Oconee SPLOST Revenues Drop Sharply

Bad Follows Good

Oconee County got some horrible news today with the release of local Special Purpose Local Option Sales Tax receipts for December of 2008. The county collected $207,517 less in the last month of last year than in December of 2007.

The county had collected $6,368 more in November of 2008 than in November of 2007, but over the last 12 months, revenues now are $668,021 behind those same 12 months a year earlier.

On March 17, Oconee County voters will decide if Oconee sales taxes should decrease by 1 cent on a dollar when the current SPLOST tax expires at the end of November of this year, or if a new SPLOST should be approved for the next six years.

Early voting started on Feb. 13, and as of 3:30 p.m. today, only 115 of the 22,090 voters in the county have cast a vote. Early voting, which is at the Board of Elections office next to the courthouse, ends at 5 p.m. on March 13.

The county has run a stealth campaign for the tax, apparently with the view that the fewer people vote, the more likely the tax is to pass.

Notes have been hung on the doors of the courthouse urging people to vote, and Board of Commissioners Chairman Melvin Davis has used two of his recent weekly columns in The Oconee Enterprise to promote the tax. The Enterprise also ran required legal advertisements about the election in its Feb. 12, 19 and 26 editions.

The only negative public comments about the tax have come from the September Grand Jury, whose report appeared in the legal advertisement section of the Feb. 26 issue of the Enterprise.

"Much concern was expressed by the members of the Grand Jury about the current use of SPLOST funds," the report said. "It is the strong recommendation of the Grand Jury that SPLOST expenditures should go back to the original concept of collections being spent on the designated, voter approved projects only."

In fact, the county is required to show that it has spent SPLOST funds only for voter approved projects, and it did that as recently as Dec. 18, when it ran a legal advertisement in the Enterprise showing expenditure based on voter approved categories.

Davis, in his Feb. 12 and Feb. 19 columns in the Enterprise, argued that one reason voters should approve the March 17 SPLOST is that people from other counties, rather than Oconee County residents, actually pay much of the tax when the nonresidents shop in Oconee County.

In the Feb. 19 column, Davis reported that "In a drive-thru, unofficial car-tag count at major establishments on Epps Bridge Parkway, we found that 71 percent of the cars were from locations other than Oconee County."

He continued: "A conservative estimate would lead one to believe that approximately 50 percent of our sales and SPLOST tax revenue is paid by individuals who reside outside of Oconee County."

Without details on where and when the "unofficial car-tag count" was conducted, it is hard to know if the estimate that half the tax comes from outside the county is correct. When Oconee citizens make purchases inside the county, they are paying the tax.

In the Feb. 12 column, Davis encouraged "all Oconee County residents to shop and buy locally."

The idea that people from other counties are paying as much as half of the tax collected in Oconee County is not likely to sit well with residents of neighboring counties.

The Georgia Department of Community Affairs reported in late December that Oconee County has the highest average per capita income in the state, at $37,000. Rusty Haygood, Oconee County economic development director, reported at the Feb. 24, Board of Commissioners meeting that in December the county had the lowest unemployment rate in the state at 4.7 percent.

Voters outside the county, of course, will not be voting on Oconee County’s SPLOST on March 17.

The county has done all its planning for the SPLOST with the assumption that over the next six years it will take in $40.4 million. The state would take $400,000 for collecting the tax, and the remaining $40 million has been divvied up among various competing interests.

The Board of Commissioners voted to allocate $4.8 to pay for the debt on the county’s new park on Hog Mountain Road and $6 million for the debt for the county jail and emergency operation center.

The commissioners decided to allocate $6.8 million for water and sewer facilities, $8 million for roads, streets and bridges, $3.9 million for fire stations and equipment, $3.2 million for an emergency communication system, $1.1 million for recreational facilities and historic and scenic facilities, and $500,000 for farmland protection.

In order to run the tax for six years, rather than five, the county had to agree to give $3.2 million to Watkinsville, $1.6 million to Bogart, $668,000 to North High Shoals and $220,000 to Bishop.

