Guest Column – Bill Bozarth, Executive Director of Common Cause Georgia
Recent news stories about slowdowns in commercial development in Buckhead and elsewhere brought some interesting facts to light. High-end projects such as the Mansion on Peachtree and the InterContinental Hotel Buckhead are getting help from a Fulton County agency to ease them through the hard times.
In an article in the Nov. 30 Atlanta Journal-Constitution, reporter Kevin Duffy describes how developers work through the Development Authority of Fulton County to arrange bond financing for their projects.
The developer of the St. Regis Hotel was quoted as saying the project would have been difficult to pull off without Development Authority help. What few people realize is that “Development Authority help” essentially equals taxpayer subsidy. We have the equivalent of our own local bailout going on here in Atlanta for the real estate and construction industry.
The use of Development Authority bonds for financing projects goes much deeper than most people know, and there is no check on whether a project is deserving of the subsidy.
Development Authority of Fulton County board member Jim Garcia has spoken out against the practices of the authority as having no criteria by which to judge projects brought to it by its own attorneys. “The board itself is poorly managed and approves nearly every deal that its attorneys recommend. The more tax breaks the board approves, the greater the burden on Fulton’s other businesses and homeowners.”
These high-end projects get the benefit of a tax rollback to 50 percent of the assessed value, which gradually returns to full value over 10 years. We are forgiving taxes on these high-end properties, thus reducing the overall collections significantly.
Development authorities were authorized under law to serve a useful purpose — to provide incentives for development where it is needed for the greater good of the community, such as creating jobs. But without proper oversight, the process is open to abuse.
The majority of the Fulton County deals don’t actually involve a financial transaction because the lessee is the bondholder, a structure known in the trade as a “phantom bond” transaction. That essentially means that Development Authority participation is nothing more than a mechanism for tax relief. The properties granted relief are often already built and operating.
Since Fulton’s Development Authority board attorneys are paid a percentage of the overall financing by the developers, their incentive is to get as many projects approved as possible. And that seems to be what’s happening. Even buildings standing for years are granted tax abatements.
Every three years, most Buckhead homeowners see increases in the assessments on their homes, meaning in most cases increased property taxes. Next time you see them coming after you, remember that we are not only being asked to keep up with the cost of services, but also being asked to make up the shortfall generated by this under-the-radar corporate welfare.