Guest Column – John S. Sherman, president of Fulton County Taxpayers Foundation
Research reveals that city and county taxpayers are subsidizing the most luxurious private developments in Buckhead, Midtown and downtown with extraordinary financing and tax concessions. The developments include the St. Regis Buckhead, the InterContinental Buckhead, The Mansion Buckhead, 3344 Peachtree Buckhead, Terminus Buckhead, The Mandarin Oriental Midtown and 55 Allen Plaza.
According to a member of the board of the Development Authority of Fulton County: “The more tax breaks the board approves, the greater the tax burden on Fulton County’s businesses and homeowners.” The records show the Development Authority of Fulton County together with the Atlanta Development Authority approved more than $3 billion in bond deals the past two years alone for the most luxurious buildings in this city.
How is this done?
The developers convey title to their sites to the development authorities, and the authorities, in turn, issue bonds and apply for the property tax concessions. The developers lease back their sites, and many developers use the bonds as collateral for financing the projects.
The tax concessions include a 10-year tax-relief plan, half the normal property tax for the first year, then 5 percent more each year until the end of Year 10. The financing and tax concessions are subsidized by the taxpayers of Atlanta and Fulton County. Yet the bond raising and tax incentives are in accordance with state law (OCGA 36-62-3).
When did subsidies begin?
The General Assembly passed the initial program in 1963 to encourage the development of blighted areas and to attract industries and jobs. As far back as July 13, 2007, the Atlanta Business Chronicle warned of a serious problem: “The Development Board attorneys who vet the deals are paid by the companies that petition for financing, not by the Board itself — and cannot collect their fee unless a deal is approved. That offers little incentive to weed out bad deals. The Development Authority of Fulton County is poorly managed and approves nearly every deal its attorneys recommend.”
According to the records, since 2007, the city and county development authorities have issued more bonds and tax concessions — for luxury properties — than in all previous years.
What is the justification?
In 2008, to attract industries and jobs, the state legislature renewed previous legislation to grant development authorities unusual powers: “Each authority created by this chapter is created for non-profit and public purposes, and the creation of each authority is in all respects for the benefit of the people of this state. For such reasons, the state covenants with the holders of the bonds issued under this chapter that such authority shall be required to pay no taxes or assessments imposed by the state or any of its counties, municipal corporations or taxing districts upon any property acquired by the authority.”
In 1981, the Georgia Supreme Court ruled (Citation 245GA277, the Harris Case) that sale/leaseback tax concessions were legal provided the leaseholds were assessed fairly and reasonably. The Supreme Court ruling requires that the sites be legally transferred to the local development authority. The development authority, in turn, approves issuing bonds, and the developers lease back the sites, selling the bonds or using them as collateral for financing. In addition, the Supreme Court ruling allows property tax concessions to leaseholder developers in accordance with state law.
The Fulton County Taxpayers Foundation is strongly in favor of assisting development in depressed areas of the state, sites that would not be built upon otherwise. But the Taxpayers Foundation questions the use of taxpayer dollars to subsidize superluxury projects.
How to correct this situation?
The Fulton County Taxpayers Foundation urges the amendment of OCGA 36-62-3 to include the following:
Investigate the Development Authority of Fulton County and the Atlanta Development Authority.
Confine such subsidies to blighted areas.
Provide professional oversight of the development authorities.
Each development authority should employ its own attorney whose primary client should be the taxpayers.
Allow for public scrutiny.
With the next session of the General Assembly convening in January, this is the perfect moment to contact the Senate and House leaders.