One would think that metro Atlanta, and particularly the north Fulton area, with its high quality of life and great neighborhoods, is sufficiently attractive to lure major corporate relocations without any inducements or incentives.
However, in today’s ultra-competitive economy, with intense international, national and regional competition, aggressive economic development techniques and efforts are generally necessary to compete successfully in contemporary corporate relocation contests.
These days, corporate relocation decisions rarely are made on the basis of subjective judgments favoring one area over another, but instead corporations usually engage consultants who analyze and compare alternative prospective sites utilizing objective measurements, including the availability and extent of economic incentives.
In most instances, Georgia must struggle to compete against economic incentives packages offered by competing urban areas within the southeastern region and beyond, because the Georgia Constitution is a bit more restrictive than comparable laws in neighboring states.
Although some modest grants and credits may be available in certain circumstances, Georgia is generally not able to match incentives offered by neighboring states. Specific recent examples include the new automotive manufacturing facilities (i.e., Mercedes and BMW) which were induced and facilitated by substantial grants and other sizeable direct economic transfers from the states of Alabama and South Carolina, respectively.
However, Kia Motors’ manufacturing plant in West Point, Ga., is an example in which Georgia prevailed against stiff competition through its use of economic development incentives in the form of a sale/leaseback taxable bond financing with the local development authority. Moreover, with the corporate relocation of major commercial names such as United Parcel Service, Newell Rubbermaid and Invesco, the north Fulton area has directly benefitted from the same form of economic development incentives provided by the Development Authority of Fulton County.
Established by the Fulton County Board of Commissions in 1973, pursuant to the applicable state law, the authority, with its nine members appointed by Fulton County’s commissioners, has issued billions of dollars in tax-exempt and taxable bonds which have added millions of dollars of additional value to the property tax base and created thousands of new employment opportunities within Fulton County.
The authority has issued a substantial volume of traditional tax-exempt bonds over the years for the benefit of a great many important Atlanta non-profit institutions, including Piedmont Hospital, Georgia Tech, Woodward Academy, Shepherd Clinic, and the Woodruff Arts Center. None of the bonds ever issued by the authority involved an investment or commitment of any public funds, and these debt obligations have no adverse or other impact upon the credit rating or financial status of Fulton County government.
The aforementioned sale/leaseback taxable bond transactional structure, which is used extensively throughout all of the metropolitan Atlanta area and across the state of Georgia, has been the target of some misguided criticism lately, particularly in connection with some recent local commercial development projects.
However, the authority has utilized this financing technique to spur commercial development – and most important, create several thousand new jobs – during this very difficult economic climate.
In this sale/leaseback transactional structure, the authority issues its taxable bonds for the benefit of a specified project to be constructed and operated by a company. The project site is then deeded to the authority for a period of 10 to 12 years, and leased back to the company, which benefits from a reduced real estate tax valuation from the Fulton County Board of Assessors once the project is completed and the stipulated number of new jobs are created.
This transactional structure does not constitute any form of current property tax relief, but represents an incentive for future development and job creation – with no tax benefit derived until the desired project is created and the stipulated number of jobs created.
Moreover, it is important to note that this structure, as illustrated by the important projects referenced above, represents the most important economic development tool available within the state of Georgia in the midst of intense, regional, national and international competition.
As reflected in the multitude of successful projects of the authority, this economic development technique has yielded substantial benefits for the metropolitan Atlanta area, and remains an extremely important tool for Georgia to compete in the world of contemporary economic development.
Robert J. Shaw chairs the Development Authority of Fulton County.