Special Purpose Local Option Sales Tax

THE ONE-CENT SOLUTION Power Point Presentation

1. What is SPLOST?

The SPLOST law, enacted by Georgia legislators in 1985, authorizes a county tax of 1% on items subject to the state sales tax for funding capital projects. It is neither a municipal tax, nor a joint county-municipal tax such as the regular Local Option Sales Tax (LOST). As a county tax, only the Board of Commissioners can authorize SPLOST.

The county controls the money, which must be used for specific capital outlays (operations and maintenance
expenditures are not authorized) such as courthouses, jails, roads and bridges. Projects financed via SPLOST are intended to benefit the county as a whole—either standing alone or in combination with other county capital outlay projects or municipal capital outlay projects.

2. What is the history of SPLOST in Hall County?

• SPLOST I, approved in 1985 with a lifespan of 30 months, generated total revenues of $25 million for
road, street & bridge improvements.
• SPLOST II, approved in 1988 with a lifespan of 33 months, generated total revenues of $35 million for a
detention center, civic center, Chicopee Woods and Elachee, Farmers Market.
• SPLOST III, approved in 1994 with a lifespan of 60 months, generated total revenues of $78.2 million for
Courthouse expansion, health department, water/wastewater projects and landfills.
• SPLOST IV, approved in 1999 with a lifespan of 60 months, has generated more than $92 million through
November 2003. The total is projected to reach $116 million when the tax expires in June 2004.

To date, nearly $88 million of the projected $116 million total has been spent on road projects ($37 million
budgeted, $27.9 million spent), sewer projects ($27 million budgeted, $23.2 million spent), water projects
($23 million budgeted, $18.8 million spent), parks and recreation projects ($16 million budgeted, $6.6
million spent), fire services projects ($10 million budgeted, $9.3 million spent) and municipal projects ($3 million budgeted, $1.7 million spent).

3. How is SPLOST enacted?

Once the board of commissioners has put together a list of projects to be funded with SPLOST, a county resolution must be adopted calling for imposition of the tax. The resolution must include the purpose or purposes of the tax levy, the maximum dollars to be raised and the time period of the levy, not exceeding 5 years. The resolution is then sent to the county election superintendent, who issues the call and conducts the SPLOST election. The county electorate must approve the tax in order for it to take effect.

4. What is listed in the referendum?

Proposed projects, time period, and maximum dollar amount to be raised for all projects must be listed on the ballot. If road, street and bridge projects are included, a separate maximum dollar amount and time period for these projects must be specified. If debt is to be issued for purposes other than road, street and bridge purposes, the ballot must state the amount of general obligation debt to be issued. The language on the ballot must be specific enough to provide fair notice to voters as to which projects will be funded. If municipalities are involved, their names and their
projects must also be identified.

SPLOST V Proposed Projects

5. Can voters pick among projects for approval?

No. The entire package of projects must be approved or rejected. The law does not allow voters to pick and choose from a list of projects.

6. What can be funded through the tax?

Capital outlay projects may be financed through SPLOST. The tax may not be used for operating expenses of a SPLOST project or of any other county or municipality government operations. Capital projects are permanent and long-lived, as distinguished from current expenditures and ordinary maintenance expenses. Specific projects allowed include:

