BRADENTON, Fla. — Seven current and former Georgia lawmakers filed a lawsuit against Fulton County commissioners after they increased the property tax rate by 17.45% to support this year's general fund budget.
The state representatives, who live in Fulton County, filed the suit Wednesday seeking preliminary and permanent injunctions against the commission saying the tax hike violated House Bill 604.
HB 604, sponsored by the lawmakers, went into effect May 6, 2013, and prohibited Fulton from increasing the property tax rate until January 2015. After that time, the law allows the county to increase the tax rate if two-thirds of commissioners vote for it.
Fulton County, home to Atlanta and the state capital, has $1.2 billion of outstanding debt, including $200 million of tax anticipation notes sold in June that are due to be paid in December.
The lawsuit should not affect the county's ability to pay bills or debt service, or impact its rating, said Rep. Lynne Riley, R-Johns Creek, a plaintiff in the suit and a former Fulton County commissioner.
The legislation, which the suit seeks to enforce, capped the county's ability to raise the millage for a short time, and does not impact any borrowing or bond payments because most of the debt is paid from a separate millage rate, Riley said in an interview Friday.
If the suit is successful, the county will have to modify spending plans for the rest of the year, she said.
"Such discretionary spending in the budget exists, and they will be able to ratchet back to prior year [tax] collection rates," she added, noting that tax income will still go up because of increasing property values and new construction.
Several years of deficit spending in Fulton County was one reason the bill was passed by the Legislature, Riley claimed. She also said that commissioners did not adequately explain why it was necessary to increase the budget by $80 million, which would be generated by the higher millage rate.
The millage increase, also approved Wednesday, is the first in 23 years for Georgia's most populous county.
The $625.4 million general fund budget is on track to be balanced with the 1.57 mill increase, according to backup materials for Wednesday's county commission meeting. The increase would bring the total general fund tax rate to 11.781 mills.
"I am disappointed that several of our state's lawmakers have chosen to sue Fulton County for doing what every other city and county in this state has been allowed to do, which is to do everything a local government can do to keep itself on sound financial footing as it strives to maintain a consistent level of service to the constituents it serves," commission chairman John Eaves said in a statement.
Eaves said the commission repealed HB 604 long before the millage rate was increased "as it represented an infringement" on the county to govern its affairs.
The bill was repealed by commissioners in June 2013 citing the county's home rule power granted by the state constitution.
"I find it unfortunate and sad this [lawsuit] has been taken to prevent a board chosen by voters in Fulton County from carrying out the duties Fulton County taxpayers entrusted to them," said Eaves. "No other county should have its rights to govern its own affairs trampled upon by outside entities."
Fulton County's general obligation bonds are rated AA-minus by Fitch Ratings, Aa2 by Moody's Investors Service, and AA by Standard & Poor's.
Fitch maintains a negative outlook on its ratings. In a credit report affirming the ratings in April, Fitch said that its concerns center on the county's "significant dependence" on fund balance since 2010 to support operations, and challenges the county faces in restoring budget balance with a projected gap of $32 million this year.
"We knew about the potential for litigation," Fitch analyst Patricia McGuigan said Friday when asked for a comment about the lawsuit. "It is a situation we are concerned about and will continue to monitor."
