2018 Johns Creek Property Tax Millage Rate Analysis

Property Taxes, the Residents and the City of Johns Creek

Prepared by Stephanie Endres 1

POSITION FOR 2018 JOHNS CREEK MILLAGE RATE

WITH RISING CASH BALANCES ANNUALLY, THE CITY OF JOHNS CREEK HAS AMPLE ROOM TO CUT THE MILLAGE RATE BELOW THE ROLLBACK RATE TO 3.0 MILLS ($4.1 MILLION LESS THAN 3.87). THE RESIDENTS CAN USE THIS MONEY TO OFFSET THE FULTON COUNTY TAX INCREASE. THE LOWER THE MILLAGE RATE FOR JOHNS CREEK, THE MORE WE ELIMINATE THE MALFEASANCE OF PROPRTY TAX VALUATIONS AND GROSS INACCURACIES FROM THE FULTON COUNTY TAX ASSESSOR’S OFFICE ON ALL PROPERTIES. NO LAW CAN DO THIS TODAY AS WE VOTE ON THE MILLAGE RATE. HERE IS WHY… 2

CITY OF JOHNS CREEK – NET POSITION (CAFR) Governmental Activities (In thousands) 2017 2016 2015 Assets Current assets Capital assets, net accum depreciation Total Assets

$ $

Liabilities Current liabilities Long-term liabilities Total Liabilities Net position Net investment in capital assets Restricted for capital projects Restricted for law enforcement Restricted for public safety facilities Restricted for trade and tourism Restricted for transporation enhancements Unrestricted Total net position $

Total Assets grew 58%, Total Liabilities grew 777% and as a result, the Net Position increased 22% from 2014 to 2017.

2014

111,615 $ 48,214 $ 70,351 $ 61,371 197,289 170,537 143,084 134,434 308,904 $ 218,751 $ 213,435 $ 195,805

10,373 70,527 80,900

6,244 6,623 12,867

7,703 7,343 15,046

5,131 4,089 9,220

173,456 165,092 137,184 131,881 53 53 524 508 393 264 39 39 39 102 6,719 47,305 40,143 60,720 54,348 228,004 $ 205,884 $ 198,389 $ 186,585

Debt of $70 million represents - $41 M Park Bond paid by Property Taxes (2017), $24 M Note on City Hall acquisition/build out (2017), $4 M for road resurfacing (2008) and $1 M for acquisition of Shakerag Fire Station (2008).

“Unrestricted” represents positive unrestricted net position of $47 million that is available to meet the ongoing obligations of the government.

The City enjoys a healthy balance sheet with adequate reserves to compensate in times of financial need.

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CITY OF JOHNS CHANGES IN NET POSITION (CAFR) Governmental Activities (In thousands) 2017 2016 2015 2014 Revenues Program Revenues: Charges for services $ 5,542 $ 6,156 $ 5,902 $ 5,174 Operating grants and contributions 24 230 83 48 Capital grants and contributions 16,724 1,892 4,909 5,720 General Revenues: Property taxes 21,022 18,070 19,973 18,256 Sales and use taxes 20,968 20,839 20,562 19,732 Hotel/Motel taxes 466 502 490 437 Franchise taxes 4,339 4,357 4,431 4,344 Business taxes 7,015 6,629 6,336 6,048 Unrestricted investment earnings 212 104 77 51 Miscellaneous revenues 2,220 216 145 84 Gain on sale of capital assets 43 Total revenues 78,532 58,995 62,908 59,937 Expenses General government Judicial Public safety Public works Culture and recreation Community development Interest on long-term debt Total expenses Change in net position Net position, beginning of year Net position ,end of year

9,119 631 22,745 17,390 3,211 2,424 893 56,413

8,510 642 21,253 15,341 2,780 2,748 226 51,500

9,883 606 21,490 12,823 3,002 3,178 122 51,104

9,173 571 21,804 8,588 2,736 2,783 149 45,804

22,119 7,495 11,804 14,133 205,885 198,389 186,585 172,452 $ 228,004 $ 205,884 $ 198,389 $ 186,585

City maintains approximately $13 million of “Unrestricted” New Position in the general fund to meet 3 months of expenditures, in accordance with governmental standards.

The remaining “Unrestricted” of $34 million is reserved at the pleasure of the Council, above and beyond the 3 month requirement.

Expense increase worth noting is Public Works that increased 102% since 2014. This is due to increase in capital projects (TSPLOST has not incurred material expenditures through Sept 30, 2017).

