The document analyzes the effects of Sandy Springs' incorporation in 2005 on the City of Atlanta's budget from 2004-2009. It finds that while revenues and expenditures decreased substantially in 2006 due to a change in fiscal year, they increased in subsequent years. Higher property tax rates and service fees adopted after 2005 may have been influenced by the loss of Sandy Springs revenues, though the budget impacts are unclear. Budgeting errors also contributed to deficits.

1. City of Atlanta Budget Analysis 1
City of Atlanta
Budget Analysis FY 2004-2009
The Incorporation of Sandy Springs Effect on City Budget
By Madeleine Ehrnrooth
Budgets & Finances
November 20 2008
Florida State University

2. City of Atlanta Budget Analysis 2
In the past few years, Georgia has incorporated four new cities including Sandy Springs,
Johns Creek, Milton, and Chattahochee Hill Country 1. With over 500 cities already, and more
new cities being proposed, concern has risen about how these new governments will affect the
existing local government within Fulton County. Currently there has been talk about turning the
newly redeveloped Buckhead area of Atlanta into a city. While a plethora of reasons for
incorporation back new city proposals, the key argument has been to relieve heavy tax burdens
on citizens. Jeffrey Doorfman, Atlanta-Journal Constitution contributor, in an article about
services not matching the tax burden, mentions “[w]hen a county or city advances the argument
that the formation of a new city will cause economic hardship to the existing government,
resulting in service cutbacks or tax increases, it is admitting to overcharging the area
considering forming a new city” (Doorfman,2008).2 Doorfman goes on to explain that Atlanta
doesn’t want to lose Buckhead as the area residents pay “far more in taxes and
fees” (Doorfman,2008).3 Sandy Springs, incorporated in December 2005, had a similar case
where residents felt the value of the city services received were disproportionate to the taxes
paid. Fairness of the current tax system is a political question with no right or wrong answer.
However, these recent city formations convey a growing discord among north Fulton County
citizens whose taxes are being used to provide for south Fulton County residents, primarily
within the city of Atlanta. Sandy Springs residents not only paid a general fund tax but were also
required to pay a special service district levy used to pay for betterment projects totaling an
estimated $23 million. Using Sandy Springs as a case study, this analysis examines the
economic consequences of incorporation and effects on the budget process of the city of
Atlanta. To determine whether or not the City of Atlanta incurred economic damage, the budget
1-3Dorfman, Jeffrey H. (2008, July 8) “Incorporating Cities: Tired of Services not Matching Tax Burden”.
Atlanta Journal-Constitution. Retrieved November 9, 2008 from http://www.ajc.com

3. City of Atlanta Budget Analysis 3
cycle before Sandy Spring’s incorporation (2004 & 2005) and the budget cycles ensuing
(2006-2009) will be analyzed for significant changes in revenues and expenditures.
The city of Atlanta, located in the north-central part of Georgia was Incorporated in 1847.
For 30 years, the Atlanta Metropolitan area has been one of the highest growth areas of the
country 4. According to the United States Census Bureau, Atlanta has a population of 483,108,
approximately 10% of the total metropolitan area. Policy-making and legislative authority are
vested in a City Council whose primary responsibilities are adopting the budget, setting policy
for the city and passing ordinances.5 The municipal services provided by the city range from fire
and police protections; infrastructure such as construction and maintenance of highways and
streets; recreational activities and cultural events; land use and building regulation; and solid
waste collection and disposal. Hartsfield-International Airport is operated and maintained by
Atlanta, but as the world’s busiest airport it is exclusively financed by airport-generated income6.
The city is home to a diverse mix of industries the largest of which include, government,
services, finance, trade, education, real estate, insurance, ad manufacturing sectors. Often
called the economic engine of the Southeast U.S, Atlanta’s “highly integrated transportation
network” helps to lend further support to it’s economic base (City of Atlanta, 2007).7
The City of Atlanta participates in an executive budget process, where all departments
submit budget requests to the Mayor. The Mayor then proposes the budget to the City Council
whose finance committee after discussion and review approves or suggests changes to the City
Council. After modifying the budget it is formally adopted by Ordinance no later than June of that
fiscal year.8 Each year the Mayor and City Council together publish a Budget Report and Capital
4-7
City of Atlanta, Georgia website. (2007) 2007 Comprehensive Annual Financial Report. pg iii. Retrieved
November 15 2008 from http://www.atlantaga.gov
7-10 City of Atlanta, Georgia Website. (2007 December) 2007 Comprehensive Annual Financial Report. pp
iii-iv. Retrieved November 15 2008 from http://www.atlantaga.gov

