What’s it to Utz? – Decatur’s budget breakdown

Posted by Decaturish.com June 7, 2015
Hans Utz

Hans Utz

This post has been updated. 

Editor’s note: Unless otherwise noted, the numbers in this column will be from the 2015-2016 Proposed Budget, and therefore unaudited. That very well means they may turn out wrong. Based on the audited track record of the city so far, I’m comfortable saying they should be reasonably close.

For more background on the components of Decatur’s budget, check out the information section at the end of this story.

By Hans Utz

For the purposes of this column, we’ll focus on Decatur’s proposed operating budget, also called the general fund.

The city is proposing a $23.2 million general fund expenditure budget for Fiscal Year 2016, which begins July 1. That is a 4.2 percent growth in spending over last year. The growth in spending is getting closer to the inflation rate and less than the 5.9 percent annual growth of the budget since 2011.

What does that mean? It means on average the city’s spending has increased 5.9 percent per year since 2011. This would be quite high for any normal time frame. But the city and the country coming out of the worst recession in a generation isn’t normal.

Decatur’s spending has been typical of a healthy city gaining distance from a terrible economic downturn.  The rate of growth is now slowing given that the downturn is behind us and the city has broadly recovered.

All of that is good news, but it’s not the whole picture.  For the rest of the story, we have to look at the city’s revenues. The city is anticipating $23.5 million in general fund revenues this year, up 3.9 percent since last year. That is slower growth than the 7.6 percent annual revenue growth since 2011.

This is also expected. Housing prices dropped dramatically in the recession, which means dramatically less tax revenue. For the past five years, Decatur has benefited from a recovering housing market, hence the 7.6 percent average annual growth in general fund revenues.

We will talk about this in more detail in a minute, but because home values have increased this year, Decatur does not need all of the money that it would collect under the current millage rate.  That’s why the city is proposing to roll back the millage a full point, from 13 mills to 12 mills.

The $217,800 difference between the $23.5 million in estimated revenue and the $23.2 in estimated spending will go to the reserve fund balance. The reserve fund is, in effect, the city’s savings account. The fund balance will be $6.13 million, or 26 percent of the operating budget. A conservative fund balance should be between 20 percent and 30 percent of the operating budget, which means we are right where we should be.

Overall, pretty good news, and at a surface examination quite responsible. Let’s look under the covers a bit.

What Decatur makes, and what it spends

Revenue comes in several forms. Taxes make up the largest share. Last year, the city received $17.4 million in tax revenue.  This year, $19.2 million of the anticipated $23.5 million in revenue is from taxes. That is a substantial increase over last year, on the order of 10 percent.

So, by far the largest portion of revenue has grown 10 percent, but overall revenues have grown only 3.9 percent. That means the city won’t be taking in as much money somewhere.

Sure enough, starting this budget year, Decatur will transfer one-half of net revenue related to the sale of alcohol to the City Schools of Decatur. In 2015-2016, the transfer is expected to be nearly $300,000. That is the largest portion of the anticipated revenue decrease.

That’s what city anticipates making in revenue this year. Now, how will the city spend it?

There are two ways to break down out expenditures. One is by function, like Police, Fire, etc. The other way is by category, for example personnel, supplies, etc. Both are illuminating.

The city’s largest single expenditure category by a wide margin is employees. According to the proposed budget, $15.4 million, or over 66 percent, is for personnel salaries and related expenses like retirement, health insurance, etc.

This is also where the majority of the proposed general fund budget increase will go. Of the total $940,680 proposed increase in spending, $732,550 goes toward personnel costs. That’s 5 percent more in personnel costs than last year and nearly 80 percent of the total proposed increase.

The largest spending increase is for Police. The department is requesting $318,650 more this year, a 6.1 percent increase. The bulk will go toward increased regular and temporary salaries and associated costs.

The Police Department is also asking for two additional crossing guards to handle the growing enrollment in the city’s schools and the success of the Safe Routes to School walking programs.  These are not full time positions, and at least one is funded by City Schools of Decatur.

The rest of the spending increases primarily go to full funding of existing positions and the creation of new positions.

The city is proposing raising its General Government spending by 12.8 percent, which is just shy of $206,000. The vast majority of this is in employees and professional services, and includes the addition of an administrative assistant position.

The Community and Economic Development department is seeking an additional Planner position and the creation of a new position called the Community Information Services & Volunteer Coordinator.

Public Works is seeking two additional crew workers, one for facilities maintenance and one for grounds maintenance.

