Tax breaks granted to developers by bodies called development authorities are under growing scrutiny in metro Atlanta’s hot real estate market. But behind the issue of when to grant tax breaks is another question: Who should grant them in local cities – local authorities or their county versions? And what happens when one says no to a developer and the other says yes?
The Development Authority of Fulton County is facing a call from Atlanta’s authority to stay out of its turf and state legislation that would bar the DAFC from operating within cities without local government approval. The development authority in DeKalb County, known as Decide DeKalb, has better relationships with local cities now, but four years ago stirred controversy with the city of Brookhaven for lack of notice on major tax abatements that hit its budget unexpectedly.
“It is not in the interest of a city’s residents to allow developers to play a county development authority off against that city’s development authority for tax breaks. That is what happens now,” said Julian Bene, a critic of tax breaks and a former board member of Invest Atlanta, that city’s development authority. “A city development authority tends to be more accountable and responsive to the needs of its residents and protective of their tax burden.”
Leaders of the county authorities disagree.
“Overall, DAFC serves an extremely important purpose in Fulton County, as its focus is on economic development that benefits Fulton County as a whole and the needs of all of its residents and not just those in one particular municipality in isolation,” said DAFC Executive Director Al Nash in an email. “We always look forward to solidifying and strengthening our partnership with the municipalities to ensure economic development continues within Fulton County.”
“We are extremely intentional to coordinate with cities,” said Dorian DeBarr, the interim president of Decide DeKalb. “[We] don’t want developers to game the system.”
But the details of county authority tax breaks can be opaque. Only last year, after decades in operation, did the DAFC start publicly releasing the estimated value of the tax abatements it provides. For years its agendas did not even list the location of many projects. Decide DeKalb cut one tax-abatement deal in a local city last year that it refuses to divulge. “We do work for the public but some companies don’t want to be named until they announce,” said DeBarr.
Both county authorities say they make deals that “create” — often meaning relocate — jobs, and in DAFC’s case, some affordable housing units. But they lack mechanisms to confirm that those goals are met and there appear to be no way for the authorities to get full taxes paid if the developers don’t hold up their end of the bargain.
In contrast, city development authorities in Brookhaven and Sandy Springs have created “payment in lieu of taxes” agreements that get some of the abated money back for city purposes, such as building new streets or acquiring land for city facilities.
Citizens may not be aware of the tax breaks, or have difficulty in discovering why a particular authority granted them. Sandy Springs in recent years promoted the development of a new downtown area with luxury apartment complexes that have been both lauded as modern and criticized as traffic-generators. Of five new apartment complexes, four have received tax abatements – two from the city and two from the county.
Tax break powers
Development authorities are government-created, but independently operating and self-funding, bodies that can offer incentives and property tax abatements in a variety of ways. Fulton and DeKalb counties have development authorities, as do many local cities, including Atlanta, Sandy Springs, Dunwoody and Brookhaven. A powerful deal-making ability authorities wield is to issue bonds on behalf of a developer, using its tax-exempt status to grant a partial property tax abatement for a period of time, usually 10 years. The general rationale is to promote economic development.
The DAFC has been targeted with criticism for years for granting abatement deals on luxury projects in such hot markets as Buckhead and Midtown, where there appears to be little need to spur economic activity. Atlanta Public Schools Superintendent Meria Carstarphen, herself a former DAFC board member, is a fierce critic of such deals, with the controversy ballooning to major proportions again over the past two years. Carstarphen has said various tax breaks cost her system tens of millions of dollars in lost revenue each year.
In fiscal year 2019, the Fulton County School System lost $6.2 million in “potential revenue” from various abatements and incentives, and $4.8 million in fiscal 2018, according to Chief Financial Officer Marvin Dereef. In 2019, the DeKalb County School District lost $3.9 million to tax abatements, according to interim Chief Financial Officer Robert Morales.
The county authorities say that the developments they assist boost the tax base enormously. Critics argue that many of the developments would have happened anyway, so the abatements are giveaways of money.
Brookhaven and Dunwoody have good relationship and communications with Decide DeKalb, according to city spokespersons. And in Sandy Springs, Mayor Rusty Paul, a professional marketer and lobbyist, has had the DAFC as a client for about 15 years. He said that when the DAFC contacts city government, it does so through the city manager in a process that does not involve the mayor.
Relationships are more strained in the Atlanta area, where the DAFC cuts far more local tax abatement deals than Decide DeKalb does.
Last year, Invest Atlanta’s president and CEO, Dr. Eloisa Klementich, sent Nash a letter asking DAFC to stop cutting bond-based tax abatement deals within the city limits. She questioned the legality of such deals; said her board is more representative of local taxing jurisdictions; and noted a divergence in the two authorities’ policies on affordable housing. She also raised the issue of “perspective” from the local point of view. “We think it is essential to be at the table for the conversation and the future development in the city,” she wrote.
The recently incorporated city of South Fulton was the scene of another tax abatement dispute last year.