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PROPERTY TAX COLLECTIONS & PER RESIDENT ANALYSIS Collected within the Fiscal Year of the Levy Fiscal Period Ended Taxes Levied September for the Fiscal 30, Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Amount

Percentage of Levy

$ 16,142,319 $ 466,654 17,104,875 16,309,021 2,753,052 15,286,779 3,228,341 14,984,738 3,048,566 14,828,030 4,469,702 15,757,405 1,137,915 17,238,724 1,949,940 16,820,317 663,689 17,300,319 -

2.9% 16.9% 21.1% 20.3% 30.1% 7.2% 11.3% 3.9% -

Total Collections to Date

Collections in Subsequent Years 15,661,434 17,087,090 13,537,922 12,039,609 11,890,037 10,322,877 14,577,734 15,255,194 16,127,032 -

Amount 16,128,088 17,087,090 16,290,974 15,267,950 14,938,603 14,792,579 15,715,649 17,205,134 16,790,721 -

Percentage of Levy 99.9% 99.9% 99.9% 99.9% 99.7% 99.8% 99.7% 99.8% 99.8% -

Every year since inception of the city, the City of Johns Creek has received almost 100% of taxes budgeted.

Source: Fulton County Tax Commissioner - as reported in the Required Supplementary Information of the September 30, 2017 CAFR Package

Per Resident Expense

Fiscal Period Ended September Population 30, (1)

$700.00 $650.00

Expenses (2)

Per Resident Expense

83,102 $ 51,104,000 83,335 51,500,000 83,873 56,413,000

614.96 617.99 672.60

Growth

$600.00

2015 2016 2017

$550.00 $500.00

$450.00

0.5% 8.8%

Source: (1) US Census as reported in the Required Supplementary Data; (2) Change in Net Position

$400.00 2015

2016

2017

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GROWTH IN THE DIGEST – ECONOMIES OF SCALE?

2018 Estimate 2017 Baseline Variance $ Variance %

Calculate Dollar Growth Received by the City of Johns Creek No Growth Factor City Calculation 17,986,626.79 19,140,395.00 ** 17,986,626.79 17,986,626.79 1,153,768.21 0% 6%

Millage Rates

3.64

3.87

-Option 1 - 2017 Baseline was a true roll back of assessments to “start over” due to the notable errors from Fulton County.

Need to define what Services Grew to justify increase in cash taxes.

Option 2 legal definition of Revenue Neutral Roll Back

**Assessed values derived from advertisment approved by JC City Council 7/9/2018

New Development High Density Housing Major Shopping Centers Residential Changes Existing Development Total Real Property Changes

Valuation Changes to Taxable Digest % of Total 32,321,400 24% 66,869,160 12,976,120 22,903,720 102,749,000 135,070,400

Refer to Appendix A, B & C for detail Tax Levy calculations and property tax budget reporting

65% 13% 22%

76% 100%

City Staff justification for increase in levies is due to “growth” (i.e. new development that requires services now) -Actual New Development comprised 24% of total Real Property Growth.

-Existing Development accounted for 76% of the Real Property Growth with no New Development; all are “reassessments” which means existing property owners have been SUBSIDIZING services for under assessed properties.

NO NEW SERVICES are required.

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CONCLUSION FOR CASH TAX REVENUE NEUTRAL POSITION, IF NOT LOWER • $34 million – Net Position available at the pleasure of City Council (Refer to Slides 3-4)

• $2.8 million – Unappropriated 2015-18 budgeted expenditure dollars for project completions and/or unspent dollars now available for other spending needs as discussed August 13, 2018. (Refer to Appendix D)

• Park Bond – increased millage rate by .5 mills which resulted in $40 million influx of cash to expedite Park development, maintenance and acquisition as defined in the referendum. To be charged to residents and debt paid off in 20 years.

• TSPLOST – increased sales tax .075% to expedite completion of Road expansion, maintenance and improve traffic congestion with influx of approximately $12 million additional dollars a year to be charged to residents over 5 years.

• Per Resident Expense – costs increased as population increased, no realized economies of scale.

(Refer to Slide 5)

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CONCLUSION FOR CASH TAX REVENUE NEUTRAL POSITION, IF NOT LOWER • Digest Growth – 76% of specific property growth due to revaluation of commercial and personal real property. (Refer to Slide 6) – 78% of revaluation was due to significant increases in high density housing and two commercial properties. None experienced any increase in size of developed footprint.

– 22% of revaluation was due to residential properties that made enhancements to their personal residences.

– These items are not “growth” and demonstrate how Residents have been SUBSIDIZING services received by commercial and other personal properties. Similar to conclusions on the Business Tax Analysis presented in Spring 2017. (refer to Appendix E)

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CONCLUSION FOR CASH TAX REVENUE NEUTRAL POSITION, IF NOT LOWER

WITH RISING CASH BALANCES ANNUALLY, THE CITY OF JOHNS CREEK HAS AMPLE ROOM TO CUT THE MILLAGE RATE BELOW THE ROLLBACK RATE TO 3.0 MILLS. THE RESIDENTS CAN USE THIS MONEY TO OFFSET THE FULTON COUNTY TAX INCREASE.

