Georgia Municipal Debt Limits Excessive

Over the years, the Georgia Legislature has pass legislation enabling cities and counties to do pretty much anything they want, without consulting the voters. Why didn’t Cobb voters get to weigh in on the Braves Stadium deal ?

The Georgia Handbook for Mayors and Councilmembers 5^th Edition, Part 5, Municipal Indebtedness page 2

Debt Limitations

Generally, the Georgia Constitution limits indebtedness to 10 percent of the assessed value of all taxable property located within a municipality.2 This provision also states that no new debt may be incurred without the assent of a majority of the qualified voters voting on the question of whether the city should incur the debt.3 Exceptions to the 10 percent limitation and the required election include

• funds granted by and loans obtained from the federal government or any agency pursuant to conditions imposed by federal law,4

• funds borrowed from any person, corporation, association, or the state to pay in whole or in part the cost of property valuation and equalization programs for ad valorem tax

purposes;5

• temporary loans; and6

• funds to pay for damages caused by the city's breach of a contract.7

 

Counties and school districts have their own 10 percent limitation.8 A city may enter into a contract with an authority and levy taxes to meet its contractual obligations to the public authority as long as the contract between the city and the public authority is authorized by the intergovernmental contacts clause of the state constitution.9 Contracts that are authorized by the intergovernmental contracts clause and require a municipality to pay an amount sufficient to pay the debt services on an authority's debt do not create new municipal debt.10

 

Special District Debt

Municipalities may incur debt on behalf of special districts created to provide local government services in such districts. Before doing so, the city must provide for the assessment and collection of an annual tax within the district sufficient to pay the principal and interest of the debt within 30 years. The state constitution requires that such debt must be approved by a majority of the voters of the special district voting in a special election held for that purpose. A municipality cannot incur any debt on behalf of a special district that, when added to the rest of the municipality's outstanding debt, exceeds 10 percent of the assessed value of all taxable property within the municipality. The proceeds of the tax collected from the special district must be used exclusively to pay-off the principal and interest of the debt incurred on behalf of the special district.11

Handbook for Mayors and Councilmembers     2 http://www.gmanet.com/GMASite/media/PDF/handbook/handbook_complete

The limit of borrowing up to 10 percent of the assessed value of all taxable property within the municipality is way too high.  Individuals and corporations are limited to borrowing up to the value of their total assets.  Why shouldn’t municipalities be subject to the same limits ?

The City of Dunwoody has about $2 billion in assets on their tax register and total annual revenue of $25 million a year and assets around $100 million.  Allowing them to borrow up to $2 billion is like approving a $2 million home mortgage for a family with an annual income of $25,000 per year.

DeKalb County and DeKalb County Schools uses the same tax register to figure their borrowing limits. Each of these government entities can use your assets a collateral.

The game for these municipalities is to spend their budgets on bloated bureaucracy, gadgets, studies, excessive engineering, “economic development” and lawyers, leaving unnavigable roads, bridges, water distribution and treatment plants to rot. And then, when they have a crisis, they want to sell Bonds or pass SPLOSTs.

What voter would vote against having their broken water treatment plants fixed ?  A 30 year Bond paying 5% acts like a 30 year home mortgage; you pay double.  A $200,000, 30 year mortgage at 5% costs $400,000 to pay off.  You can save a lot of interest cost if you pay it off in 15 years.

Municipalities should have accrual accounts to pay for planned maintenance of critical infrastructure and pay for this maintenance out of these accounts. If they don’t sell Bonds, you don’t pay double.

Norb Leahy, Dunwoody GA Tea Party Leader