Cities Cite Rising Costs to House Study Committee

GMA told lawmakers July 22 that rising costs for police, fire protection, and infrastructure are outpacing city revenue growth. GMA CEO and Executive Director Larry Hanson illustrated the challenge with one example: it costs Newnan about $161,000 a year to put a single police officer on the street, including salary, benefits, equipment and a vehicle.

Hanson made the case to the House Blue-Ribbon Study Committee on Local Government Taxation, Funding and Budgeting, which is examining how local governments are funded in Georgia.

Cities Carry a Large Load

Georgia's 536 cities hold 45% of the state's population and account for 70% of its jobs and 91% of its gross domestic product, all within 8.4% of the state's land area, Hanson told the committee. "That's a pretty strong statement about what cities do," he said.

GMA's most recent five-year capital needs survey found cities need $33 billion between 2025 and 2029, led by $10.3 billion for water and sewer infrastructure and $9.7 billion for transportation.

Cities' revenue comes 27% from property taxes, 26% from sales taxes and 47% from other sources such as franchise fees and business licenses. "Those property taxes are crucial because they're an anchor," Hanson said. "They're predictable. They're a stable piece of that revenue portfolio." Cities receive just 21 cents of every property tax dollar, compared with 46 cents for schools and 33 cents for counties.

Costs Rising Faster Than Revenue

Public safety and public works together make up roughly 60% of city spending, and both are exposed to market forces cities cannot control, Hanson said. He cited the city of Lenox, where a police interceptor cost $56,000 in 2022 and now costs $71,000, a 27% increase. A fire engine that cost $589,000 in 2020 now runs about $1.1 million, and takes two to four years to arrive. In Monroe, water main repair costs are up 209% since 2019.

A GMA survey found 63% of city officials said their city lacks adequate revenue to meet residents' expectations. Hanson said that shortfall drove GMA's requests to the committee.

Flexibility, Liability Relief, Road Funding

Hanson grouped GMA's requests into three areas, arguing that cities need flexibility to provide not only core infrastructure but also the amenities that attract residents and employers. "It can't just be roads and water and sewer," he said.

On flexibility, he asked lawmakers to loosen restrictions on funds like SPLOST and T-SPLOST so they can be used for maintenance and operations of the approved projects, not just capital costs of the projects, and to give legal protection to city fees, such as stormwater and fire fees, now being challenged in court.

Hanson said the Flexible Local Option Sales Tax is helping cities diversify away from property taxes. Thirty-six counties and 131 cities have already implemented FLOST, with 19 more cities and seven counties beginning collections in October. He noted the tax still requires voter approval and failed in four counties last year.

On liability, Hanson said cities face a tort inequity compared with the state and counties. "The state has caps. Counties have a really good deal. Cities have nothing," he said.

And on roads, he noted local governments maintain 82.4% of Georgia's road miles, and asked the committee to raise the share of motor fuel tax revenue directed to local road grants from 10% to 20% over five years. He also asked that LMIG funds be distributed based on lane mileage rather than centerline mileage, since a four-lane highway costs more to maintain than a narrow two-lane road.

Committee members asked Hanson about city-county consolidation, how much property tax revenue comes from homestead properties, and whether rising valuations, rather than tax rates, are driving up what homeowners pay.

Franchise Fees Also Discussed

The committee also heard testimony on municipal franchise fees. About 400 cities have agreements with Georgia Power and electric cooperatives capping fees at 4% of electricity sold inside city limits, generating roughly $260 million statewide, said Jim Thornton, GMA's deputy executive director. These agreements often run decades and have worked well, he said, and GMA sees no reason to change them. Counties cannot levy similar fees on electric service. Thornton said that's a matter for the General Assembly to resolve, and that any efforts to address that issue should ensure cities are not impacted.

The study committee will meet again in August.

Resources

Presentation Slide Deck (PDF)
The Value of Cities
Capital Needs of Georgia's Cities