The City of Decatur sent out this note to press – and me! – this morning…
The City of Decatur’s primary interest during the 2016 Georgia General Assembly session is to support the passage of homestead exemption legislation amending and creating tax relief for our resident homeowners, particularly for seniors. Mayor Patti Garrett said, “Property tax relief for long-time residents who have been a part of our community for many years is our top priority, and we are focused on getting homestead exemption legislation passed this session.”
School Board Chair Annie Caiola said, “Over the past decade there have been significant austerity cuts to the State’s education budget, meaning that local residents have had to pay more and more property taxes in order to maintain the strength of our school system. The increasing property taxes are forcing too many seniors out of our community, and it needs to stop. The City Schools of Decatur School Board strongly supports legislation that will exempt our seniors from ad valorem school taxes.”
Proposed homestead exemption legislation would authorize referendums in November, 2016 and, if approved by the voters, would be effective in 2017.
In the 2015 General Assembly HB 663 was adopted by the Georgia House of Representatives that authorized a referendum to annex areas to the east of the existing city limits of Decatur. “We have new City leadership, a new School Superintendent and new Board of Education leadership,” said Mayor Garrett, “and we need to look at a variety of issues, including annexation, so we will not be pursuing adoption of HB 663 by the Georgia Senate during the 2016 session.”
It is anticipated that the City Commission and the Board of Education will revisit annexation later in 2016 to determine what options should be pursued in the future.
Photos courtesy of City of Decatur and CSD
There was some talk at the last School Board meeting about putting a sunset clause of 3 to 5 years on the tax relief meaning that the exemption would go away after 3-5 years unless, presumably (?), it’s re-upped by the sitting leadership at the time.
I’d like to hear more details about exactly how this would work. Are we just talking about a 3-5 year perk and then done? Who wants to plan their retirement around that? Or, what would be the process of getting it renewed?
Another alternative that seems to be discussed is, after the sunset, go back to some kind of income limit, whereas my understanding of the current proposal is that it’s age related only with no income limit.
I also saw recently that somebody in the legislature proposed a similar thing for DeKalb County, which caused a great cry by the school folks due to the revenue they would lose.
The difference is that Decatur’s proposal originated with the City and CSD, whereas the DeKalb proposal came out of the legislature and essentially blindsided the school folks.
It is foolish not to pursue annexation this year .
+1 – an incredibly backwards move.
Side note: It speaks volumes that this is a shared, COD/CSD cooperative press release.
Why don’t those under 65 pay the school taxes for those 65 and over? Oh, wait, that is what will happen – regardless of income or whether or not there are children in the 65+ household. I will be writing the assembly in opposition to this.
Actually, Mac, keeping older folks here by exempting them from school taxes saves you money. If I, for example, decide to leave the city because of the tax rates, someone with two or three kids will likely buy my house, a dwelling that does not generate enough in school taxes to cover even one child. Even if the house is fixed up and appraises at a higher rate, there is no way the higher taxes would cover the cost of more than one child.
At present, it takes a valuation of about $700K on a dwelling to generate enough tax revenue to pay for one child in the system. So it would take a $2.1M house to pay for three kids. Exempting me from school taxes potentially saves the system a bunch of money. And that does not even take the cost of additional buildings into account.
I know it does not seem logical at first thought, but exempting seniors from school taxes is really a win-win.
I am under 65. Please explain how my taxes would not increase in 2017 should this pass. There will be a huge hole in the budget, who will fill it? Sorry, but it is only a win for the 65+ demographic.
I think the point is that a hole is inevitable but, should seniors leave their homes rather than stay with no school taxes, the hole — under the conditions cited by Bill — would be larger than if seniors stayed.
It is fair to ask, however, how big the hole is going to be if we exempt every single senior from school taxes in one year. Has anyone seen an analysis of just how much money we are talking about? My thoughts may be very different if we are talking about a million versus ten million, for example.
Some maybe-flawed math:
Average home appraised value: $350k
Average home assessed value: $175k
School millage rate: .01866
School tax paid: $3,265
Number of 65+ households required to create a $10M “hole”: 3,062
Number of 65+ households required to create a $1M “hole”: 306
Seems like the “hole” would have to be a lot closer to $1M than $10M.
