MEMORANDUM

TO: Mayor Bill Grant

   City Councilors

FROM: Mr. Billy Peppers, City Manager

CC: Mr. Nathan Ingram, Assistant City Manager

Ms. Annie Fortner, City Clerk

Mr. Ryan Luckett, Finance Director

DATE: July 3, 2025

RE: 2025 Millage Rate Recommendation & Fiscal Year 2026 Budget Proposal

 
The City of Canton is set to proceed with the adoption of the property taxing millage rate and initiate the process of approving the Fiscal Year 2026 Operating Budget (October 1, 2025 through September 30, 2026). In accordance with the City’s Charter, a copy of the Proposed Operating Budget and this memorandum related to the budget and millage rate are attached. Additional background information concerning the processes for adopting the millage rate, operating budget, and overall operations of the City of Canton is included in this memorandum. This information may be shared as needed, and any questions regarding processes, programming, and budgetary items can be directed to the budget team, including Assistant City Manager Nathan Ingram and Finance Director Ryan Luckett.

REQUIREMENTS

The City of Canton operates utilizing a variety of fund sources, including ad valorem taxes on real and personal property, sales taxes on consumable goods, enterprise fund revenues (from utilities such as Water, Wastewater, Stormwater and Sanitation), user fees (such as Hotel/Motel Taxes and Rental Car Taxes), fines through municipal court operations, and development related revenues through the imposition of Impact Fees.  The City’s Charter provides for the procedures related to the approval of the operating budget and for the adoption of a millage rate necessary to impose ad valorem taxation on real and personal property.

Below are the corresponding sections of the Charter related to property tax and the creation of the millage rate:

Sec. 6.10. - Property tax.
The city council may assess, levy and collect an ad valorem tax on all real and personal property within the corporate limits of the city that is subject to such taxation by the state and county. This tax is for the purpose of raising revenues to defray the costs of operating the city government, of providing governmental services, for the repayment of principal and interest on general obligations, and for any other public purpose as determined by the city council in its discretion. 

Sec. 6.11. - Millage rate; due dates; payment methods.
The city council, by ordinance, shall establish a millage rate for the city property tax, a due date, and the time period within which these taxes must be paid. The city council, by ordinance, may provide for the payment of these taxes by installments or in one lump sum, as well as authorize voluntary payment of taxes prior to the time when due. 

In 2017, the City of Canton entered into an agreement with Cherokee County to collect City property taxes on behalf of the City. In accordance with this agreement, the City is required under the intergovernmental agreement to provide a millage rate to Cherokee County annually by August 1. 
Below are the corresponding sections of the Charter related to the creation of the budget:

Sec. 2.29. - Powers and duties of the city manager.
The city manager shall be the chief administrative officer of the city. He shall be responsible to the city council for the administration of all city affairs placed in his charge by or under this Charter. As the chief administrative officer, the manager shall: 
(5) Prepare and submit the annual operating budget and capital budget, including any and all requested substantiating detail supporting planned line-item revenues and expenditures, to the city council. The annual operating and capital budgets for the next fiscal year are to be submitted 75 days in advance of the start of the next fiscal year. 

Sec. 6.25. - Submission of operating budget.
On or before a date fixed by the city council, but not later than 30 days prior to the beginning of each fiscal year, the city manager or his designee shall submit to the city council a proposed operating budget for the ensuing fiscal year. The budget shall be accompanied by a message from the city manager or his designee containing a statement of the general fiscal policies of the city, the important features of the budget, explanations of major changes recommended for the next fiscal year, a general summary of the budget, and such other comments and information as he may deem pertinent. The operating budget and the capital improvements budget hereinafter provided for, the budget message, and all supporting documents shall be filed in the office of the city clerk and shall be open to public inspection.

Sec. 6.26. - Action on budget.
(a) The city council may amend the operating budget proposed by the city manager or his designee; except, that the budget as finally amended and adopted must provide for all expenditures required by state law or by other provisions of this Charter and for all debt service requirements for the ensuing fiscal year, and the total appropriations from any fund shall not exceed the estimated fund balance, reserves, and revenues. 
(b) The city council, by ordinance, shall adopt the final operating budget for the ensuing fiscal year no later than 30 days prior to the end of the fiscal year or until such time as prescribed by city council. If the city council fails to adopt the budget by this date, the amounts appropriated for operation for the current fiscal year shall be deemed adopted for the ensuing fiscal year on a month-to-month basis, with items prorated accordingly until such time as the city council adopts a budget for the ensuing fiscal year. Adoption of the budget shall take the form of an appropriations ordinance setting out the estimated revenues in detail by sources and making appropriations according to fund and by organizational unit, purpose, or activity as set out in the budget preparation ordinance adopted pursuant to  section 6.24. 
(c) The amount set out in the adopted operating budget for each organizational unit shall constitute the annual appropriation for such, and no expenditure shall be made, or encumbrance created in excess of the otherwise unencumbered balance of the appropriations or allotment thereof, to which it is chargeable. 