4. City of Atlanta Budget Analysis 4
Improvement Plan. The annual budget includes activities of the general fund, special revenue
funds, and the debt service fund. 9 Budgetary control is accomplished by maintaining an
encumbrance accounting system and allotment system. If appropriations for encumbered
amounts at the end of the year exceed a certain percentage of the ensuing years budget, the
excess is carried forward to the proceeding year. 10
The City of Atlanta Department of Finance manages and accounts for the Cityʼs financial
resources by preparing the annual budget. During the Fall, multiple public hearings take place
throughout the city regarding budget proposals. The City of Atlanta takes a conservative
approach to budgeting by placing restrictions on revenue anticipations. Conservative
anticipations coupled with the securities already available at the beginning of the fiscal year
determine the Fund appropriations.11 The City of Atlanta budget is structured on a performance
basis with departmental spending information presented at the line item level. The 2009 Budget
includes detailed information on City operating performance, finances and spending as well as
an economic outlook. Additionally, each service department such as fire and police services
create their own budget included within the budget document. Each entity provides a detailed
expenditure summary along with revenue anticipations, appropriations, and actual and target
performance measures.12 On January 1st 2006, Atlanta moved from a calendar year ending
December 31 to a Fiscal year ending June 30th. For this reason the 2006 Budget Report
accounts for only 6 months.
11City of Atlanta. Georgia website. (2005) FY 2005 Proposed Budget, 2, 14. Retrieved November 19
2008 from http://www.atlantaga.gov.
12 City of Atlanta. Georgia website. (2008) FY 2009 Proposed Budget. Retrieved November 19 2008 from
http://www.atlantaga.gov

5. City of Atlanta Budget Analysis 5
There are three fund groups in the City’s budget. The Governmental Fund Group is
supported mainly by general taxation, special assessments intergovernmental grants. The
General Fund is the principle operating fund of the City. Providing basic city services such as
parks and fire services, the General Fund is financed through general purpose tax receipts such
as Sales, Property, and Business taxes.13 Other funds within the Governmental Fund include
The Special Revenue Fund, The Debt Services Fund, and the Special Assessment Fund.
Steve Rapson is the Assistant City Manager for Administration and Finance for the City
of Sandy Springs. Previously the Fulton County budget director, he “came to Sandy Springs
from the Fulton County Chairman’s Office” (Rapson, 2008). Mr. Rapson has experience in
administration, coordination, and supervision of the county budget. As Assistant City Manager,
Rapson works closely along with the City Manager directing and overseeing all operations.
When asked how Sandy Springs’ incorporation affected the City of Atlanta’s budget process
Rapson replied. “with the incorporation of Sandy Springs, there was uncertainty for them with
regard to budgeting and revenue forecasting; the [Fulton County] general fund lost a
considerable amount of revenue from sales tax” (Rapson, 2008). While Atlanta continues to
struggle along with the rest of Fulton County, Rapson mentioned Sandy Springs is facing a
surplus. “With a budget of over $79 million, our priority right now is to maintain and ensure
financial stability” (Rapson, 2008). While Unincorporated Sandy Springs didn’t pay the City of
Atlanta property taxes, Rapson explained how high property values made Sandy Springs a cash
cow to Fulton County accumulating an estimated $23 million in special service district property
taxes alone. These receipts were placed in the Fulton County General Fund, 20% of which was
appropriated to the City of Atlanta (Chart 1) .14
According to Mayor Shirley Franklin, whose comments came during a City Hall meeting
in 2008, Atlanta is facing two problems. First the city is “facing a projected deficit of about $65
13 City of Atlanta. Georgia website. (2008) City of Atlanta Budget Update. Retrieved November 19 2008
from http://www.atlantaga.gov/
14
Fulton County, Georgia website. “About Our Office”. Retrieved November 19 2008 from https://
www.fultoncountytaxes.org/