“Exempting me from school taxes potentially saves the system a bunch of money.”
As it would (under your assumptions) as to any household that does not place kids into CSD, whether it be childless couples or homes sending their kids to private schools. So why should you get a big tax break that they don’t get?
Isn’t it fair to say that the senior has less opportunity for increasing income that other age groups? a tax discount is meant to consider this fixed income. I believe seniors have to budget better than most.
That is true in some cases, but I would not necessarily agree with it on an across-the-board basis. Moreover, what seniors tend to forego in income, they make up on expenses. That is, many have paid off their mortgages, sent the kids off to college long ago, and may have no debt or recurring expenses to speak of. A younger family may expect its income to increase over time, while at the same time bearing the large expense of raising children.
A younger family has great wealth based on future earnings and the fact that banks are willing to lend to them. Seniors don’t have that wealth. And due to the older age at which recent generations have been marrying and having children, not to mention the weak job market for college graduates, many seniors are still paying tuition costs and providing other support to older teens and twenty-somethings!
I’ll bet there’s a correlation between the age of the posters in this thread and the direction of the comments!
“A younger family has great wealth based on future earnings and the fact that banks are willing to lend to them. Seniors don’t have that wealth.”
Money you have not yet made — i.e., future earnings — is not wealth. And debt is the opposite of wealth (i.e., a liability). Hence, that banks may be willing to lend to younger families does not make them wealthier.
Well, if “wealth” isn’t the right word, how about “buying power”? A young family can get a mortgage for a home or a car or a home renovation that a senior cannot.
I don’t want to belittle the financial burdens of either group. There’s just less time and ability for seniors to build wealth or recover from financial setbacks beyond their control, e.g. recession, job loss, medical crisis, family crises etc. But young families can have horrible financial disasters too, e.g. death of a wage earner, medical crises, mental illness, addiction, etc.
You (and others here) are assuming an awful lot of things. In some cases they are probably true, in others, not. At a basic level, I don’t think that age alone is a reliable proxy for financial wherewithal. (Nor is “buying power” a sensible means of deciding who pays what in taxes.)
I am sure it is true that some (not all) seniors lack the cash flow to afford to pay Decatur’s high rate of tax on appreciated assets. If COD wants to therefore exempt all seniors from those high taxes, go right ahead. My point was that this solution is not obviously fair, as there are many reasons why some seniors — who have had a lifetime to save, invest, and pay down debt — might be in an even better position to pay the exorbitant taxes. Moreover, some of the stated reasons for exempting seniors apply with equal force to non-seniors, so why not cut them a deal, too?
Progressive government weaves a tangled web.
2 things – remember tax valuation and market value are two different things. Correct me if I’m wrong, but a house that sells for $700k today has a tax valuation of a percentage less than the $700k sales price.
Secondly – COD has had explosive growth in condos and apartments and added to the numbers of section 8 public housing. Isn’t this figured into the tax base? It seems they have not figured the potential for a huge influx into the Decatur schools. In other words, the school construction underway will be way under what is needed. For example, in the new public housing called Trinity Walk, they are adding 27 more units than were in the old development. If each of those houses even 2 children adding say 54 kids, there will be 2 full classrooms of additional children in CSD. Where does the tax money come from to cover those kids? I have neighbor’s with 5 kids in CSD and they pay less school tax than I do as a single, childless homeowner nearing 60.
I do not mind “contributing” to the education of all children, but I am not the one creating the demand for more classroom space. It is rather cavalier to keep building and creating demand on our small city resources and just assume the needs will be met by raising taxes. Maybe it’s time to go to a Pay Per Child process.
The county tax appraisals are meant to reflect market values, even though they often lag the market a bit. If you appeal, the county appraiser will bring comparable sales from the past year to justify their numbers. If a county appraiser sets the value of home that sold for $700k at $700k, they’d certainly be within their right to do so. I want to say there is a provision that the appraised value can’t EXCEED the sales price for a year, but there is nothing mandating it must be lower. There wouldn’t be much point in artificially lowering appraised values across the board by some fixed percentage for everyone. You could just change the millage rate or assessed values (50% of apprasied in Decatur) if you wanted to do that.
