 pair of shoes: $3

Gwinnett County – 6 percent

2 percent local (education tax and SPLOST) and 4 percent state

Total sales tax on $50 pair of shoes: $3