The House Blue-Ribbon Study Committee on Local Government Taxation, Funding and Budgeting heard testimony from GMA and ACCG on Wednesday, October 28, on the potential impact of a recent court decision on fire fees and a proposed tool to decrease financing costs.
Questions Remain on Fire Fee Court Ruling
The focus of the study committee has been on how to reduce property taxes and encourage cities to rely more on other revenue options. While fees are an option used by cities and counties, recent lawsuits have taken aim at those in certain circumstances. An overview of how the courts have been addressing this issue was presented as the committee considers legislation in 2027.
Currently there are about 18 lawsuits across the state that argue that fire and EMS fees are really taxes. And if they are, according to the various plaintiffs, the Georgia Constitution requires them to be based on property values.
Lumpkin County Manager Alan Ours provided the example of his county which wants to fund its fire and EMS service partly through a fee as opposed to property taxes. One reason the county would like to use a fire fee is because the University of North Georgia and nonprofits generate over eight percent of all calls but don’t pay any property taxes that fund those services. The county has not proceeded with implementing a fire fee because of current litigation on this issue. Ours indicated that the county commission would cut the millage rate for property owners dollar for dollar if a fee is authorized and adopted.
Viviane Ernstes, Deputy General Counsel for ACCG, told the study committee that the Georgia Supreme Court’s decision in Chatham County v. Smith is not final as the county has asked it to reconsider. Also, the case did not strike down fire or EMS fees statewide, nor did the court rule on the constitutionality of fees. Its ruling was based on the Service Delivery Strategy Act. Because the court did not resolve the constitutional question, there is a question of whether a fix to the issue can be addressed by general law or if a constitutional amendment would be required.
“Cities and counties want a sure thing,” Ernstes said. Any legislation would need guardrails to protect taxpayers while preserving local control in funding needed local services.
How to Lower Financing Costs
Rep. Victor Anderson plans to reintroduce legislation next year that would lower the cost of paying for fire trucks, police cars, sanitation trucks, and school buses. GMA Deputy Executive Director Jim Thornton outlined how the legislation would help.
Thornton discussed how expensive rolling stock is, specifically pointing out that a fire truck can cost $1.2 million. Because a fire truck lasts up to 15 years or longer, those costs are often spread out over time. They cost too much to be paid for in one year’s budget and are too small to be financed through bonds where the cost of issuance would wipe out any savings. “You can bond a $25 million wastewater treatment plant,” Thornton said. “You can’t bond a $1.2 million fire truck.”
Most cities and counties in Georgia use annual direct lease programs to fund those purchases. Because a 15-year lease is really a one-year lease renewed 14 times, lenders charge a premium since a future council or commission could decide not to renew the lease.
Rep. Anderson’s legislation would create a state authority that would allow cities, counties, and school boards to pool their purchases into a single bond issue backed by an intergovernmental agreement that would run longer than a year, thereby providing security to lenders and lowering costs. GMA estimates that it could save between 50 to 100 basis points on the financing. For example, at 3% for a bond vs. 4% for a lease, a $24 million bond issue for vehicles would save over $2 million over the life of the bond.
The study committee is still collecting recommendations and will publish its findings later this year.