I can understand this from having an income limit standpoint, but it isn’t fair to the rest of the residents if you have seniors that still have a large income/retirement income/business income that will get this exemption while others that may be struggling to barely afford being in this school district are having to pay this tax.
Instead of an income limit it would be much easier to implement and enforce an exclusion of the first 250k of assessed value (so first 500k of appraised value) from school taxes. This way you don’t have to collect income information from residents and those who can afford to live in houses appraised >600k can pay school taxes on the excess value of their property.
Agreed. The proposal, as advertised so far, is vastly overbroad. If the stated purpose is to keep older long time residents from having to move out of their homes because they can’t afford school taxes, then the exemption should be crafted to exclude wealthy seniors who are not being forced out of their homes and seniors who are not long time residents. Otherwise, this looks like an unsustainable boon to those who currently fall within the parameters. I have no expectation that this tax break will still exist when I turn 65.
This will not work as you wish, unfortunately. ‘Home value’ is the not the same thing as ‘cashflow’. There are seniors in Decatur who bought their homes for $50,000 twenty years ago sitting on appraisals of $800,000 now. Their income has not remotely kept up with the increase in property tax on their home. Even at the exemption levels you describe you will have long-term residents unable to keep up with their taxes, while simultaneously allowing wealthy recent buyers to opt out of their taxes. What you propose is simpler, yes. But fairer? not as much. The manner in which property taxes work is complex, and ill-suited to simple solutions. Sadly. The likely answer will be some blend of both, if I were to hazard a guess at this point. A true solution, which I do not think GA law allows, would be caps on the valuation increases for homes owned by individuals that meet certain parameters such as age and income. You still pay, but you pay at a rate that matches the growth in your fixed income cost-of-living adjustments.
I think someone with nearly $800K of equity in their home to tap, could probably afford to pay the school tax for a number of years. Of course, if they have already used that equity to afford a nicer lifestyle, then that choice has been made, but they should not expect everyone else to subsidize.
Why do you assume that seniors in this situation have (or should)borrowed money on their equity? Many people aspire to live debt-free.
Aspiration is fine, but may not be realistic given an individual’s current economic situation. I would like to be debt-free, but understand that I will need to carry debt for the foreseeable future to maintain my current lifestyle. There is a big difference between a necessity and a luxury. For most homeowners being debt free should be considered a luxury.
“For most homeowners being debt free should be considered a luxury.”
Are you serious? Why would being debt free be a luxury? For those of us who are debt free, it’s NOT a luxury. We have foregone a lot of TRUE luxuries to be debt free, and worked our butts off to get there. Just because you accept the burden of long-term debt doesn’t mean everyone has to.
I think we may have a different definition of “luxury”. I commend you for foregoing other luxuries to be debt-free. That was an admirable choice your household made. I consider it a luxury to live in Decatur these days, and maintain a moderate lifestyle. I could take the equity in my house and live debt-free is some far out suburb. That is a on-going discussion in our household, but we are staying in Decatur for the time-being.
So maybe what I’m trying to say is being debt-free is not a luxury, but being debt-free and living in Decatur while maintaining a moderate lifestyle is a luxury.
I think you’re forgetting that seniors are at a different stage in the life cycle of debt and earnings. They have hopefully paid off their 20-30 year mortgage. So they are “debt-free” but their incomes are fixed and they still have plenty of monthly debt in the form of monthly bills and taxes. So debt-free is not a luxury at that stage of life for many seniors; it’s almost a necessity. Hence, the reluctance of banks to lend to that age group.
I’m not opposed to this action, but I do have to correct you here. I don’t think banks are reluctant to provide loans to seniors with a high value secured asset (a home).
They have the option to take out a home equity line to pay those taxes to liquidate the equity they have locked in their house, even if they are on a fixed income. So it’s not that they are unable to pay the taxes, its that they are unwilling to explore other options.
Of course this issue is irrelevant to the larger, more important question- how people behave.
We need to understand two things:
– How much tax relief will we give in dollars?
– How many incremental people will not sell their house if they get tax relief?
