By Jody Steinberg
Heeding words of caution from DeKalb County CEO Burrell Ellis, the Board of Commissioners and its own underwriting adviser, the Development Authority of DeKalb County on June 18 deferred a decision on a proposed 20-year, 100 percent tax abatement worth $52 million for the Sembler Co.’s Town Brookhaven, pending a review and revision of the authority’s policies.
The proposal was charged with controversy as DeKalb residents, mobilized by Rep. Mike Jacobs (R-Brookhaven), decried the authority for even considering the abatement.
“Using tax abatements in an area where houses are $600,000 makes a mockery of what the tools were developed for,” said Viola Davis, a self-described “voter who cares” who lives off Memorial Drive in an area more in need of economic development incentives.
“You can’t make a developer invest in a certain area. You can use TADs (tax allocation districts) and abatements to entice them, but if you use them all up in the areas that don’t need them, then what will you have left?” she added.
The Development Authority uses tax incentives and issues bonds to promote economic development and attract investment to the county. When Sembler announced Town Brookhaven, it promoted the upscale demographics and proximity to Buckhead. But at a recent community meeting organized by Jacobs, Sembler President Jeff Fuqua suggested the Peachtree Road corridor is blighted.
Because of the controversy, the authority’s June meeting was unusually crowded. While Brookhaven residents generally have expressed a desire to see Town Brookhaven completed, most who have spoken on the issue oppose subsidizing an existing project so substantially with tax dollars — especially without the approval of officials accountable to voters.
The authority’s chairman, Eugene Walker, called the meeting to order, then recused himself from the discussion and vote. Walker also is on the Board of Education, a position he won with the help of donations from Sembler associates. The school system stands to be the biggest loser if Town Brookhaven’s 1,000 residences pour children into the schools while the development’s property taxes are abated.
Town Brookhaven was granted a 10-year tax abatement Dec. 29. Estimated at $20 million, that abatement is a graduated tax exemption: Owners pay 5 percent of property taxes the first year, and the percentage rises annually to 100 percent in the 11th year. As the economy continued to falter, Sembler sought to enhance its abatement. Under the proposal, Sembler would deed the Town Brookhaven properties to the authority, which would finance the purchase with bonds and lease the tax-exempt property to Sembler for 20 years.
The Development Authority asked Wachovia Securities expert Dick Leyton to analyze the cost/revenue projections that KPMG created for Sembler and assess the fiscal impact of Town Brookhaven on DeKalb and the school system. Over 20 years, the net benefit to the county, schools and MARTA after costs (infrastructure, schools and tax exemption) could exceed $100 million, Leyton concluded.
While other counties also offer abatements for 20 to 25 years, Leyton said: “In all cases, abatements start out higher and decrease over time. The 20-year, 100 percent abatement is a significant departure from existing policy, and any significant change in a policy should be approved” by an elected body.
In his letter to the authority, Ellis called the proposal an “unusual departure from existing policy that increases the county’s exposure to market risk” in uncertain economic times. He urged the authority to “be careful to neither create new policy nor carve out exceptions to existing policy to favor a specific investor or project.”
County Commissioner Jeff Rader presented an anti-abatement resolution signed by most of the commission. Questioning their motives in considering such incentives for a business already invested, Rader told authority members that some of the projected sales tax revenues would be displaced from other businesses.
Rather than cannibalize retail sales from neighboring areas, Rader encouraged investment to attract new businesses with national sales, such as NCR, which is moving its headquarters to Gwinnett.
After the authority voted to postpone a decision and to develop a policy of best practices in economic development, member Vaughn Irons commented on the outpouring of public interest, inviting more of it.
“My heart is heavy that one project has so much more attention than all the things we do that serve the county so well,” he said.
But some attendees questioned what the outcome would have been without the public outcry and the wake-up call from Jacobs.
“The issue of transparency still needs to be addressed by this board,” authority member Michael Williams said.