HOST OVERVIEW. 05 Oct 2012 (17 pages) Cherokee County where metro meets the mountains

Transcription

1 HOST OVERVIEW On the November 6, 2012 Ballot, Cherokee County voters will be asked to consider a HOST, an additional penny sales tax, which will be used to reduce property taxes 05 Oct 2012 (17 pages)

2 OVERVIEW WHAT IS IT? Homestead Option Sales Tax an additional 1% sales tax to be used to reduce property taxes It would increase sales tax in from 6% to 7% Then, the proceeds from the additional 1% would be used to reduce General M&O property taxes for homeowners in their primary residence up to 5 acres (per state law) By law, 80% of the sales taxes would be required to reduce homeowner property taxes s Board of Commissioners adopted a resolution to require 100% of these sales taxes to reduce homeowner property taxes (2) Sales tax is paid by everyone making purchases in Property tax is only paid by the owners of property in Therefore this option would reduce the burden on property owners and spread the cost of government services among all purchasers living in/visiting 2

3 FULL DISCLOSURE POINTS WHO QUALIFIES FOR THE CREDIT ON THEIR PROPERTY TAX BILL? Per state law, the credit is first required to primary residences up to five acres with an active homestead exemption on file. Example: Primary residences larger than 5 acres will receive full credit on first five acres if an active homestead exemption is on file. If more sales tax is collected than attributable to homestead properties, the excess credit will be spread pro rata to all other property owners in the county. HOW LONG WILL THE RESOLUTION TO USE 100% OF SALES TAXES TO REDUCE PROPERTY TAXES BE EFFECTIVE? All members of the current Board of Commissioners approved the resolution to use 100% of sales tax proceeds to reduce property taxes. However, the current Board cannot encumber future boards. However, if a future board wished to reduce the credit from 100%, it would require a new resolution which would be made public to residents and require approval by 3 of 5 board members. 3

4 WHY HAVE A HOST? It is believed this is more fair because: it requires everyone making purchases in a County. who are all receiving the benefits of county services to contribute to the cost.and not burden property owners with the total cost 156 of Georgia s 159 counties have a local sales tax in place which levels the cost of governments across all buyers in a county, not just the property owners 4

5 Only property owners pay property tax Residents who rent do not pay property taxes In counties with a local sales tax, everyone who makes a purchase in a county contributes to the cost of government operations Current value of 1% sales tax is ~ $30 Million per year The new outlet center to open in mid 2013 will add more than $1 Million annually Elimination of auto sales tax will lower receipts 5

6 HOW WILL IT IMPACT THE AVERAGE HOMEOWNER? The average home value is ~ $160k. Here is an actual example: General M&O $ Fire Fund $ Parks Bond $ School $1, State $ Total Tax $1, HOST Credit ($ ) Final Bill $1, If sales within the county continue at current levels, this portion will be eliminated from the homeowner s tax bill But that homeowner will still contribute (with all other buyers) through the sales tax 6

7 HOW WILL IT IMPACT THE AVERAGE SENIOR HOMEOWNER? The average home value is ~ $160k. Here is an example of the senior impact: General M&O $ Fire Fund $ Parks Bond $ School $ 0.00 State $ Total Tax $ HOST Credit ($ ) Final Senior Bill $ If sales within the county continue at current levels, this portion will be eliminated from the homeowner s tax bill Seniors with an active senior exemption on file already do not pay School Tax The increase in the retirement income exclusion from state income taxes will also benefit some seniors 7

8 SO ARE HOMEOWNERS JUST TRADING ONE TAX FOR ANOTHER? Because more people will be contributing (non property owners and visitors to the county), the amount paid per homeowner should be less. Homeowners could track their spending and estimate their impact. A real example of the impact on a homeowner is shown to the right. COUNTY M&O TAXES PAID UNDER PROPERTY TAX METHOD FMV of Home $155, Assessed Value $62, Homeowners Exemption $5, Taxable Value of Home $57, Millage Rate for County M&O Property Tax Paid for County M&O $ Note: Property Taxes are deductible for income tax ESTIMATE OF SALES TAXES PAID Avg Monthly Amount Spent in Cherokee $1, Estimated Annual Cherokee Purchases $23, % Sales Tax on Cherokee Purchases 1% Estimated Sales Taxes Paid $ Note: Sales Taxes are not deductible for income tax Estimated Savings in Property Taxes $95.12 Savings Adjusted for Estimated Income Tax Impact $45.21 Note: The savings and income tax impact will vary by individual depending on personal spending, tax bracket, and whether an individual itemizes deductions. The example shown is simply one example to demonstrate the math/impact. Everyone is encouraged to evaluate their own situation to assess the impact. 8

9 IS THIS GIVING THE COUNTY GOVERNMENT MORE TAX DOLLARS? No. It is dollar neutral for the government. Instead of collecting ~ $35M from property taxes, it is estimated would collect: $30M from sales taxes $5M from property taxes Still $35M in Total The County does benefit from: diversified revenue sources, and cashflow improves since sales tax is received each month, rather than major property taxes receipts in December January $40 $30 $20 $10 $0 $35M $35M With HOST Sales Tax Property Taxes Only Property Tax 9