Per US Census, we have 526 homes with head of household over 65, out of a total of 4,536 “family led homes”. (for reference, we have 1,402 65+ households out of 4,063 “non-family homes”)
What I don’t know is the rate at which these people are choosing to sell. Zillow says Decatur sold 600 homes in the past 12 months – a 13% turnover (wow! more than i thought!) Assuming seniors in dire straights are more willing to sell, I’d guess their turnover is around 20%. So we are looking to reduce the sale of 105 homes per year. Realistically, we can’t assume that taxes would reduce that turnover rate by more than 20%, so we are looking to retain 21 homes that would have been sold.
Using King Tommen’s assumption above, we are discounting 526 homes * $3,256/home = $1.7M in tax reduction per year to avoid adding ~20 homes with additional children. Given each child costs $14.5k and assuming 2 children per new household, we avoid $580k in student expenses per year. Compounding on an annual basis suggests that this tax reduction turns cash flow positive in the 3rd year and pays for itself in the 4th year.
So… its not a slam dunk case, but it’s feasible that this could be economically neutral to the tax base over time.
If you take the city’s claim that it requires the taxes from a $700k home to educate one child in Decatur, the number is more like $6,500. The assessed value ($350k) is 50% of the appraised value ($700k). The millage rate of .01866 for schools gets applied to the assessed value.
It’s hard for me to imagine that a home purchased for $50,000 20 years ago that hasn’t had major improvements to it is now worth $800,000. The homes worth $800,000 in COD right now are either new construction or they are older houses that have had quite a lot of money thrown into them. Our little old house without updates is worth about $325,000. Just saying.
The problem is that someone in a million dollar house who is 65+ would likely move. Yes, the owner of a million dollar home could afford the astonishingly high school tax bill, but why do that rather than moving a few miles away outside the COD? The million dollar house gets sold to a family with several children and the city school system has to make up the difference in cost vs revenue for years to come.
A million dollar home would still get a 50% tax break on the school portion of taxes if 500k of appraised value is exempt from school tax. That’s nothing to sneeze at. This could bring their tax bill in line with what they may pay outside COD and reduce motivation to move.
I think this is a good idea. Simple to implement.
I just want to make sure I am understanding this correctly. Are you saying that only those with houses appraised > 600k should pay school taxes? So the burden of educating all of Decatur’s children falls on a small minority of homeowners?
Not sure who your question is for, but I was endorsing the general idea of exempting the first 250k (though that may be too high) in assessed value for senior citizen tax payers (not everyone). Perhaps I misunderstood the proposal.
Sorry, intended as a question to Robert’s initial comment. I don’t see how it is fair to make families in homes worth > 600k (or even greater than 500k) shoulder the entire burden of the school system.
Everyone (seniors, families with no children, families with children in private schools) benefits from a strong public school system, so I think everyone needs to contribute to its costs. I understand that this can compete with the need to maintain diverse community. Perhaps one solution would be a property tax freeze for seniors? They receive the benefit of a fixed cost, and the school system and community receive the benefit of their contribution. A freeze would also ensure that seniors don’t come to the community simply to avoid property taxes. New residents, regardless of age, would pay property taxes based on the assessed value of their home at the time of purchase (though it remain frozen from that point forward). Too complicated? Maybe not legal?
The general proposition is for all seniors 65+ to be exempt from paying COD school taxes. Many people believe this should be income dependent so the “wealthy” still have to pay. I was simply proposing that instead of looking at income and forcing everyone 65+ to prove their income annually (and thus force an administrator(s) to check these numbers) that instead we provide an exemption of 250k of assessed value. This would be much simpler (cheaper) to administer and enforce. Note that I just chose 250k out of the air as it seemed reasonable to me and the 600k in my original post is actually a typo, it should say 500k.
Got it. I understand.
I don’t know if there is a legal hurdle for this, but I wish the sr. exemption included a past residency requirement, such as 10 or 5 years. That way we know those getting the exemption have contributed to the schools in the past and we are truly helping to preserve their homeownership in COD. It would also prevent retirees from other neighborhoods moving to Decatur just to avoid taxes- or if they do so, they have to invest in the community first. I think the school board is worried about this legislation potentially creating a swing in school population long term (big # srs, less school age families, leaving the schools then overbuilt), so a past residency requirement of a decent number of years would help alleviate this concern as well.
