The Dunwoody City Council is expected to pass a “tight” $39.5 million budget at its Oct. 28 meeting, as concerns about slowing revenue growth due in part to homeowner tax breaks are being raised by some city leaders.

The city retains its 2.74 millage rate in the budget, which includes $25.6 million in the general fund for day-to-day operations. The largest spending from the general fund would go to police, public works and parks. Each department continues to grow and require more funding, including more staff to provide more services expected from residents since the city was founded over a decade ago.

More than 30% of the general fund’s revenue comes from real property taxes. Those tax dollars are plateauing due in part to the city’s homestead freeze and 1.0 mill exemption that have been in place since the city was incorporated, according to Assistant City Manager Jay Vinicki.

“We are no longer in the land where we can count on 3% or 4% or 5% growth,” he told the council at its Oct. 14 meeting. “That budget has 1.2% growth [just over $23,000] in it … and other categories of revenue have limited room for growth.” Those other categories include business license and franchise fees.

A pie chart that shows the proposed budgets for each city department. (City of Dunwoody)

Dunwoody homeowners who filed and qualified for a homestead exemption pay no more in city taxes than the amount paid in 2009, based on the residential property assessment freeze exemption effective since the city’s inception.

That exemption is in addition to the 1 mill exemption also in place, granting homeowners an effective millage rate of just 1.74 mills. Homeowners average a 49% exemption in assessed values. Those exemptions are included in the city’s charter.

A homeowner with a house valued at $615,000 pays just $316 a year in city taxes, Mayor Denis Shortal said. A resident with a house valued at $450,000 pays only $286 in city taxes.

“You know what folks I don’t know if you’ll find that anywhere else around here — anywhere,” Shortal said. “We’ve been very prudent, but we have to maintain a good watch on it.”

The proposed budget includes a section titled “Future Challenges” and says that while the city has nearly $13 million in a unassigned reserves, or enough to fund the city for about five months, there are important conversations that need to be made as the city enters its next 10 years.

The city’s tax digest was a record $4 billion in 2019, but exemptions were also at an all-time high of $882 million, according to the budget documents. That means 21% of Dunwoody’s total value of property was exempted, decreasing overall revenue by approximately $2.4 million a year.

The Parks & Recreation Department’s 2020 budget is proposed at nearly $3.4 million, up from $2.8 million that year as parks services remain popular and demand for more grows, including the construction of two new athletic fields at Brook Run Park.

Councilmember Terry Nall, who is running for mayor, said when the city was founded, the millage rate and exemptions were set for the 2009 fiscal year and at that time the city was not responsible for funding parks maintenance or services.

“We assumed [control of] parks using the same millage that wasn’t set up to cover parks,” he said. “Parks is now at $3.5 million with a millage never designed to fund parks.”

When DeKalb County voters overwhelmingly approved a 1% special local option sales tax increase in 2017 to fund transportation projects, such as paving, they also voted to eliminate the homestead option sales tax (HOST). HOST money was used by Dunwoody for many years to cover parks expenses. SPLOST money is to fund transportation projects, such as paving roads and intersection improvements, and public safety.

“HOST went away and there is no parks capital money in SPLOST,” Nall said. “It seems like that is going to be a problem for the long term.”

Nall told Shortal the proposed 2020 budget was the “tightest budget” he had seen in his eight years on the council. “And how you and the department heads pulled it out of the hat, kudos to you,” he said.

“It is a tight budget,” Shortal said. But the city continues to stay in the black while making infrastructure improvements, including paving streets and stormwater repairs.

“One of the things I’ve also realized is we are in a McDonald’s society, which means I want my hamburger in 30 seconds,” Shortal said. “That’s not the way we’ve decided, so far, to go, and I applaud that because I’m not a big tax guy. I like low taxes. I think we all pay enough.”

Councilmember Lynn Deutsch, also running for mayor, asked Vinicki how and when the city’s reserves could be used because there is currently no clear policy. He explained the city is required to have at least four months of operational reserves for emergencies, but anything above that amount could be spent.

The Police Department’s total proposed budget is $9.8 million that includes the hiring of two officers funded with savings. SPLOST money would cover $494,000 to replace computer equipment for the police department.

The Public Works Department’s proposed budget is $9.3 million with $3.1 million in SPLOST dollars going toward paving. Other projects include adding sidewalks in various parts of the city.

The budget also includes $60,000 to go the Economic Development department to start a city public art program; a 3.1% pay increase for police officers and raises for other city employees; and increasing the city’s contribution to employees’ 401 (a) plans from 10% to 11%. Another $800,000 in hotel-motel taxes would pay for parks and trails in Perimeter Center.

Shortal closed his comments on the proposed budget with a warning about “personnel creep.”

“One of the other things I think we really have to watch is personnel creep,” he said. “Everybody likes to have a couple more staff members and I understand that but there’s also a time when you have to make due with what you got and everyone works more efficiently and a little bit more and still get the job done.”

The proposed budget is listed under the consent agenda for the Oct. 28 meeting. Consent agenda items are typically voted on as one action with little or no discussion.