10 Option1 : Continue with General M&O Taxes Only Paid By Property Owners $16.8M + $3.6M M = $35.0 Million Total Option 2: Implement a HOST Tax to Spread Costs Among Everyone Benefitting from General County Services $0 M + $1M + $4M + $30M = $35.0 Million Purchasers Total Primary Residences < 5 Acres * Other Residential Other Real Property & Businesses * The HOST Credit will first be applied to Primary Residences up to 5 acres. If sales taxes are adequate other properties will then benefit. Option 2 is based on current sales tax collections. 10

11 TIMELINE IF APPROVED? If approved on November 6, 2012 Ballot the new 1% sales tax would be effective April 1, 2013 House Bill 108 instructs the County to calculate a full calendar year s collections to compute the credit Therefore according to state law, homeowners would see a HOST Credit on their property tax bill due 12/20/2015 However, on September 18, 2012, the Board of Commissioners adopted a resolution to credit 2013 and 2014 tax bills for the amount of HOST tax collected prior to setting the millage rate in July This ensures property owners receive the benefit of all HOST collections beginning in the year implemented 11

12 2013 IMPACT TO TAX BILL Assumptions: Estimated HOST tax receipts before 2013 millage rate set in July 2013: $5M Calculation based on current tax digest values/mix $35 Million Rounded Estimate of Property Tax Levy $5M HOST Collections = 14% Credit on Every Real $35M Tax Levy Property Owner s 2013 Tax Bill For County Portion (M&O) of Bill Average Homeowner M&O Bill = $ Credit on Tax Bill = ($46.48) $ x 14% = $46.48 Net Tax to be Paid = $ * Until 2015, the County must pass the credit to all real property owners 12

13 2014 IMPACT TO TAX BILL Assumptions: Estimated HOST tax receipts before millage rate set July 2014: $30M Calculation based on current tax digest values/mix $35 Million Rounded Estimate of Property Tax Levy $30M HOST Collections = 86% Credit on Every Real $35M Tax Levy Property Owner s 2014 Tax Bill For County Portion (M&O) of Bill Average Homeowner M&O Bill = $ Credit on Tax Bill = ($286.14) $ x 86% = $ Net Tax to be Paid = $46.58 * Until 2015, the County must pass the credit to all real property owners 13

14 2015 IMPACT TO TAX BILL Primary Residences Up to 5 Acres with Homestead Exemptions Assumptions: Estimated HOST tax receipts for calendar year 2014: $30M Calculation based on current tax digest values/mix $35 Million Rounded Estimate of Property Tax Levy $16.8M Rounded Estimate of Property Tax Levy on Resid/Homestead $30M HOST Collections $16.8M to be Used to Eliminate County Portion of Tax Bill on Residential Properties with Homestead Exemption First Remaining $13.2M to be Credited to Other Real Properties Average Homeowner Bill = $ Credit on Tax Bill = ($332.72) Net Tax to be Paid = $0 Beginning in 2015, the Residential Homestead Properties Receive Full Credit First, Any Remaining Credit is Passed to Other Real Property Owners 14

15 2015 IMPACT TO TAX BILL All Other Real Properties Assumptions: Remaining $13.2M to be Credited to Other Real Properties $13.2M Remaining HOST Collections = $18.2M Remaining Tax Levy 73% Credit on All Other Real Property Owners 2015 Tax Bill For County Portion (M&O) of Bill Example Of Other Property Owner M&O Bill = $2, Credit on Tax Bill = ($1,440.00) $2, x 73% = $1, Net Tax to be Paid = $ Beginning in 2015, the Residential Homestead Properties Receive Full Credit First, Any Remaining Credit is Passed to Other Real Property Owners 15

16 EXPLANATION OF COUNTY GENERAL M&O The average homeowner in a $160k home has the following property tax bill: General M&O $ Fire Fund $ Parks Bond $ School $1, State $ Total Tax $1, This tax supports the following County Services: Law Enforcement County Jail County Courthouse Operations Tax Assessor/Tax Commissioner Voter Registrations/Elections Administration/Property Mgmt And also partial support funding to: Libraries Senior Services Parks & Recreation Transportation/Bus Services Ambulance Services Animal Shelter 16

17 THE HOST BALLOT QUESTIONS: NOTICE TO ELECTORS: Unless BOTH the homestead exemption AND the sales and use tax are approved, then neither the exemption nor the sales and use tax shall become effective. Question 1 asks to approve the additional 1 cent ( ) YES Shall a retail homestead option sales and use tax of 1 percent be levied within the special district within for the purposes of funding capital outlay projects and of funding services to ( ) NO replace revenue lost to an additional homestead exemption of up to 100 percent of the assessed value of homesteads from county taxes for county purposes? ( ) YES Shall the Act be approved which provides a homestead exemption from ad valorem taxes for county purposes of up to 100 percent as determined from the proceeds generated from the collection of a retail homestead option sales and use tax for residents of?" ( ) NO Question 2 asks to approve the additional homestead exemption 17