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Editor's Note: Taxes, fees, and SPLOST

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THE FIRE FEE went out not in a blaze of glory, but with a whimper. Thankfully.

After months of getting raked over the coals by a vast and nearly unanimous cross-section of Savannah society, City Council opted for the wisest path forward, both practically and politically, when they voted last week to repeal the Fire Fee and simply raise property taxes.

I’ve noticed there is still some confusion out there about what happened, whether the Fire Fee will remain in any form, and about how taxes work in Savannah.

For starters, there’s this:

• The Fire Fee is going away completely. As in, no Fire Fee for anybody.

• City property taxes are going up by a bit less than one mill, about 7 and a half percent.

Rather than following through on Mayor DeLoach’s threat a couple weeks ago to lay off five percent of City workers (!), City Manager Rob Hernandez laid out a matrix of possible tax hikes, with their respective trade-offs.

In the end, Council went with the second-highest increase presented, one which will leave a hole of “only” about $3 million in the budget, with no draws from reserve funds.

After all that controversy and rancor, a fairly small tax increase will solve much of the problem.

Or will it?

The huge number of new arrivals moving to Savannah has become quite notable, both in everyday life and in impact on local political life.

Often, I’ve noticed, our new neighbors need to be kept up to speed on the ins and outs of local politics.

So here is a little civics lesson, which you can treat either as new information or as a refresher:

It is absolutely true when DeLoach, Hernandez, and Council tell the public that the City has been exceptionally diligent in keeping property tax rates low.

Indeed, this is the first City property tax increase in decades — an accomplishment to be proud of.

The School Board, for example, also raised taxes last week, just a day before the City’s tax hike. But the schools raise their taxes much more regularly than the City does.

And last week’s school tax hike was not only double the increase of the City’s, but because the schools levy a far greater percentage of local property taxes than any other body — over half of the typical property tax bill — the impact of their tax hike will be much more keenly felt.

Adding to this impact is the fact that public school taxes aren’t subject to the Stephens-Day Homestead Exemption, passed in 2001.

But property taxes are just one part of how local government funds projects and operations.

(And as City Council says they just found out while discussing the Fire Fee, about a third of local property owners pay zero or near zero in City property tax!)

The simple truth is that local government has become so big that there is no way they can fund operations solely through property taxes, especially in the wake of the Stephens-Day exemption.

Big-ticket capital projects in Savannah are generally funded separately, either through SPLOST (Special Purpose Local Option Sales Tax) or bond issues (such as the bonds underwriting two new parking garages at $50 million apiece, one set for the east end of downtown and the other on the west end of River Street.).

Simply put, the City’s diligence in keeping property taxes low is more than offset by its heavy reliance on SPLOST and bond issues.

SPLOST funding is especially convenient for politicians. Because that sales tax is passed by referendum in six-year increments, local politicians can always use the excuse, “well, the public voted for it” if a SPLOST project is criticized for going over budget or being poorly designed, or both.

While laudable, the City’s relative fiscal prudence with property taxes is a fig leaf of sorts, to cover what many see as an addiction to SPLOST funds.

(The School Board has its own sales tax addiction in the form of the ESPLOST, also voted in by public referendum.)

And say what you will about the Fire Fee, but it at least would have provided for year-to-year operating expenses.

By law, SPLOST funds can only be used for capital construction, i.e. new buildings and infrastructure.

So if you build something with SPLOST funds — say, a new arena or cultural arts center, to use two high-profile local examples — you still have to come up with money for operating expenses.

This is the shiny but empty promise of SPLOST: It’s a nearly “free” way to get new stuff — since supposedly tourists shoulder about half the sales tax burden — but the full bill comes due later, when you have to actually operate that spiffy new building.

SPLOST originally began in the ‘80s as a way to fund key infrastructure items, such as roads and drainage projects. (Keep in mind that back then the City’s drainage/stormwater system was nowhere near as comprehensive as today’s.)

But as politicians discovered what a huge extra revenue stream SPLOST is — and how they could always “blame” the public for it since the sales tax is passed by referendum — they began using it for other things.

Still big-ticket items, but more recreational and cultural items rather than things you just can’t go without.

Such as a new arena.

Or such as the million-plus dollars in SPLOST funds that each City Council member is granted for their district, with almost no strings attached. (I like to call this “Incumbent Re-election Insurance.”)

So for the time being, the Fire Fee is extinguished. City property taxes are going up a bit.

But there is still an almost insatiable need for more money.

This need builds on itself — for example, in order to self-fund the debt service on those bonds for the new parking garages, parking rates downtown were doubled.

It’s a cycle that’s hard to stop.

The Fire Fee was just another chapter of a long book.

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