• Roads, streets and bridges, which may also include sidewalks and bicycle paths; proposed road improvements
• Projects benefiting the residents of the entire county, consisting of: county courthouses; county
administrative buildings; civic centers; hospitals; correctional institutions or other detention facilities;
county libraries; coliseums;
• Local or regional solid waste handling facilities (excluding incinerators) and solid waste recycling
processing facilities; Candler Road Landfill
• County or regional jails;
• Projects operated by a joint authority of the county and one or more of the county’s municipalities which
will be for the use and benefit of the county and municipality residents;
• Projects owned or operated or both by the county and/or one or more municipalities having more than 1/2
of the municipal population in the county and which projects are the subject of a contract entered into
between the county and municipalities before the resolution or ordinance calling for the election is adopted;
• Cultural facilities; recreation facilities; or historic facilities;
• Water and sewer capital projects owned or operated by a county water and sewer district and one or more
municipalities, so long as an intergovernmental contract exists between the county and affected municipalities for the project’s ownership and operation, and the contract was executed prior to the call for the SPLOST election;
• Retirement of previously issued general obligation (G.O.) debt of the county and/or one or more cites, other than road and bridge debt, only if the debt was incurred for projects of a type for which new SPLOST
general obligation debt could be issued;
• County public safety facilities, airport facilities, or related capital equipment used in the operation of public
safety or airport facilities;
• County and/or municipality voting equipment;
• County transportation facilities including but not limited to railroads, port and harbor facilities, and mass
transportation;
• Hospital or hospital facilities owned by a county or hospital authority and operated by the county, hospital
authority, or nonprofit 501 (c)(3) organization through contract or lease with the county or hospital
authority;
• Police cars, fire trucks, ambulances, garbage trucks, and other major equipment. Proposed Fire Stations

7. Can equipment be financed through a SPLOST?

In addition to “bricks and mortar” projects, some, but not all, equipment can be financed through SPLOST revenues. Examples include capital equipment related to public safety and airport needs as well as police cars, fire trucks, ambulances, garbage trucks, voting equipment and other major equipment. Generally, this means equipment that has a long life and would be chargeable to a capital account.

8. Other than the projects expressly spelled out in the SPLOST law, can other capital projects be financed?

Yes. Use of the intergovernmental agreement provision in the SPLOST law provides counties with the opportunity to consider additional capital projects when municipal projects are included in the call for the referendum. Since SPLOST is a county tax, the project or package of projects to be financed by SPLOST must provide benefits to the entire county. This can be done directly by financing only projects of countywide benefit, such as a county administrative building, roads and bridges or a county jail. But the law provides an alternative. By including city facilities in a package of projects, a county can finance needed projects that generally benefit only the unincorporated area of the county. The combination of the city projects with the unincorporated projects meets the “countywide” objective. In other words, by including city project in the referendum, the county has more flexibility to address its capital needs. Generally, only the specific types of capital projects specified in the law may be
financed through SPLOST. However, by including city projects in the referendum, the range of capital projects that may be financed is broadened. Essentially, any capital project not otherwise listed in the SPLOST law may be financed as part of a proposal which includes municipal projects included in an intergovernmental agreement entered into before the call for the referendum.

Municipal Projects

9. Can municipalities levy a SPLOST or finance municipal projects through SPLOST revenues?

Counties are permitted to include municipal projects or joint county/municipal projects in the referendum, so that the SPLOST will address the broad range of community needs required to gather widespread support for the referendum. Although, the law requires that counties hold a meeting with the municipalities, there is no requirement that counties include any municipal project in the SPLOST. To include a municipal project, the county must enter into an intergovernmental agreement or contract before the call of the election with a municipality. Approval for any
municipal project is exclusively the purview of the Board of Commissioners, which must determine whether the public is best served by including the municipal projects in the referendum.

10. What municipal projects can be included?

The SPLOST statute does not authorize municipal projects generally. It only authorizes those municipal projects specifically referred to in the law or subject to a qualifying intergovernmental contract, including voting equipment, water and sewer projects if owned and operated jointly by the county and municipality through a contract and refunding certain municipal general obligation debt. Any other municipal capital project is authorized only where an intergovernmental contract has been entered into before the referendum between the county and the municipality or municipalities having more than one-half of the aggregate population of all municipalities in the county.

11. Why would a county choose to share county SPLOST proceeds with a city?

Counties have an interest in keeping their cities healthy and viable. Using county SPLOST revenues to finance city projects may help in this regard by resolving pressing municipal capital needs. Furthermore, including municipal projects in the package encourages a spirit of cooperation among county and city officials.