Sec. 6.27. - Tax levies.
The city council shall levy, by ordinance, such taxes as are necessary. The taxes and tax rates set by such ordinance shall be such that reasonable estimates of revenues from such levy shall at least by sufficient, together with other anticipated revenues, fund balances and applicable reserves, to equal the total amount appropriated for each of the several funds set forth in the annual operating budget for defraying the expenses of the general government of this city. 

MILLAGE RATE CALCULATION & ADOPTION

The millage rate is a number by which each $1,000 of real and personal property is taxed to provide funding for the operations of the City.  The Cherokee County Tax Assessor is responsible for calculating the fair market value of the real and personal property in Cherokee County, including said property within the City of Canton.  The fair market value is then discounted to a taxable value which is forty percent (40%). This taxable value is then multiplied by the millage rate to determine the taxes due for said property. Below is this equation and examples of this process:
Simple Millage Rate Calculation:

Fair Market Value (FMV) x 40% = Taxable Value (TV)
Taxable Value (TV) x Millage Rate = Taxes Due

The City’s budget team recommends the City Council consider a property tax cut from the existing millage rate of 5.4 to 5.25.  The estimated rollback millage rate for Canton is 5.288. Below is an example of the calculation. 

Example of a Standard Millage Rate Application to Property Taxes:

James Smith’s Home is given a fair market value (FMV) by the Assessor of $500,000. The City of Canton’s current millage rate is 5.25 mills. 
$500,000 (FMV) x 40% = $200,000 (TV)
$200,000 (TV) x .00525 (Millage Rate) = $1,050 (Taxes Due)

James Smith has a tax liability to the City of $1,050 for his property valued at $500,000.

Example of a Millage Rate Application to Property Taxes with a Senior Exemption :

If James Smith is a senior aged 62 or older and has filed for a City of Canton Senior Tax Exemption by April 1 with the Cherokee County Tax Assessor, his calculation will be reduced for the first $280,000 of fair market value as shown below:

$500,000 (FMV) - $280,000 (Senior Exemption) x 40% = $88,000 (TV)
$88,000 (TV) x .00525 (Millage Rate) = $462.00 (Taxes Due)

James Smith has a tax liability to the City after the application of a senior exemption of $462.00. 

Having the senior exemption, Mr. Smith sees a tax reduction of $588.00. The senior exemption, however, does not discount the rate of fire taxes paid on behalf of Mr. Smith to Cherokee County. Based upon the current fire millage rate of 2.888 mills, the City of Canton is responsible for paying $577.60 on behalf of Mr. Smith for fire services. With the senior exemption, the City of Canton is responsible for making up $115.60 from other fund sources to subsidize fire services for Mr. Smith.

Tax Digest & Millage Rate Adoption

Each year, the Assessor provides a draft digest of all property values to the City of Canton. The draft digest results in estimated property taxes due to the City prior to appeals utilizing the current millage rate. If the tax digest is higher than prior years, the Assessor will show what the millage rate could be reduced to allowing the total dollars collected in taxes to remain revenue neutral. This is referred to as a revenue neutral rollback millage rate. As the City’s budget team is presenting a property tax millage rate reduction (5.25 mills) beyond the estimated rollback rate (5.288 mills), the City Council is not required to have a public hearing to adopt the millage rate.  

CANTON’S MILLAGE RATE HISTORY & QUICK FACTS

The current millage rate for the City of Canton is 5.4 mills. Below is a chart of the historical millage rates of the City of Canton since 1997:

Year Millage Rate

1997 8.500
1998 8.250
1999 8.250
2000 8.250
2001 8.000
2002 7.500
2003 7.385
2004 7.115
2005 6.778
2006 6.256
2007 5.966
2008 5.950
2009 6.800
2010 6.800

• Ball Ground      6.888 Mills (4 mills for operations plus 2.888 mills for fire)
• Holly Springs   6.888 Mills (includes operations and fire)
• Waleska             4.925 Mills (2.037 mills for operations plus 2.888 mills for fire)
• Woodstock       5.677 Mills (includes operations, City provided fire, and parks bond)
• Canton                5.25 Mills (includes operations and fire)

In addition to operating under the lowest effective millage rate (less added fire mills and a parks and recreation bond mill) for a full-service City in Cherokee County, Canton residents also benefit from the lowest sales tax rate in Georgia (6%) and Canton seniors (age 62 and up) receive a full exemption of property taxes on the fair market value of a home up to $280,000.

Annual Operating Budget

The City of Canton's General Fund Budget is projected to increase from $27.8 million to $30.5 million for FY26. This $2.7 million rise in expenditure will be balanced by augmented revenue collections from property tax ($783,000), franchise fees for utilities ($182,000), occupational and alcohol taxes ($400,000), an adjustment in indirect cost accounting ($764,000), and an increased use of fund balance compared to the previous fiscal year ($1,342,000). Additionally, this budget accounts for a reduction in revenues related to decreased fines and forfeitures due to less frequent RedSpeed violations (-$568,000).

