Rural Georgia governments scramble to decide on new homestead tax exemption

EDISON – The majority of Georgians voted yes in November for a statewide floating homestead exemption that would limit annual increases on assessed values of homesteads, unless a local government chooses to opt out. 

However, rural governments across the state are realizing the benefit of this exemption might not extend beyond suburbs near Georgia’s Capital. Larger metro areas may see meaningful tax cuts, but poorer, smaller areas with low business or homeownership could face higher taxes elsewhere to compensate.

Tommy Coleman, an Albany attorney, said rural areas struggle with stagnant tax bases.

“How would you continue to provide services when the tax base isn’t growing?” he said.

House Bill 581 went into effect New Year’s Day. It was introduced by Rep. Shaw Blackmon (R-Bonaire) who represents parts of Houston County – one of Georgia’s wealthiest counties. Lawmakers representing southwest Georgia’s districts, many of them poor and rural, voted in favor of House Bill 581. Sixty three percent of Georgia’s constituents voted yes for the amendment. 

The law essentially places a “freeze” on a homestead’s value assessment. It does this by increasing the value of an exemption to offset inflation. 

For example, under a typical floating homestead exemption, if a property had a taxable value of $100,000 and the taxable value increased the next year due to market changes to $110,000, then the exemption “floats” to be worth $10,000 so the homeowner still pays taxes on the base year value of $100,000

HB581 is unique because the base year value is adjusted and will increase by an inflation rate determined by the State Revenue Commissioner – likely the consumer price index (CPI). So, take that same property with a value of $100,000 and say the CPI is 2% the next year. Then that base value may increase up to 2% to give an adjusted base year value of $102,000. The homeowner would pay $102,000 in that second year.

It doesn’t affect homestead exemptions currently in place.

If every city in a county decides not to opt out, then the county can pass a new local option sales tax, referred to as a FLOST, between half a cent and $0.01, that can be used for property tax relief. It’s only in place for five years. The FLOST is not available to school boards. 

Coleman pointed out that there is no provision in the law to opt out of HB581 after March 1 or to renew the FLOST after five years.

In rural governmental systems, concerns multiply. A 2021 presentation from the University of Georgia listed 120 out of 159 Georgia counties as rural.

HB581 provides a tax break to homeowners but not agricultural property, businesses, industrial or rental property. Many rural areas in Georgia depend on farm economies and lack industry or significant home ownership.

“When you give a tax break to one segment of the population, somebody else has to pick it up,” Coleman said. “The demand for the funding to the government doesn’t go away so it really shifts the burden to others.” 

The law gives local governments a chance to opt out. Before they do that, they need to go through a process of advertising and hosting three public hearings – a process that couldn’t begin until Jan. 1 and must be completed by March 1.

Calhoun County Clerk Mandie Milner said the county is leaning toward opting out to avoid having to raise the county’s millage rate “exponentially” – an effect that most taxpayers aren’t aware of. Calhoun County is a rural county west of Albany with a population of about 5,500

Leaders in Calhoun County and its municipalities are hosting a meeting Jan. 14 to discuss the new law and how it may affect their area’s tax bases. 

Coleman said the March 1 deadline is bound to be tight for smaller local governments as many struggle with short staffing. He said in order to meet the deadline, these governments had to begin the decision making process before Jan. 1. 

Edison, one of Calhoun county’s municipalities, began discussing the exemption at their December council meeting. 

Edison’s Mayor Shirley Worthy said since then, the city has been trying to assess if the exemption would help the city’s tax base in any way.

“But we have no industry. We have very few businesses,” Worthy said. “All these places that are larger can get income off of that. We can’t.”

Worthy said the same people that would benefit from the floating homestead exemption in Edison would then be hit with higher taxes in other areas in order to keep fueling the city’s revenue.

Coleman said each community needs to conduct an analysis – take a look at their housing stock, community wealth, etc.

“If you’re in Atlanta, you’ve probably got government staff that can handle this, but smaller cities and counties have limited staff to be able to review the tax base and look into the future that in depth,” Coleman said. 

Worthy said she wishes there was more time to learn about the new law, make a decision about opting in or out and then hosting the necessary public hearings. She said it’s already a busy time of year for cities who have to get their end of year tax reports together. 

Sen. Freddie Powell Sims (D-Dawson) voted yes to HB581 in last year’s legislative session. She said areas in her district are probably some of the most rural in the state, but she doesn’t expect them to have difficulty meeting the March deadline if they wish to opt out.

“When you make laws, there are sometimes unintended consequences for different regions of the state, whether it’s rural or urban,” she said. “But remember, we make laws for everybody.”

She encouraged county and municipal leaders to reach out if help was needed.

Darlene Paul, the Chief Appraiser of Terrell County’s Tax Assessor’s Office said the short timeline is a stressor. Terrell County commissioners voted to opt out Tuesday night. She said the county is also in the midst of a tax base reevaluation.

“We’re really in crunch time now,” Paul said. “We’re busy trying to figure out what kind of values we’re gonna use and what we’re gonna do.”

She said she also worries about unequal treatment for taxpayers under governments that opt in.

“If I have a house and you have an identical house beside me that isn’t homesteaded, then they’re not going to be valued alike,” she said. 

Paul said to her, the law seems to target larger, more metro counties with expensive homes. Many, including Coleman, said it just doesn’t make sense for rural communities.