12. Is it necessary to divide SPLOST revenues among the county and cities by population?

No. SPLOST revenues are to be used for specific identified projects. SPLOST revenues are not to be apportioned in the manner provided for by the joint county and municipal sales and use tax. A county cannot act as a mere conduit of tax proceeds to cities for use on projects independent of the purposes identified in the resolution. However, a county could use population as a target for the value of proposed city projects to be included on the ballot.

13. Are there any other considerations a county should take into account when contemplating municipal SPLOST projects?

Yes. As a matter of fairness to all residents of the county, commissioners should consider that city projects primarily of benefit to city residents should be balanced with projects which primarily benefit the unincorporated residents. In other words, if only countywide projects, like a county courthouse or jail, are on the ballot with city projects, then city residents get two shares of the county SPLOST revenues while unincorporated residents get one share.

14. What should be addressed in an intergovernmental agreement between a county and cities for financing capital projects?

In addition to detailed list of county and municipal projects to be financed, the intergovernmental agreement should include provisions that provide a procedure for distributing SPLOST funds (such as according to a specified schedule or upon being requisitioned).

15. How should SPLOST funds be distributed to a city for a municipal project approved by the county?

This should be addressed in the intergovernmental agreement between the county and the city or cities entered into before the call for the referendum. Distribution can occur according to a regular schedule or upon being requisitioned as moneys are expended for the municipal project. The requisition procedure ensures that county SPLOST funds are properly administered, and not commingled with general city revenues. Some projects may not have as high a priority as others, and the distribution of the SPLOST revenues as specified in the intergovernmental agreement may reflect the relative importance of the county and municipal projects to the community.

16. Can local schools be built through the tax?

No. Local schools are not eligible. A separate ESPLOST for schools is available for school systems. The school’s
levy of a 1% ESPLOST does not count against the county’s 2% local option sales tax cap.

17. In case of a “shortfall” of SPLOST funds to pay for projects, what happens?

The projects could be scaled back, or the county’s general fund or other funding sources would have to make up the shortfall to complete the projects.

18. What happens if more funds are collected than are needed to pay for the projects?

The Georgia Department of Revenue will shut down the tax at the end of the calendar quarter in which the
department determines that the amount approved by the voters will be obtained.

19. Can SPLOST collections be deposited in the county’s or participating municipalities’ general fund?

No. Each government receiving SPLOST moneys must “maintain a record of each and every project for which the proceeds of the tax are used.” Funds must be separately accounted for. Under no circumstances can these funds be commingled with county or municipality general funds.

20. What records must be kept on SPLOST projects?

Each annual county or municipal audit must include a schedule for each project, the amount expended in prior years, the amount expended in the current year, and the estimated percentage of completion. Records sufficient for these audit purposes must be maintained for every project for which the SPLOST is used.

21. Where should interest earned on SPLOST proceeds be deposited?

The interest earned from SPLOST collections must be treated the same as other revenues from the tax. It must be separately accounted for and annually audited to ensure proper expenditure. Additionally, it may only be used for purposes specified in the SPLOST ordinance or resolution. Since the tax is first and foremost a county tax, interest accrues to the overall list of countywide projects approved by the voters of the county.

22. What involvement can public officials have in promoting the tax’s passage by the county’s voters?

Governmental entities cannot expend public dollars to obtain passage of the tax. While local elected officials may express their opinion on the tax, and may use county funds to prepare neutral descriptions of the SPLOST proposal and the impact of the SPLOST proposal on the county, tax dollars may not be spent for advertisements, flyers, mailings, or any other direct promotion in support of passage of the SPLOST. Elected officials may exercise leadership in their communities to let the public know why the SPLOST vote is being held and how the projects will enhance the community. The very fact that the commission has voted to let the voters decide whether to tax themselves to construct these facilities would seem to require elected officials to explain why the county commission decided to move forward with the tax in the first place.

23. How does the tax terminate?

The tax automatically terminates on the final day of the maximum period of time specified for imposition of the tax, or when collections equal the amount voted upon by the county’s electorate, whichever comes first.

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