A study of the proposed city of LaVista Hills’ finances relied on unrealistic tax estimates that overstated its viability, according to a researcher’s analysis.
The legislation authorizing LaVista Hills capped its property tax rates below the level used by the University of Georgia’s Carl Vinson Institute of Government to conclude that it was financially solid. Lower-than-expected tax revenue could constrain the new government’s ability to offer services.
The analysis by Russell Carleton, a researcher who lives in the LaVista Hills area and opposes the cityhood proposal, showed that the city would have had a projected deficit of about $114,000 under its maximum tax rate in 2014, a steep drop from the $1.7 million surplus estimated by UGA.
The UGA study was commissioned for $15,000 by supporters of LaVista Hills as the cityhood proposal was advancing through Georgia’s legislative process. Voters will decide whether to form the cities of LaVista Hills and Tucker during a Nov. 3 referendum.
“If you take the time to look up the numbers, it doesn’t pan out that well,” Carleton told The Atlanta Journal-Constitution last week. “The reason the state requires this (study) is that if in the event a city goes insolvent, the state has to back them up. It’s kind of uncharted territory.”
Cityhood proponents said they remain confident that LaVista Hills, which would include about 67,000 residents, is financially feasible.
“A city will be able to provide services at a much less expensive rate than the county does currently,” said Mary Kay Woodworth, a member of the LaVista Hills Alliance. “That makes a huge difference to the bottom line.”
The UGA study provided a conservative estimate of LaVista Hills’ finances, and it’s no substitute for real-life budgeting decisions that elected officials would have to make, said Kevin Levitas, a supporter of the potential city.
“My hope is that if LaVista Hills passes, the city council will do whatever it can to come up with the most efficient ways to provide services and do it in a cost-effective manner,” he said. “One of the big drivers of cityhood movements is allowing people a voice in how their tax money is being spent.”
But Carleton, who has taught university-level research methods and statistics, said he doesn’t think UGA’s numbers add up. The university’s evaluation of LaVista Hills, which was completed in May, didn’t account for its proposed tax structure as contained in the bill that passed the Legislature on April 2 and was signed by Gov. Nathan Deal on May 12.
The university conducts financial studies for proposed cities based on known factors such as predetermined boundaries and existing revenue sources, said Shannon Ferguson, a spokeswoman for the UGA Carl Vinson Institute. At the time of LaVista Hills’ study, its legislation — including limits on property tax rates — hadn’t yet been signed into law.
“Unknown factors would be similar to trying to hit a moving target,” Ferguson said. “The institute’s study accurately reflects what we analyzed at the time the LaVista Hills study was completed for the client.”
Reducing LaVista Hills’ expenses to match its income wouldn’t be an easy task for city’s future leaders, said Joel Gottlieb, a former DeKalb County finance director.
“It would be very concerning if there’s a negative cash flow,” he said. “Of course they could adjust their expenses, but they have certain services that have to be provided like police, general government operations, the city council and the mayor that are required that they can’t reduce.”
Sen. Elena Parent, the chairwoman of a Senate task force evaluating the state’s cityhood approval process, said she will ask UGA and Georgia State University, which studied Tucker’s feasibility, about how their analysis can be improved.
“They give a rough outline. I don’t think their usefulness should be overstated,” said Parent, D-Atlanta.
Unlike LaVista Hills, the Tucker feasibility study’s assumptions remained valid after its legislation passed. Georgia State University researchers assumed a lower property tax rate than the maximum approved by state lawmakers, and they concluded that Tucker’s estimated revenue would exceed expenditures by nearly $800,000.
LaVista Hills is envisioned as a full-service city with police and many other services. Tucker would have a more limited government without a municipal police force, and it would provide basic services of planning and zoning, code enforcement, and parks and recreation.
The outlook for LaVista Hills’ finances improved this year, though it’s unclear by how much, Carleton said.
UGA’s evaluation used 2014 data, and rising property values in 2015 led to higher tax collections across Metro Atlanta this year, including in the LaVista Hills area.
Behind the numbers
A study by the University of Georgia Carl Vinson Institute concluded that the proposed city of LaVista Hills would be financially feasible based on the assumption it would charge residents a 7.64 millage rate on their property taxes. That rate represents how much DeKalb County billed in 2014 for police, parks and roads in the area.
If voters choose to incorporate LaVista Hills in a Nov. 3 referendum, their new city would take over those services but its maximum property rate would be set at 5 mills, according to the city’s legislation, House Bill 520.
The UGA study said LaVista Hills would have an estimated $1.7 million surplus when projected expenses are subtracted from revenue.
But if the study had anticipated LaVista Hills’ property tax rate at 5 mills, the proposed city would have had a $114,000 deficit, according to calculations by Russell Carleton, a researcher and area resident.
A spreadsheet breaking down the figures may be found online at http://on-ajc.com/1KaKUMH