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Posted: February 20, 2011 12:00 a.m.

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The costs of SPLOST

Supporters of SPLOST point to the fact that non-residents pay sales tax, and; therefore, contribute to Newton County projects. The opposition isn't sold on the entire list and some simply want to end a tax that they can actually control.

If the SPLOST is voted down on March 15, it can be brought back for a vote in one year, but officials say losing even one year of revenue would be costly.

This first part of The News' SPLOST series will cover the basics of sales tax and SPLOST: Why do they exist and how do they work? And most importantly, how much will SPLOST cost taxpayers, regardless of whether it's passed.

Complex math: What will it cost?
Newton County residents spent a total of $750 million in the county in 2007, according to the county's 2008 economic development study, which means they contributed $7.5 million to SPLOST. During the 2007 calendar year, SPLOST collections totaled $11.38 million. The simple math shows that non-residents contributed the remaining 34 percent of collections.

Using those percentages for 2010 SPLOST collections - just more than $10 million - means Newton residents contributed $6.63 million to SPLOST. Dividing that number by the county's estimated population of 104,828, shows that the average Newton County resident contributed $63.29 to SPLOST in 2010. Previous census estimates said the average family in Newton County was 2.94 people, so that family would have paid $186 last year.

The projection is a very rough estimate and will vary widely among families.

If the SPLOST is not passed, at least some of the projected $57.6 million list would have to be paid through another form - property taxes. Chairman Kathy Morgan believes that at least $38 million worth of projects would need to be completed by the county at some point during the next six years. The simple division shows that county property taxes would have to cover an additional $6.33 million per year.

Using the weighted average of home sales during the past two years and census data, The News estimated that the average Newton County home would be valued at $126, 778. Assuming that property's value did not drop, that homeowner would pay an additional $136 in county property taxes in 2011. This doesn't include any possible property tax rate increases by cities.

While the SPLOST costs the average family more, the county could lose $3.26 million per year in sales tax revenue from non-residents.

Back to basics: How does the sales tax work?
SPLOST stands for special local option sales tax. Newton County has a 7 percent sales tax rate, according to the Georgia Department of Revenue. For every $1 of goods or services purchased in Newton County, an additional 7 cents is added in sales tax:
- 4 cents goes to the state's general fund
- 1 cent is a local option sales tax which goes to either the county or various cities' general fund
- 1 cent goes to the SPLOST fund, which is kept separate from county and city budgets and is used for capital projects
- 1 cent goes to the education special purpose local sales tax, or ELOST, fund and is used by the county school system for capital projects

The state's 4 percent sales tax and the first 1 percent of local sales taxes help fund the day-to-day operations of government.

The additional 2 percent are used to fund capital projects for the school system and local governments. Capital projects generally include the construction of buildings - like a jail or a school - or the purchase of equipment - like road paving equipment or a school bus.

Newton County residents vote separately on the capital projects sales tax for education and the one for local governments.

Voters approved the $66 million education sales tax in fall of 2007 that will end in 2014. The local government SPLOST is up for a renewal vote on March 15.

Death and Taxes: Why does the sales tax exist?
Local governments in Georgia primarily depend on property and sales taxes to fund the public services they provide. Either tax alone could fund public services, but governments choose a variety of taxes in an attempt to equally spread the burden.

Property owners who own large tracts of valuable land and industries, whose buildings and equipment are worth millions of dollars, pay large amounts of property tax when compared to the average resident.

Everyone pays sales tax, which is why some have called it the fairest tax. However, it's also referred to as a regressive tax, because lower income residents contribute a larger percentage of their income to sales tax than wealthier residents.

"The idea of a sales tax is that it's a consumption tax. It's an alternate form of taxation as opposed to taxing income. Instead of going after corporate or individual income, a consumption tax is meant to tax what you bought," said Kail Padgitt, an economist with the Tax Foundation, a non-partisan tax research group based in Washington, D.C.

Padgitt said that property tax is easier and less expensive to collect, because it is paid directly from residents to the government. While the collection of sales tax can be problematic, sales tax collections still provide a stable tax base for counties and states.

SPLOSTly Projects: Why SPLOST exists
The law allowing SPLOSTs was enacted in Georgia in 1985. Newton County voters approved their first SPLOST in 1987, and the money collected went to build Lake Varner, the county's main drinking water reservoir.

A SPLOST is not needed, but it's a preferred funding method for several reasons.

If the county needs to build a new jail or judicial center, or expand existing ones, it could simply raise the property tax rate for one or two years to pay for those projects. Property tax owners would be hit hard, but once the project was completed, the property tax rate would return to its previous level.

The SPLOST allows governments to collect money for multiple capital projects over the course of six years, spreading out the burden. If projects need to be completed immediately, the county can sell bonds to collect the money up front and then pay off the debt later. If the county doesn't want to add debt, it can collect the funds for a few years and then build a project.

SPLOST can only be used for capital projects that will provide a clear public benefit. Newton County has used its past SPLOSTs to build a community center, fire stations, a jail, a judicial center, a landfill, a library, and Turner Lake Complex. SPLOSTs have also paid for tens of millions in road projects.

One of the key benefits of SPLOST is that anyone who spends money in Newton County pays sales taxes, not just residents. Determining the exact percentage of tax dollars contributed by non-residents is impossible, but based on the county's 2008 economic development study and SPLOST collections for the 2007 calendar year, the percentage is about 34 percent.

"It's advantageous in a political sense, because everyone who comes into the community is going to pay that whether they live in the community or not," Padgitt said. However, he noted that sales tax is less transparent. "People don't add up the amount they paid in sales tax at the end of the year."

The second part of our SPLOST series will look at how the 2011 list was compiled and how other counties form their SPLOST lists, as well as how the 2005 SPLOST funds were used.

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