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Dear Editor:
The desire to reduce the Peachtree City’s reserves has, yet again, become a political issue. The projected current year reserve is 59%-60% and the planned FY2026 reserve will be 58%-59%. What this mathematically means is that with no revenue, including taxes, charges, and permits, Peachtree City can continue its daily operations for seven months. Anything that would drive a major reduction in revenue would also compel the City to take extraordinary measures to make the reserves last as long as possible so they would likely last much longer. I don’t have a strong opinion on an exact number, but around 50% to 60% seems fine with me. Below is part of an email I sent to the Peachtree City Mayor and Council advocating for this, but it is greatly expanded due to the format of a Letter to the Editor.
We have a large degree of economic uncertainty in the US right now due to a politicized Federal Reserve, unpredictable tariffs, unpredictable inflation, an ever-increasing national debt, potential bond vigilantes, a labor market in statis, and a Federal government that is making it very clear that it will not help with anything. The Federal Reserve has a dual mandate of full employment and inflation at 2% or below. At 2.7%, inflation is clearly still a problem, but President Trump is pushing the Federal Reserve to lower short-term interest rates; rates are typically kept higher for longer to bring down inflation; however, it doesn’t really matter what short-term rates are if the United States loses credibility. Our national debt is out of control, and the day may come when the purchasers of US government bonds will simply not show up at auction, or if they do show up, they will demand higher interest rates to be compensated for the risk of default. A way to fix the national debt is to simply adopt pro-inflationary measures, but this hurts savers and retirees living on fixed income; furthermore, active bond traders, the “vigilantes”, may sell their Treasury holdings to put a glut of bonds on the market that drives up interest rates. Given the recent fiscal reports, hiring and the economy are clearly in statis, and many companies are not hiring because they don’t know where tariffs will land. When there is uncertainty, very little gets done except trying to handle the current uncertainty. We are no longer in the low inflation, high growth and relatively stable period of certainty that lasted from the end of the Great Recession to the start of the pandemic.
The Federal bureaucracy is being hollowed out. If a significant natural disaster strikes in Peachtree City, FEMA will not be coming. There is no cavalry riding to the rescue. The State of Georgia is considering eliminating state income tax so they won’t have the revenue to support municipalities if there is a disaster. HB 581 limits the ability of municipalities to raise taxes to the rate of inflation for homestead properties. As an example, Asheville, North Carolina is significantly inland, similar to Peachtree City, but it was decimated by Hurricane Helene, and Helene’s path took it close to Peachtree City on the way north- close enough that Atlanta experienced some flooding. It is not a matter of “if” a disaster strikes Peachtree City, it is a matter of “when,” When a disaster strikes Peachtree City, it will take more than normal operating income to repair City infrastructure, and residents likely won’t be in the mood to fund a tax increase after a disaster- if a tax increase were even possible. And, honestly, I’d be really hard-pressed to pay property taxes on my home if it were significantly damaged in a disaster. Yes, I have homeowner’s insurance, and, yes, I’d rebuild, but that’s a second job, and the tax man showing up would just add insult to injury- my home’s “fair market value” assumes I have a home in saleable condition. I suspect many share my feelings on this. And businesses can’t collect sales tax if they are shuttered making repairs. Limited or no taxes mean limited operations by the city, precisely at a time when we need them the most.
I do not want to sound like an alarmist, but due to current economic conditions, the reduction of government at the state and national level, Peachtree City may need to go it alone in the future. Until recently several significant city purchases were made using American Rescue Plan funds, but those funds are nearly gone, and they must be completely spent by the end of 2026. What replaces the post-pandemic government largess in a time of need? Anyone? Maybe city reserves. Frankly, a reduction in the reserve is just a short-term gimmick designed to appease the loudest voices in the room, not necessarily voices that represent the majority of residents.
That I’ve seen, those who want to reduce the reserves have no plan for how to do it. If the City simply reduces taxes for one year, the average property tax bill will go down about $1,000- see the math below. Then, the next year, they will have to increase that much, with any home value increase limited to the rate of inflation as mandated by HB 581, and most of the low information residents will be screaming about skyrocketing property taxes without knowing about or remembering the one-time windfall abatement. If the reserves are lowered over more than two or three years through more modest tax decreases, most taxpayers won’t even notice, and the FCBOE would likely step in to kindly offset the difference (sorry, couldn’t resist the dig against the second most unrestrained taxing authority- remember they opted-out of HB 581).
This is the simple math on reserve reduction. Current reserves are $34.7-million, making them 59% of the $58.4-million FY2026 budget. Bringing them to 25% or $14.6-million would be a $20-million reduction. If all that is used to reduce total property taxes of $24.1-million, the City only needs to collect only $4.1-million or 17% of current. If the average property tax bill is $1218, an 83% reduction would take it to $207 or about a $1,011 reduction, quite a windfall, but we are trading massive uncertainty for just a one-time reduction. A $14.6-million reserve pays for about six months of public safety and nothing else. New roofs for larger City buildings cost close to $1-million. $14.6-million doesn’t last long in even a minor natural disaster, and putting urgently needed repairs “in the budget next year” doesn’t work for an immediate need.
I care about this because I’m financially conservative by nature. A typical financial advisor will tell clients to keep a three-to-six-month emergency fund (sound familiar?), but all of us know someone who has been unemployed for six months to a year or even longer, even someone very competent. While I’ve never been laid off in 30+ years of professional work (and hope to never be), I still keep one year of income in a bank account. I anticipate I could collect unemployment, but I have no intention of relying solely on something that could be easily taken away, similar to the Medicaid reductions passed into law recently- remember, nobody is showing up to help. This is exactly where Peachtree City is now. Our Helene, the next pandemic, or financial meltdown may not arrive for years or decades, but if we reduce the reserve in a time of relative plenty, we will regret it in a time of true need.
I could continue with all the benefits of keeping the reserve at 50%- the improved bond rating that lowers borrowing costs, the flexibility to pay cash rather than finance, the ability to take advantage of short-term price reductions for things the City buys a lot of, but I’ll end this letter here.
Paul Schultz
Peachtree City
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