How the budget affects property taxes

Mathematically, there are two ways that you could pay more in taxes. The first, easiest to explain, is when the city straight up increases the millage rate. This usually gets people’s attention, and the city generally needs to have a solid explanation behind why.

The second way is when the value of the tax digest increases dramatically, as it has this year. The appraised value of your home has likely increased, thus the amount you pay in taxes will increase proportionate to the increase in your home’s value. The city has not “raised” taxes, but you will pay a higher amount nonetheless.

This year the growth in the tax digest is estimated be close to 20 percent.  According to the US Census, that is the most significant increase since the downturn. A quarter of that growth is due to new construction, which tax-wise is a good thing since it offsets your existing bill.

Three-quarters of that growth is due to the growth of property values in the city. Property values are expected to increase some 15 percent on average. In a recent column we discussed your property tax bill, and we determined the value of the average home last year was $400,000. A 15 percent increase would make the new average value home in Decatur $460,000.

This is why you need to watch the city, county, and school budgets unfold. If the millage rates are not lowered the average home tax bill will see a sharp increase.

This year, because the digest has significantly increased in value, Decatur is able to reduce the millage rate and still bring in more money than last year.

Here are the details. Last year, the City of Decatur charged $2,368.40 in taxes to the average homeowner, equivalent to 13 mills, in order to balance the budget.  This year, because of the increase in spending discussed above, the City of Decatur will need $2,568.40 from the average homeowner to balance the budget.

That is a $180 increase on the average tax bill. But because the digest increased significantly in value, Decatur will only need to levy 12 mills to receive that amount.

That is why, even though the city is technically reducing your tax rate from 13 mills to 12 mills, they still have to advertise a tax increase. They are reducing the tax rate, but they are not reducing it as much as the average home value increased.

For those interested, Decatur would have to reduce its millage from 13 mills to around 11.5 mills to keep the values flat and avoid advertising a tax increase. There are solid reasons for not lowering taxes that much, not the least of which is that the digest growth is only an estimate from the county. The chances of error are high enough to not put the city’s finances at risk.

If your home did not increase 15 percent in value like the average property in Decatur, then your tax bill may actually decrease this year.

However, if your home value increased substantially more than the 20 percent average, which will be the case for some homes, then your tax bill will increase far more than the average.

Long story short your personal experience may vary.

The bottom line

The city is asking the average homeowner to pay $180 more per year primarily to fully fund all positions and to add five new positions.

This is a lower increase than in the last couple of years, as it should be. You have to decide whether you think an increase is warranted at all, and tell your Commissioners.

I encourage you to read the budget to get a feel for how the city is doing financially and how the administration conveys the municipal priorities. I also greatly encourage you to attend the upcoming public sessions on the budget: June 8 on the budget and proposed millage rate, and June 15 when the budget is finally voted on by the Commission.

Thanks for hanging in there. This is tough detail, but ultimately the budget is the single most important municipal document in terms of defining the city’s priorities and direction.

If it’s all the same to you, I think my next column will be about Taylor Swift, whose net worth, incidentally, is about five times Decatur’s entire annual budget.

Just sayin’.

Hans Utz has lived in and around Atlanta for 25 years and formerly served as the Deputy COO of the City of Atlanta.  He writes about local and national politics. He and his family currently reside in Decatur.

More info: Components of Decatur’s Proposed Budget

Decatur’s budget is made up of a number of separate funds, which are accounted for independently.

For example, the Sanitation Enterprise Fund is funded through the sanitation fees, the cost of Decatur’s ‘Pay As You Throw’ bags, etc. Because these fees are assigned to a specific enterprise purpose, you cannot legally mix them with property taxes going into the General Fund.

Similar restrictions exist for using capital money, hotel/motel taxes, etc. Starting on page 37 of the proposed budget, the document lays out in clear detail the purpose and accounting of each fund if you are interested.

Some of the funds are tied to capital projects specifically, and while the numbers in any one year can be quite large, the true accounting must be measured in decades. I wrote an earlier column that tackles Decatur’s municipal debt tied to these capital funds.

The General Fund is the operating budget of the city. It is far and away the most expensive fund, and it contains most of what people think of as ‘city services’. It is where the bulk of discretionary spending occurs. It is where most of your tax dollars go.

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  • G Buck

    Another solid breakdown for us taxpayers. Thanks Hans and Decaturish.

  • RAJ

    Dan…How about a separate page for North Central DeKalb(NCD)so we can talk about city hood/annexation,county budget & service issues. I think some businesses in Northlake, Oak Grove & Toco Hills would like to advertise on your site but without readers they have little need to do so!

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