An independent group of finance and legal professionals reviewing a feasibility study for the proposed City of East Cobb has concluded that it’s not only financially viable, but also could offer enhanced services and reduce property tax rates.
But the five-member Independent Financial Group, which was formed in May, also is recommending a future East Cobb city government not provide police services from the beginning, should a city be created.
That’s because the review group says determining the actual revenues for an East Cobb city police force wouldn’t be known until a city government would work out a revenue-shifting agreement with Cobb County.
The feasibility study, commissioned last fall by the Committee for Cityhood in East Cobb and conducted by the Georgia State University Center for State and Local Finance (read it here), “lacks sufficient funding for police protection and does not assume an equitable agreement,” according to the IFG, which is releasing its findings to the public.
A summary of the key findings of the financial review group can be found here; the full 15-page report can be found here.
The GSU study estimated a City of East Cobb annual budget of around $49 million, with police expenses costing $13.2 million. It based those figures on a property tax rate of 2.96 mills, and cityhood leaders have said a city can operate without higher taxes than what East Cobb taxpayers are currently paying.
Police is one of the three services the East Cobb cityhood group is proposing to provide (cities must provide at least three), along with fire and community development, which includes zoning.
The cityhood group is proposing to carve out most of unincorporated Cobb Commission District 2 for a City of East Cobb, with nearly 96,000 residents, for what advocates maintain would be “more local control” of government services.
Legislation introduced by State Rep. Matt Dollar, an East Cobb Republican, must pass next year calling for a referendum in November 2020. If a city is approved, elections for mayor and city council would take place at the start of a transition period from 2021-22. That would include the transfer of county-provided services before the City of East Cobb’s first full budget in 2023.
Related stories
- Independent group scrutinizing East Cobb city feasibility study
- Comparing City of East Cobb finances to nearby cities
- Grassroots citizens group forms to oppose East Cobb Cityhood
Instead of police, the financial review group is recommending that a City of East Cobb offer solid waste disposal services.
“It’s an easy service to provide that’s revenue-neutral,” said Ken Pollock, a member of the financial review group, who joined three other members for an interview with East Cobb News Wednesday.
Pollock is a public finance attorney at Butler Snow LLP, an Atlanta law firm. Bill Green is a retired finance executive with Open Solutions, a cloud computing company. Russ Morrisett is a retired corporate finance executive with United Parcel Service. Both have MBAs. Bill Dennis is a financial analyst with a master’s degree in economics.
They all live in the proposed City of East Cobb, as does the fifth member of the group, Shailesh Bettadapur, vice president and treasurer for Mohawk Industries, who also holds an MBA. Bettadapur was the only vote against the review group’s findings, according to Green. He said Bettadapur, who did not attend Wednesday’s meeting with East Cobb News, resigned from the group on Monday.
Green said he and Morrisett have known each other as long-time neighbors in the East Hampton subdivision, but otherwise the review group members didn’t know each other beforehand. Nor were they vetted by the cityhood group.
Green said he was a cityhood skeptic, then attended an April town meeting at Walton High School (ECN coverage here) and volunteered to serve on the financial review group.
The four financial review group members East Cobb News spoke with on Wednesday all said they are neutral on the subject of cityhood.
They said their work was limited only to an analysis of the GSU financial feasibility study—which they said has some flaws—and that they were completely independent of the cityhood group.
“We’re not saying yes or no on cityhood,” said Green, who added that he’s reached out to Bill Simon of the East Cobb Alliance, which opposes cityhood.
To budget for police, or not
The review group hasn’t yet put together what Green calls a “strawman” budget proposal because it’s still seeking financial data from the county, in particular for public safety services.
In what it calls its “near-term most likely” scenario, the review group has outlined a $40.3 million annual budget without police. Property taxes would provide $24.9 million in revenues. The biggest expenses would be administrative ($12.2 million) and fire ($9.9 million).