THE LOWER THE MILLAG E RATE FOR JOHNS CREEK, THE MORE WE ELIMINATE THE MALFEASANCE OF PROPRTY TAX VALUATIONS AND GROSS INACCURACIES FROM THE FULTON COUNTY TAX ASSESSOR’S OFFICE. NO LAW CAN DO THIS TODAY AS WE VOTE ON THE MILLAGE RATE.

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APPENDIX

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APPENDIX A – DETAIL MILLAGE RATE CALCULATIONS Step 1 Calculate 2017 Baseline for Revenue Neutral Calculation 4,125,373,116.00 1,000.00 4,125,373.12

2017 Digest - Total Divide by 1,000 for tax calculation A - 2017 BASELINE - TAXABLE ASSESSMENTS

Step 2

4,125,373.12 4.36 17,986,626.79

A - 2017 BASELINE - TAXABLE ASSESSMENTS 2017 Millage Rate - multiply B - 2017 PROPERTY TAX - BASELINE

Step 3

4,945,838,511.00 1,000.00 4,945,838.51

Preliminary 2018 Digest - Total Divide by 1,000 for tax calculation C - 2018 Taxable Preliminary Assessment - Total

Step 4 - I

17,986,626.79 N/A 17,986,626.79 4,945,838.51 3.64

Step 4 - II

17,986,626.79 2.10 18,364,345.95 4,945,838.51 3.71

B - 2017 PROPERTY TAX - BASELINE 2017 Annual CPI (Homestead Exemption - lessor of 3% or CPI for growth factor) D - 2017 PROPERTY TAX BASELINE WITH GROWTH FACTOR C - 2018 Taxable Preliminary Assessment - Total B/C - Estimated Revenue Neutral 2018 Millage Rate 556,062,947.00 4,945,838,511.00 4.3600 0.49

E - 2017 PROPERTY TAX - BASELINE F - 2018 Taxable Preliminary Assessment - Total B/C - Factored Millage Rate before Legal Definition of Revenue Neutral Millage Rate Reduction

3.87 4.36 Less .49

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APPENDIX B - CALCULATION OF 2018/19 BUDGET COLLECTIONS Calculate Dollar Growth Received by the City of Johns Creek No Growth Factor City Calculation 2018 Estimate Tax Levied 17,986,627 19,140,395 Discounted For Collections 97% 97% Proposed Net "Revenue" 2018 17,447,028 18,566,183 A Variance $ 1,119,155 Variance % 0% 6% 2018 Collections (96%) 2019 Collections (2018 Taxes) (4%)

- Budget dollars estimated factoring in successful appeals which results in 97% recognition rate.

-Based on GASB, only taxes collected through November 2018 will be recorded for fiscal year ending Sept 30, 2018.

So budget is develop recognizing 96% in current year and 4% carryover to next year.

16,749,147 697,881 17,447,028

-Millage Rate discussion now is for 2018 to officially set the eventual audited revenue however with only 45 days left in the fiscal year, it is critical as the starting point for 2019 budget.

17,823,536 742,647 18,566,183 A

-The money for the 2018 budget has already been spent without seeking outstanding debt or creating default scenarios.

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APPENDIX C - 2016-19 BUDGET DISCUSSION – PROPERTY TAXES Tax Levied per Advertisement Discounted For Collections Net Tax Revenue Per Year Variance $ - Year over Year Variance % - Year over Year

Per Advertisement - Gross Millage Rate Calculation 2016 2017 2018 17,753,809 17,986,627 19,140,395 97% 97% 97% 17,221,195 17,447,028 18,566,183 B 225,833 1,119,155 0% 1% 6%

20XX Collections (96%) 20XX Collections (Yr Carryover Taxes) (4%)

20XX Collections (96%) 20XX Collections (Yr Carryover Taxes) (4%) Net Tax Revenue Per Year Variance $ - Year over Year Variance % - Year over Year

- Slide reports effects of the Current 2018 Tax Digest and History of Level to work through the effects of the budget by fiscal year.

-Millage Rate impacts 2018 only through final adjustments on cash collections through the final audit.

16,532,347 688,848 17,221,195

16,749,147 697,881 17,447,028

17,823,536 742,647 18,566,183 B

Property Tax Revenue by Budget Year 2017 2018 2019 16,576,475 17,639,788 18,168,982 ** 681,746 690,686 734,991 17,258,221 18,330,474 18,903,973 1,072,253 573,499 0% 6% 3%

**2019 Budget developed by taking 2018 and grossing up 3%; the max allowed if the Homestead Exemption passes in November 2018.