Personnel
The City employs 144 full-time staff members, with 143 positions currently occupied. Among these, nine employees are fully compensated through enterprise funds (Water and Sewer Fund). The average hourly pay for non-exempt full-time employees is $28.98. Hourly sworn police personnel, working 2,236 hours annually, earn an average annual salary of $72,695, while civilian hourly employees, working 2,080 hours annually, have an average annual income of $68,871. This category includes police officers up to the rank of lieutenant, public works technicians, court clerks, inspectors, support managers, finance clerks, administrative assistants, utility billing customer service representatives, technology support staff, community development customer service representatives, records clerks, investigators, public outreach personnel, and maintenance workers.

In preparation for the forthcoming budget, a thorough assessment was conducted to determine appropriate compensation adjustments for staff members in response to the rising cost of living. As per the Bureau of Labor Statistics, national compensation costs for state and local government employees increased by 4.3 percent over the twelve-month period ending March 31, 2025 (Employment Cost Index, ECI). Additionally, the Consumer Price Index (CPI) saw a 2.4 percent increase across all items during the same period.

The City adheres to a Step Pay Plan for sworn Police Department employees and field labor personnel within Public Works, incorporating standard schedules for step and grade increases. These adjustments are based on cost-of-living allowance (COLA) shifts to the schedule and an annual incentive tied to the employee’s anniversary date, resulting in a higher step. The proposed budget includes a 2.5 percent COLA applied to the step and grade schedule.

Management recommends a 2.5 percent COLA for all employees not involved in the Step Pay Plan, along with a $1,000 salary adjustment on the employee's anniversary date. The COLA will be applied to all pay ranges to ensure competitive alignment with the local market. The anniversary adjustment aims to provide a service-based increase within the scale to mitigate future compression. The combined effect of the COLA and anniversary increases will position the majority of employees' salary enhancements between the nationwide CPI and ECI levels. Additionally, job descriptions and pay adjustments may undergo modifications throughout the fiscal year, depending on operational requirements for City programs and projects. The budget maintains the Christmas Bonus program at last year's level.

The current general fund budget accounts for seven new positions: a new Procurement Manager, a new Land Development Administrator, a new Special Events Coordinator, and the annualization of four Public Safety Ambassadors. The COLA, anniversary increase, and new positions result in a total wage expenditure increment of $1,057,327 for FY26.

The proposed budget includes:

• Up to a 10% increase in employee health benefits (employer share only).
• A 10% increase in workers' compensation insurance.
• An 8% rise in all other insurance.
• A 27% hike in fuel costs, primarily for public safety.
• A 32% increase in electricity, mostly due to new water and wastewater systems.
• A 4.8% rise in retirement expenses based on reports from GMEBS and MissionSquare.

In FY2026, the City plans to complete various projects, including:

• Expanding the water pollution control plant
• Designing SR 140 road projects in North Canton
• Implementing the first Transportation Master Plan Projects
• Constructing the South Canton Park and Ridge Pine elevated water tank
• Collaborating with Cherokee County on North Street designs and construction
• Resurfacing streets
• Upgrading stormwater systems
• Improving the water treatment plant
• Building the Etowah River Pedestrian Bridge
• Enhancing pedestrian and road infrastructure in Hickory Flat Highway and Marietta Road
• Upgrading waterlines at Highway 20 and I-575
• Enhancing restrooms at Canton Theatre
• Purchasing a new streetsweeper and bucket truck
• Starting a rewrite of the City's Unified Development Code
• Installing a traffic signal at Prominence Point
• Constructing the West Main to Mill Pedestrian CorridorRehabilitating the downtown fire station
• Improving the Public Safety and Municipal Court Complex
• Implementing an odor control project at Great Sky
• Completing various other infrastructure projects.

Use of Fund Balance
Since 2013, the City of Canton has relied on its reserves to maintain low property taxes. The proposed FY2026 Operating Budget includes the allocation of $3,745,319 from the fund balance. According to the most recent comprehensive audit, the City had an unassigned General Fund Balance of $14,406,879 as of September 30, 2024. With the anticipated use of the fund balance for the FY2026 Budget, the City would have sufficient operating reserves for just over four months ($2.5 million per month in average General Fund-only expenditures).

In the absence of a fund balance, the budget would necessitate the implementation of a millage rate of 6.982 mills.

The City Council will conduct a public hearing related to the adoption of the FY2026 Operating Budget.  This public hearing will be held on Thursday, July 17, 2025 at 6 p.m. in the City Hall Auditorium at 110 Academy Street.  

Respectfully submitted,

_____________________________________
Billy Peppers,
City Manager