First-year expenditures under this scenario would be $28.6 million, with a surplus of $11.6 million. Recurring expenditures would cost $27.9 million and the recurring surplus would be $12.4 million.
Those revenues do not include new franchise fees, which were factored into the GSU feasibility study at $6.1 million a year. Franchise fees are imposed by cities for such services as utilities, so current East Cobb residents don’t pay them. But they do pay franchise fees assessed on cable television bills.
“We’re tossing them out because we don’t think they’re needed,” Green said.
In addition, “many citizens of East Cobb are unlikely to accept any new taxes or fees, unless the property tax millage rate were reduced to offset the new franchise fees,” the review group wrote in its report.
The IFG’s “intended scenario” budget with police, fire and community development would have $50.8 million in revenues and $46.8 million in expenses. The police line-item is the same $13.2 million that’s in the GSU study. It also would have $11.4 million in intergovernmental revenues, including an agreement with Cobb over shifting police services to a new city.
The state Service Delivery Strategy Act of 1997 (also known as SDS and HB 489) spells out intergovernmental agreements between cities and counties. The Cobb Six Cities Memorandum of Understanding, or MOU, has existed since 1999.
The East Cobb city review group is recommending that before providing police services, a new city government should push to renegotiate the current 10-year MOU (which ends in 2024) for what it sees as double taxation. The MOU allows for cities to draw a share of funds from counties for services, based on a city’s share of the combined municipal tax digest.
The Cobb MOU allocated $4.85 million total among the six cities in 2017, and $5.45 million is expected by 2023, according to the GSU study.
An East Cobb city would get around $2.5 million, or 50 percent of that amount, since half the tax digest value of what would be seven cities would be in East Cobb.
But the bigger issue is what the East Cobb review group has found to be double taxation by the county for police services in cities not patrolled by Cobb Police.
Every property owner in Cobb was levied a county general fund tax rate of 6.76 mills in 2017. The review group found that in spite of provisions of HB 489, taxpayers in Cobb’s cities are actually paying 8.46 mills, the current general fund millage rate, under the MOU, the same as unincorporated Cobb.
Green called that “a red flag,” and the review group report goes deeper on the subject by saying that “in return, these cities appear to have accepted insufficient intergovernmental transfers from the County.”
Furthermore, the East Cobb cityhood’s lawyer “has commented that the cities should be prepared to litigate aggressively, if necessary, to force County compliance with the SDS Act’s spirit and letter.”
The IFG calculated that East Cobb taxpayers generate $10.5 million a year in general fund revenues for county police operations alone, a figure that “is expected to grow.”
The GSU feasibility study also has determined that $7.8 million of a projected $8.6 million in start-up costs would be for equipping and training a 142-officer police force.
The IFG is suggesting instead a 90-officer force “until further detailed budgeting is complete.”
Surplus, taxes, services and more
Without police costs to start, the review group believes a City of East Cobb would be able to keep a healthy surplus to improve services, if it chooses to spend some of that money, or possibly reduce the current millage rate.
The Cobb Fire Department, Green said, is “world-class. Our opinion is that we would want to replicate what we’re getting now and enhance it.”
According to the proposed city map, the City of East Cobb would have five fire stations. If those boundaries expand, as some with the cityhood committee have been suggesting, another fire station could be added.
The review group says “a meaningful tax cut is possible because county taxes currently generated from East Cobb taxpayers . . . far exceed the expenditures made by the County for services benefitting East Cobb,” the review report states.
“The opportunity to mitigate this current imbalance is what makes a future City of East Cobb compelling from a purely financial standpoint.”
At the end of it all, Green said, “we [the review group] don’t make that decision. It’s a political decision, the voters who elect a city council, will make that decision.”
East Cobb News will follow up this post with reaction from pro- and anti-cityhood forces and will examine more details of the review group’s report.
Cityhood committee member Rob Eble told East Cobb News recently there are plans for a town hall meeting in October, but a date hasn’t been scheduled.
East Cobb News Cityhood page
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