By Gerhard Schneibel

Not rolling back the Sandy Springs millage rate in fiscal 2009 would only minimally affect residential property owners, City Council members supporting the property tax increase recently said. But some in the business community foresee a substantial downside to the council’s plan to keep an estimated $2.7 million in additional tax revenues.

Commercial and industrial properties absorbed the brunt of a recent property value reassessment done by the Fulton County tax assessor’s office in Sandy Springs. Their reassessment accounted for four-fifths of the 13.5 percent increase in city property values, some of which can be attributed to economic growth.

Burt Manning, the chief appraiser for the Fulton County Board of Assessors, recently said he expected double or triple the number of appealed commercial reassessments countywide this year compared with 2007. Some properties were last assessed 17 years ago, and about 85 percent of Fulton County commercial property owners will experience tax increases this year, he said.

According to Sherian Wilburn, the president and CEO of the Sandy Springs/Perimeter Chamber of Commerce, substantial reassessment and the economic downturn make a millage rate rollback necessary to avoid the possibility of businesses moving out of Sandy Springs.

“This sets back [businesses’] ability to do many things that they might want to do, like hire more people, expand a product line or build new facilities. You have to be sensitive to the fact that businesses are not bottomless money pits. They suffer in the same economic cycles that individuals do,” she said.

“When an employer sees that the business community is not supportive, they start looking elsewhere,” Wilburn added. “Say you’re over in the Perimeter area, and you look at a piece of property in Sandy Springs, and you look at a piece of property over the line in DeKalb County. What do you think you’re going to do? You’re going to go to the one you feel like has the most favorable business environment. And we’re already seeing companies that are saying they’re going to put expansions elsewhere.”

Pat Chesser, the vice president of development with Ackerman & Co., works to develop mixed-use properties in Sandy Springs, including Abernathy 400, at Abernathy Road and Ga. 400, and Perimeter Town Center, at Peachtree-Dunwoody Road and Hammond Drive. He explained that turning a profit on development has become difficult under recent circumstances.

“Right now, with energy costs going up as they are, with the tax readjustments going up as they are and with rents staying flat — or conversely going downward because of vacancy issues in Sandy Springs — you’re going to see net revenues falling from buildings. This is very discouraging for a property owner in the city of Sandy Springs,” he said.

The lack of a millage rate rollback, he added, “just doesn’t help because you’re trying to scrape off as many crumbs as possible to make a project financially viable. It’s just hard to make a project financially viable with a decreasing spread between revenues and expenditures.”

Chesser also said the combined circumstances make it increasingly difficult for developers to justify some new projects to their home offices or to investors.

“A project is usually built if they can guarantee — or somewhat guarantee — a return of about 8 or 9 percent,” he said. “And with these taxes now inflating, that 8 or 9 could go down to a 7½ or 7 [percent]. It’s hard to make a building work, with today’s taxes, on a speculative basis.”

Chesser added: “The word on the street with Sandy Springs is that they are trying to be development-friendly, but trying to be a successful start-up city at the same time. They’re trying to be all things to all people if possible, and you’re going to short somebody. In this case it will be the commercial developers.”

Lonnie Mimms, who owns five shopping centers in Sandy Springs, said that under a standard commercial lease agreement, property tax increases are passed directly on to the tenant. The combined value of his property in Sandy Springs has been reassessed at a 66 percent increase.

“Sandy Springs is probably one of the best places in the entire metro area. It’s an unbelievable market, but you still have limitations. You still can’t price yourself too far beyond your competition or you’re going to lose your customer,” Mimms said. “The whole idea that these tenants are remote entities which we can just suck dry — because we’re just that darn good — is wrong. There are other markets they can go into. They don’t have to be in Sandy Springs necessarily.”

He added, “Bottom line is the city could reduce [the millage rate] substantially, and we’re still going to have a massive tax increase just based upon the increased assessment on the Fulton County side. The way the businesses are looking at this thing, this is a statement.”