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Tax changes bring Gainesville short-term gain

POSTED: November 14, 2013 11:39 p.m.

Gainesville will have extra money in its fiscal year 2014 budget, but revenues and expenses are likely to be a wash in 2015. 

Because of some changes in tax revenue, the city projects to have more than $200,000 extra come into the coffers, even though it will collect less in local option sales taxes because of a new distribution agreement. 

LOST is a 1 percent levy that must initially be approved by voters. Every 10 years, county and city governments where the tax has been approved must agree on a formula for distribution of the revenues it generates. The fiscal year runs from July 1 to June 30.

The budget changes were Administrative Services Director Melody Marlowe’s message to the Gainesville City Council at its Thursday work session. 

The city is evaluating the budget now that it’s halfway through the fiscal year and some major questions such as LOST and special purpose local option sales tax distributions have been answered. SPLOST is a 1 percent tax that funds specific projects approved by voters.

Changes to taxes that come into the city’s general fund include replacing the vehicle sales tax with a title tax, a new LOST agreement and a new energy excise tax. 

“It’s a combination of a lot of things resulting from our LOST negotiations, or the renegotiations on the distribution, as well (as) the House Bill 386 that allowed us to start a couple of new taxes, the energy excise tax and the (Motor Vehicle Title Ad Valorem Tax),” Marlowe said. 

“So even though we’ve lost somewhere in the neighborhood of $600,000 a year — (the) decrease in our sales collection — we are more than offsetting that through the collection of these new taxes.”

The city used $2.2 million that has been held in reserve in its 2014 budget. The additional revenue means Gainesville needs only $1.95 million of its fund balance to support the budget. A fund balance is the money left over after all the bills are paid.

LOST negotiations left the city budget somewhat up in the air as Gainesville fought with Hall County and its cities and eventually went to court-mandated “baseball arbitration” over how to split the money. 

The cities had to act fast after the Georgia Supreme Court struck down the arbitration process, leaving future LOST revenue in limbo. The General Assembly approved the court arbitration in 2010. 

Gainesville’s share took a hit, falling to 17.38 percent from 19.87 percent.

However, it’s seeing strong returns on the vehicle title tax, which took effect in March. The city is expecting slightly more than $1 million in title tax revenue.

“We really didn’t know what to expect,” Marlowe said. “But it’s been a healthy gain on the budget.”

The “birthday tax” on motor vehicles went away for vehicles bought on or after March 1, and a one-time fee of 6.5 percent when the car is titled was put in its place. The tax also applies to private sales between individuals as well as new residents to Georgia.

Owners of vehicles bought before March 1 can decide to keep paying the annual birthday tax. Residents who titled a car in the state between Jan. 1, 2012, and March 1 can opt into the new fee program until Feb. 28, 2014.

The city has also added an excise tax to replace sales tax lost from a state-approved exemption on energy used in agricultural production and manufacturing. The 2012 legislation allows local governments to add an excise tax to recover the local portion of that.

Marlowe said because of the drop in what Gainesville will get in future LOST revenue, the budget for 2015 is expected to break even.

“The reason we have a little gain in (20)14 is some of these changes weren’t implemented until midyear,” she said.


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