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APPENDIX D - 2018 BUDGET AMENDMENT – REVERSE UNUSED BUDGETARY DOLLARS (DETAIL) Unspent Budgets - 2015 Morton Road roundabout Barnwell Road @ Johns Bridge Medlock Bridge State to St Ives Medlock Bridge Wilson to JC Pkwy Comprehensive Plan Park Design Services

Budget $ $ 125,000 381,537 460,117 38,689 21,376 4,992 1,031,711

Unspent Budgets - 2016 Resurfacing Jones Bridge Imp Sargent to McGinnis Replacement Vehicle Unspent Budgets - 2017 Economic Development Impl Mainikin Bailout System Radio Replacements Fire Station 61 Concrete Fire Station 63 Concrete Replace Engine & Ladder 61 Truck Replacement Court System Upgrades FD Mobile Software LIDAR Data Acquisition Online Forms Radio Replacements 12 Replacement Vehicles 2 Replacement Vehicles Contingency Park Surveillance Camera Main Road Resurfacing

Department Public Works Public Works Public Works Public Works Community Dev Rec & Park

493,200 Public Works 146,937 Public Works 3,181 Police 643,318 150,000 5,262 5,058 4,725 4,500 889 28,038 2,053 5,532 40,000 11,200 3,000 1,460 2,561 6,504 212,930 13,654 495,515 992,881

Community Dev Fire Dept Fire Dept Fire Dept Fire Dept Fire Dept Fire Dept Fire Dept Info Tech Info Tech Info Tech Info Tech Police Police Police Public Works Public Works Public Works

Unspent Budgets - 2017 Replace EKG's Combi Tools Replace Toilets Thermal Imaging Devices Replace HVAC Fire Station 63 Purchase Land Fire Station 64 Replace 2 Chevy Silverado 4x4 Replace Fire Engine Online Backup Server Upgrade Automated License Plate Reader Task Force Vehicle Pavement Assessment Storage and Maintenance Facility Replace Ford Truck

18,719 1,479 20,780 8,840 2,805 1,849 2,091 1,450 1,891 7,268 10,558 99,123 30,000 1,680 208,533

Immaterial < $1,000 individually Total Over Budget $

Fire Dept Fire Dept Fire Dept Fire Dept Fire Dept Fire Dept Fire Dept Fire Dept Info Tech Police Police Public Works Public Works Public Works

664 2,877,107

2018 BUDGET AMENDMENT - UNUSED BUDGET DOLLARS Department Budget $ % of Total Public Works $ 1,698,993 59% Comm Dev 171,376 6% Fire Dept 435,706 15% Info Tech 38,285 1% Police 527,091 18% Other 5,656 0% $ 2,877,107 100%

Fiscal Year Budget $ % of Total 2015 $ 1,031,711 36% 2016 643,318 22% 2017 992,881 35% 2018 209,197 7% $ 2,877,107 100%

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APPENDIX E - BUSINESS TAX ANALYSIS (SPRING 2017) - BRICK & MORTAR BUSINESS > 500 EMPLOYEES Table IV Avg # FTEs per UBL

# of UBL

Total TLF 2017

Equates to Hours Worked Cost Per FTE at Per FTE to Pay Min Wage to TLF Pay TLF

Company A Company B Company C Company D Company E Total Brick & Mortar > 500 EE's

4 2 1 1 4 12

277/UBL $ 600/UBL 800/UBL 765/UBL 140/UBL 370/UBL $

33,236 300 2,842 124,069 160,447

4.14 0.03 0.51 30.50 4.99

$

30.02 0.22 3.70 221.13 36.18

Total Brick & Mortar > 100 EE's

33

218/UBL $

421,352

8.07

$

58.51

Total Brick & Mortar > 50 EE's

50

169/UBL $

581,510

9.50

$

68.88

Total Brick & Mortar > 10 EE's

241

52.3/UBL $ 1,020,676

11.17

$

80.98

Home Based Total

1,245

23.82

$

172.70

1.3/UBL

286,130

$

Johns Creek Property Taxes $

54,502 91,673 29,997 73,920 $ 250,092

*-Refer to References A-J for detail calculations of this table

As discussed with the presentation of the Business Tax Analysis during the Spring of 2017, small businesses are paying more in taxes per employee than companies with greater than 500 employees, which by size require more services than the smaller businesses.

In conjunction with Property Taxes, the smaller businesses are SUBSIDIZING the services received by the larger companies, as evidenced by the business and property taxes paid.

Legend FTE - Full Time Equivalent TLF - Taxes, Licenses, & Fees UBL - Unique Business License

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