By Jody Steinberg
DeKalb County residents have grilled Sembler Co. President Jeff Fuqua so many times that when he arrived at a community meeting June 8 at Chamblee United Methodist Church, he took one look at the steadily filling parking lot and left.
He returned to face more than 250 people who wanted to hear him, state Reps. Mike Jacobs (R-Brookhaven) and Fran Millar (R-Dunwoody), and Dist. 2 DeKalb Commissioner Jeff Rader discuss Sembler’s proposal for a 20-year, $52 million tax abatement for Town Brookhaven, which is before the DeKalb Development Authority (DDA).
Progress has slowed on the 54-acre mixed-use project off Peachtree Road, originally scheduled to open this fall. Sembler says it needs the 20-year tax break to finish the commercial and residential buildings. In December, the developer was granted a 10-year step-down property tax abatement. But the developer soon decided to ask for more: 100 percent property tax forgiveness on parts of the project for 20 years.
“There’s not a person in this room who doesn’t wish they could take their investments from a year ago and switch them to something else,” Millar said at the June 8 meeting.
Millar and Jacobs have expressed frustration that the DDA, an appointed board, has the power to commit large amounts of tax dollars.
Until recently, the authority operated under the radar, exercising its power to grant tax abatements and float bonds on behalf of DeKalb taxpayers for projects considered good for the county. Jacobs, Millar, Rader and others questioned the DDA’s ability to operate without a clearly defined policy or stated objectives.
“There’s not one elected official whose neck is on the line with this decision, and it needs to be,” Jacobs said. “Ultimately, you want elected officials who must balance the budget to make decisions of this scope.”
Jacobs has introduced legislation to rein in development authorities. But no law exists to curb the DDA’s power, and, in spite of calls to put the vote before the County Commission and county Board of Education, the authority could approve the Town Brookhaven abatement at its monthly meeting June 18.
“Tax abatements are designed to lure business, not to make investors whole after they have gambled and lost,” said Jim Smith, the president of Stand Up DeKalb, an advocacy group that supports smart development and battled Sembler the past couple of years over a now-withdrawn redevelopment proposal at North Druid Hills and Briarcliff roads. “Sembler built a project that any number of land-use and commercial real estate professionals said was a bad idea, and now they want the taxpayers of DeKalb to suffer the results.”
Fuqua defended the tax break on the grounds that the county would lose economic activity and sales taxes without Town Brookhaven.
“We are not asking for an abatement of current taxes,” he said. “We’re asking for a portion of the taxes that we create.”
Consulting firm KPMG projects that the development could generate $110 million to $159 million in taxes for DeKalb in the next 20 years from retail sales and the properties that are not part of the abatement.
“Sembler keeps repeating the mantra that no harm will fall to the taxpayers, yet somehow the increase in services and transportation resulting from the project must be paid for from the tax digest that they would not be contributing to,” said Smith, who said the development with abatements would generate only about $19 million for the county.
One reason is that only a fraction of the retail sales taxes would end up in DeKalb coffers, Jacobs said. After state taxes and MARTA and SPLOST pennies, 1 cent goes to the county, and it’s split 80/20 to reduce residential property tax bills and invest in infrastructure.
According to minutes from the April 14 DDA meeting, DeKalb Finance Director Mike Bell also suggested that the Sembler assumptions are too aggressive and that the DeKalb County School System is most likely to lose.
The DDA’s chairman, Eugene Walker, also serves on the school board and objected to Bell’s “negative projections.”
Millar said too many ad hoc decisions create a slippery slope for county policy. “This is a big developer asking for a tax break in the middle of the project, and Brookhaven is not a distressed area. If we grant it to them, what do we tell every small business that is suffering from this economy about why we can’t help them?”
He added: “If the assumptions in this proposal don’t hold true, then DeKalb County taxpayers will own it, and I don’t like the government owning businesses.”
Many Sembler mixed-use projects are in blighted areas, so local governments are eager to offer the company inducements. But Sembler sometimes has skirted financial liability by dumping its interest in losing investments.
In Tampa, Fla., Sembler and partners used government incentives, including a $9 million federally backed loan, to build Centro Ybor, which opened in 2001 amid hopes that it would improve Ybor City. The owners of the retail and entertainment complex defaulted on the loan in 2004, the same year Sembler sold its 25 percent interest to new investors. The city had to make $750,000 annual loan payments.
Sembler and partner Fred Bullard were the faces of BayWalk, a retail and entertainment complex in downtown St. Petersburg, Fla., but the city invested more than $20 million in land, parking and infrastructure. Sembler leveraged partnerships for much of the $50 million complex, which opened in 2000, was struggling by 2005 and went bankrupt this year.
Now Sembler is looking to the DDA.
Fuqua said Sembler has invested close to $200 million in Town Brookhaven, and that number could double before the project is completed. He said Sembler has lined up five anchor tenants for the project and alluded to 70 “Main Street” local tenants that need the developer to bankroll their start-up costs.
He estimated that a fully built Town Brookhaven could generate 1,000 jobs.
But he declined to offer projections adjusted to current economic conditions or to say what Sembler will do at Town Brookhaven if it does not receive the increased tax abatement.