6. City of Atlanta Budget Analysis 6
million” due to “rising pension, health care, fuel costs, and some budget errors” (Stirgus,
2008).15 Secondly, the city’s 2009 budget will come short about $119 million. In efforts to
balance the budget, the mayor is considering service cutbacks of approximately 25% in all
areas except police, fire and public safety16. To close the now estimated $140 million budget
gap for 2009, the City of Atlanta proposed in the FY 2009 General Fund Budget four ways to
eliminate the budget shortfall. These methods include; “reducing expenditures by creating work
efficiencies and improved business practices”; “increasing revenue through adjustments in
existing fees”; and increasing property tax revenues” (City of Atlanta, 2008).17 Since 2005,
expenditures have increased for Corrections, Fire services, Waste and Wastewater
Management, the Department of Aviation, and Police services (Table 1). Cutting back on
general services will take $14,575,000 away from the budget.18 Looking at the budget
documents for 2005 through 2009, property taxes make up on average 12% of total revenues
with taxes in general making up 65% of revenues (Chart 2). In FY 2009 Fulton County will raise
property tax rates by .43 mill inducing a tax increase of $7.31 for a $100,000 home and a
$41.71 increase on homes valued $300,00019. Property taxes in the City of Atlanta consists of
taxes levied by The State of Georgia, Fulton County (or Dekalb County) Atlanta Public Schools,
and the City of Atlanta.20 The mayor is also proposing increasing the property tax rate which has
decreased by 22% since 2002 as a result of higher property values21. Having some of the
15-17 Stirgus,
Eric. (2008, March 31).“Tax hike being weighed to make up Atlanta budget shortfall”. The
Atlanta Journal-Constitution. Retreived November 9, 2008 from http://www.ajc.com
17 City of Atlanta. Georgia website. (2008) City of Atlanta Budget Update. Retrieved November 19 2008
from http://www.atlantaga.gov/
18 City of Atlanta. Georgia website. (2008) FY 2009 Adopted Budget. Retrieved November 19 2008 from
http://www.atlantaga.gov
19-21
City of Atlanta. Georgia website. (2008) City of Atlanta Budget Update. Retrieved November 19 2008
from http://www.atlantaga.gov/

7. City of Atlanta Budget Analysis 7
highest property values within the Atlanta-Metropolitan Area, her statements suggest the loss of
Sandy Springs may have had an economic impact on Atlanta. The proposed property tax
increase for 2009 is anticipated to add an additional $40,411,262 in revenues to the budget
(Table 2). This places total anticipated revenues for FY2009 at $583,911,489, up $2,977,827
from FY 2008 anticipations. 22 After making adjustments the adopted budget for FY2009 was
reduced to $570,850,199 down $74,657,025 from the FY 2008 adopted budget.23
A portion of Sandy Springs tax dollars were placed prior to 2006 in a Special
Assessment Fund providing financing for betterment projects. As mentioned earlier, most of
these receipts were spent in South Fulton building parks and improving impoverished areas.
Interestingly enough, in 2007 the City of Atlanta reduced spending on parks and recreation
facilities, and cut public works expenditures in half since 2005. Due to the January 2006 change
in the calendar year, the 2006 budget accounts for only 6 months (Jan-Jun) of revenues and
expenditures. This makes it difficult to analyze the effects of Sandy Springs incorporation on the
2006 budget as the majority of tax revenue for the city was obtained after that period. Noting a
$371.7 million decrease in revenues compared to prior years, the 2006 Comprehensive Annual
Financial Report attributes 45% of the decrease to property taxes 24. However, the 12 month
period following (FY 2007) saw only a 6% increase in total net assets (Table 3). Total Revenues
increased by 8% since calendar year 2005 and were noted in the budget report as being
attributable to an increases in sales tax receipts, investment income, and service charges (Table
1).25
When reviewing the City of Atlanta Budget through FY 2004-2009, my main concern was
with finding a noticeable decrease in revenues and expenditures during the FY 2006 after
22-23
City of Atlanta, Georgia website. (2008) FY 2009 Proposed Budget. Retrieved November 19 2008
from http://www.atlantaga.gov
24City of Atlanta, Georgia website. (2006) 2006 Comprehensive Annual Financial Report, 24-25.
Retrieved November 15 2008 from http://www.atlantaga.gov
25City of Atlanta, Georgia website. (2007) 2007 Comprehensive Annual Financial Report, 24. Retrieved
November 15 2008 from http://www.atlantaga.gov