The county used the $40.4 million projection from the start of discussions about the SPLOST last fall, before the severity of the economic crisis was so obvious. It never explained where that figure came from, and estimating commercial activity and growth is not a simple task.

Over the last 15 years, annual growth rates for the SPLOST tax revenues averaged 12.9 percent, but there has been a great amount of variability year-to-year, as the county’s commercial base has expanded and as the size of the base of taxes collected the previous year increased.

I’ve created a table to show this growth rate, using tax collections based on the current, 2003 SPLOST collection period of December to November. Reports are two months behind collection, meaning that a February collection, such as the one released today, is actually for December.

In the December 1997 to November 1998 period, for example, the county collected $2,398,493.72, up 41.5 percent from a year earlier. From December of 2006 to November of 2007, the county collected 6.1 percent less than a year earlier.

The county would collect $40,466,485.26 over the six years of a new SPLOST if an annual growth rate of 7.2 percent applied across the six years and the base for growth was $5,250,558, or the amount the county collected from December of 2007 through November of 2008.

Given that the last two years have shown declines, rather than growth in revenue, and that the first three months of the last year of the current SPLOST are down by $266,791 over the same period a year ago, the projection of a 7.2 percent growth rate seems overly optimistic.

The Board of Commissioners has approved two huge commercial projects–one on Epps Bridge Parkway and the other on U.S. 78–but whether they will be producing sufficient revenue in the next six years to make the $40.4 million projection realistic is anyone’s guess.

If voters approve the SPLOST on March 17 and the county collects less than 100 percent of the projected $40.4 million, each project on the allocation list will be cut back by the same percentage.

Given the national debate about the role of tax cuts and spending as solutions to the economic crisis, one might have expected someone to argue that dropping the SPLOST would actually stimulate economic activity in the county. All of the five Oconee County commissioners are Republicans.

Neighboring counties Barrow, Clarke and Walton also have SPLOST taxes in place and are collecting 7 cents on the dollar–or the same amount as is currently collected in Oconee County.

It seems possible to argue that some people from these counties would be more likely to shop or go to a restaurant in Oconee if the tax were lower, and some businesses might find locating in Oconee more attractive as a result.

The county already collects 1 cent on a dollar in a Local Option Sales Tax, which does not require periodic voter approval, and 1 cent on a dollar from a local educational sales tax, which was approved by voters in July of 2006. So intake from these taxes would increase if the economy really were stimulated by a lapse in the SPLOST.

The problem is that this is a theoretical argument, while the SPLOST produces more predictable revenue on which the county has become dependent.

If voters do not approve the SPLOST on March 17, the county would have to find another way to pay off the debt for the park and the new jail.

The Public Utility Department, which likes to label itself self-sustaining but receives SPLOST funds, would have $6.8 million less for water and sewer projects.

The Public Works Department would have $8 million less for roads, streets and bridges, and the Fire Department would have $3.9 million less for fire stations and equipment.

At the Oct. 21, 2008, public meeting on SPLOST, one citizen said none of the proposed SPLOST spending categories struck her as consistent with the ideal of a special purpose tax. They seemed to be pretty routine and should be part of what governments do without a special tax, she said.

Only the farmland protection and historic and scenic protection parts of the discussed projects, in her view, were really what she would call special.

The Grand Jury criticism of the county suggests some members of that body had a similar reaction to the current habits of spending.

A counter argument–and one Commissioners made when they met to allocate the projected SPLOST revenues on Nov. 20, 2008--is that the routine projects will not require the county to spend money to operate a facility once it is built, while a special project, such as a new park, does. SPLOST cannot be used for maintenance and operation.

Voters will have to decide on March 17 if they want to dedicate SPLOST funds for the next six years to mostly routine government expenditures. If they turn down the tax, and the county does not increase other taxes to fund those routine activities, the county will have to do without many road improvements, fire stations, and sewer and water facilities.

If the economy does not improve, and the projected growth in tax revenues is not realized, the county is going to be scrambling to cover the difference between $40 million and the real intake as well.