Just thinking through some “unintended consequences” here, which might not really be valid. With more seniors staying put, and fewer houses hitting the market or being smushed for new builds . . . the city is effectively reducing the housing stock available to new buyers, and increasing competition for the homes that do get listed. I’d imagine that would further inflate housing prices, and consequently property assessments. Seems like a “double whammy” for those under the age limit. That might still be better than the “single whammy” of having the seniors skip town, and having more kids in the system. It’d also serve to reduce the socioeconomic diversity of new residents, as even more people would be priced out of the market altogether.
Agreed, however it looks as if the double whammy scenario is going to happen anyway.
There could be some unintended consequences, but people make the decision to sell for many reasons besides tax rates, so I don’t think it would have that much of an effect. People who really want to stay would be more able to do so.
Would definitely keep my husband and myself here longer. We have lived here for 35 years and it has been eight years since we have had a child in the system. Anyone have any idea how many people live in Decatur who are 66 and older? I know we are the only ones on our street. All of our friends left Decatur after their children graduated.
According to the American Community Survey 2014 5 year estimate, there are 2,079 people who are “more than 65 years” old, which is 10.5% of the City of Decatur’s population.
Which likely doesn’t equate to 10.5 % of the housing units, considering couples and Senior apartments.
Same data set: you can find householders by age.
Go.
Thx.
I have the antidote to your anecdote. Our kids went all the way through Decatur schools and are all out. I can’t think of one “school” friend who has sold their house. I expect the truth lies somewhere in between your experience and mine. I do think it will be a very bad thing if Decatur becomes a place people move to for the schools, then bolt as soon as the last one graduates. That is unsustainable
Seems to me that many of the households that are leaving decatur are not-yet-seniors, but the families with kids in college having finished decatur schools. Paying for multiple college tuitions along with high taxes pushes some of us in this group to the breaking point. This proposal looks like a 10 percent increase to school taxes for these guys and will result in even more people in that category moving out of decatur. Conversely, it will attract more seniors in the metro area that are looking for a nice place to retire. Decatur will become even more heavy with these two demographics: families with lots of kids and seniors that don’t pay school taxes. Don’t think this is the intent, but this is what will happen.
Excellent point. I know lots of folks selling their COD home as their last kid leaves DHS. The cost of college mandates that you free up cash from somewhere. Few students are able to get enough scholarships and loans to cover the whole cost. Back in the day, students just took out more government supported student loans; those loans aren’t there anymore. A lot of parents don’t realize that until reality hits.
On the other hand, I know of at least one family that simply downsized and stayed in Decatur.
I have too. Problem is that it’s harder and harder to find those homes to downsize to. To free up cash for college, you need to do a substantial downsize. Unfortunately, the price difference between small older homes without extensive renovations and the limited stock of condos/townhomes (many of which are new and cool but expensive) may not be enough.
it’s nice to see gentrification is finally being addressed.
Let’s consider this from a political tea leaves perspective. The city commission and the school board have two primary sources currently speaking as it relates to taxation. The first is the overwhelming passage of the Bond. This is the general electorate saying “Not only are we willing to meet our present tax obligations, we’re prepared to pay more for the things we need or want.”
On the flip side, they have a well organized and passionate senior constituency — many with very real fears and uncertainties about their future circumstances — who’ve done the hard work of lobbying for relief.
Given that, what we’re seeing now represents responsive action, even as we debate the details of how and for whom. And that’s one of the reasons I’m happy to live here.
A tax break for one group is raising taxes for all others. This extra expense of the tax break will raise school property taxes by at least 10% on other families <65, so you'll have the effect of driving out younger and middle-age families and individuals without kids, thereby reducing diversity.
To exempt seniors from paying school property taxes will cause a "grey wave" as Garrett Goebel pointed out. The "grey wave" will over-correct diversity and Decatur will become dis-proportionately senior. Communities that become dis-proportionately senior have different priorities – schools are not one of them.
I have watched this play out in communities around my hometown (in another state).