8. City of Atlanta Budget Analysis 8
Sandy Springs incorporation. While the accounts were substantially lower than the other
reviewed Fiscal Years, the low numbers were a result of the change in calender year. Therefore
it isn’t possible to determine the immediate effects of Sandy Springs incorporation. However,
review of 2007 and 2008 Financial Reports revealed that both revenues and expenditures
increased since 2005. In 2007 the largest revenues came from user charges for services, and
taxes. As noted in the budget documents, rates for these items were raised after Sandy Springs
incorporated. Although there is no mention of raising rates in anticipation of the loss of Sandy
Springs, the incorporation may have been a contributing factor in the budget decision making
process as almost a quarter of the City of Atlanta’s revenues came from the Fulton County
General Fund.
When analyzing the City budgets from the past 5 budget cycles, there was noticeable
inconsistency. Each budget listed the prior years budget anticipations for comparison. However
when going back to see the prior years adopted budget, the amounts were different. In the 2009
Budget Proposal, one of the addressed issues impacting deficits were budgeting errors. When
reviewing the 2005 budget documents, the Change in Net Assets table listed corrections made
to the prior year due to budgeting errors. One such correction reported an over calculation of
about $1.13 million. This brought the Net Assets as previously reported in the beginning of the
year in 2005 down from $4,263,623,000 to $4,150,620,000. That is just an example of a number
of budgeting errors by City budget workers that have had an impact on the current deficits as
reported by Morse Diggs (2008) from Fox 5 News Atlanta.26 Facing a $4 million budget shortfall
in June 2008, it is no surprise the city of Atlanta’s Chief financial Officer Janice Davis recently
resigned.
26Diggs, Morse. (2008, June 05). “Atlanta Chief Financial Officer Resigns Amid Budget Shortfall”.
Retrieved November 19 2008 from http://www.myfoxatlanta.com

9. City of Atlanta Budget Analysis 9
Appendix

10. City of Atlanta Budget Analysis 10
Chart 1 - Fulton County Expenditures by Region 2007
Nothwest Fulton County: Sandy Springs, Roswell
Northeast Fulton County: Milton, Alpharetta, Johns Creek
South Fulton County: Atlanta, College Park, East Point, Fairburn, Hapeville, Palmetto,
Union City

11. City of Atlanta Budget Analysis 11
Table 1 - City of Atlanta Changes in Net Assets, FY 2004-2007 (in thousands)

12. City of Atlanta Budget Analysis 12
Table 2 - FY 2009 Revenue Anticipations and Appropriations
Retrieved from City of Atlanta 2009 Proposed Budget

13. City of Atlanta Budget Analysis 13
Chart 2 - Anticipated Revenue Percentages by Source (2004-2009 Average)

14. City of Atlanta Budget Analysis 14
Table 3 - Change in Net Assets FY 2006-2007
Retrieved from City of Atlanta 2007 Comprehensive Annual Financial Report

15. City of Atlanta Budget Analysis 15
References:
City of Atlanta. Georgia website. (2008) FY 2009 Adopted Budget. Retrieved November 19 2008 from
http://www.atlantaga.gov.
City of Atlanta. Georgia website. (2008) City of Atlanta Budget Update. Retrieved November 19 2008 from
http://www.atlantaga.gov.
City of Atlanta, Georgia website. (2005) 2005 Comprehensive Annual Financial Report. Retrieved
November 15 2008 from http://www.atlantaga.gov.
City of Atlanta, Georgia website. (2006) 2006 Comprehensive Annual Financial Report. Retrieved
November 15 2008 from http://www.atlantaga.gov.
City of Atlanta, Georgia website. (2007) 2007 Comprehensive Annual Financial Report. Retrieved
November 15 2008 from http://www.atlantaga.gov.
City of Atlanta, Georgia website. (2008) FY 2009 Proposed Budget. Retrieved November 19 2008 from
http://www.atlantaga.gov.
Dorfman, Jeffrey H. (2008, July 8) “Incorporating Cities: Tired of Services not Matching Tax Burden”.
Atlanta Journal-Constitution. Retrieved November 9, 2008 from http://www.ajc.com.
Diggs, Morse. (2008, June 05). “Atlanta Chief Financial Officer Resigns Amid Budget Shortfall”. Retrieved
November 19 2008 from http://www.myfoxatlanta.com.
Fulton County, Georgia website. “About Our Office”. Retrieved November 19 2008 from
https://www.fultoncountytaxes.org.
Stirgus, Eric. (2008, March 31).“Tax hike being weighed to make up Atlanta budget shortfall”. The Atlanta
Journal-Constitution. Retrieved November 9, 2008 from http://www.ajc.com.