Major controversy erupted over whether the local government’s authority or the DAFC should grant a tax break for a major commercial project. Controversy within the city government dragged on for weeks, as the Atlanta Journal-Constitution reported, at one point threatening to remove South Fulton Mayor Bill Edwards and a City Council member from office.
As a result, a state legislator has filed a bill that would bar the DAFC from granting such breaks within cities without the approval of local governments and school boards.
State Rep. Derrick Jackson (D-Tyrone) said he filed House Bill 986 to promote conversations between the DAFC and local leaders. “You would think that would happen naturally, but unfortunately it did not,” he said. “… The whole goal is to make sure development authorities touch base with local municipalities.”
Paul, the DAFC lobbyist, said before the bill’s filing that he was aware of its general approach.
He called it “more punitive than policy-setting. It singles out DAFC and leaves the other development authorities operating in the county out of the proposed regulation.” Paul said he understands the intent was to “start a conversation about the relationships among the cities and the two school boards [in Fulton and Atlanta]. That discussion is healthy and I look forward to it.”
One provision of Jackson’s legislation would bar an elected official from chairing a development authority, to avoid what he called “tension and confusion” about political roles. But local input is his main goal, he said. The bill would bar the DAFC from acquiring property, granting any tax abatements or “undertak[ing] any project” within cities without the “approval” of the local board of education and the city government.
“Although it’s great the county can come in… the county may not be familiar with their comprehensive plan, the land use, just the whole arch of having a particular vision for that city,” Jackson said.
Nash said that DAFC’s perspective has its own advantages. “The need to have a development authority that crosses city lines and takes into consideration Fulton County as a whole cannot be overstated,” he said. “People oftentimes reside in one part of Fulton County and work in another part. In addition, proposed projects may be located in multiple cities [or] jurisdictions, which is something DAFC is well-equipped to handle and has done so in the past.”
Jackson noted that abatements can affect local governments and school system revenues, where people have elected representatives to oversee the operations. “Keep responsibility and accountability where they belong,” he said.
Local projects with tax abatements
The following are projects with tax abatements provided through bond issuances by county development authorities within Reporter Newspapers communities in the past 10 years. Abatement values are estimated. The Development Authority of Fulton County did not report estimated abatement values until 2019.
- 1001 Perimeter Summit office tower, 1001 Summit Boulevard, Brookhaven. Abatement of $2,349,439.
- Elekta, Inc. headquarters, 400 Perimeter Center Terrace, Dunwoody. Abatement of $745,404.
- Perimeter Summit 9009, 4000 Summit Boulevard, Brookhaven. Abatement of $2,834,877.
- Perimeter Summit Hotel PT LLC, 7000 Summit Boulevard, Brookhaven. Abatement of $2,072,097.
- Source One Direct commercial printer, 1800 B Northeast Expressway, Brookhaven. Abatement of $1.9 million.
- Zurich North American Insurance Company, 1001 Summit Boulevard, Brookhaven. Abatement of $8.9 million.
- 99 West Paces Ferry Road apartments/mixed-use building, Buckhead. Abatement of $3,355,560.
- 371 East Paces, medical building, 371 East Paces Ferry Road, Buckhead.
- Aaron’s building renovation, 309 East Paces Ferry Road, Buckhead.
- AMLI 3464 apartments, 3464 Roxboro Road, Buckhead.
- AMLI Oak Valley apartments, Oak Valley Road, Buckhead.
- Arabelle Perimeter apartments (formerly Hanover), 1110 Hammond Drive, Sandy Springs.
- Cliftwood apartments, 185 Cliftwood Drive, Sandy Springs.
- CORE at Lindbergh Station apartments, 741 Moresgo Drive, Buckhead.
- Cox Communications headquarters, Peachtree-Dunwoody Road, Sandy Springs.
- Elle apartments, 235 Pharr Road, Buckhead.
- Global Payments headquarters move and renovation, 10 Glenlake Parkway, Sandy Springs, and 3550 Lenox Road, Buckhead.
- Hampton Inn & Suites Atlanta Buckhead Place hotel, 3312 Piedmont Road, Buckhead.
- Hyatt House hotel, Peachtree-Dunwoody Road and Lake Hearn Drive, Sandy Springs.
- Icon Buckhead apartments tower, 3372-3374 Peachtree Road, Buckhead.
- Kroger supermarket, 2450 Morosgo Way, Buckhead.
- Mercedes-Benz USA headquarters, Barfield Road/Mercedes-Benz Drive, Sandy Springs.
- Modera Buckhead apartments, 3005 Peachtree Road, Buckhead.
- Overture Buckhead South senior housing, 658 Lindbergh Drive, Buckhead.
- Phipps Plaza mall, redevelopment of former Belk department store, 3500 Peachtree Road, Buckhead.
- Plaza at City Springs shopping center, 5840 Roswell Road, Sandy Springs.
- SkyHouse Buckhead apartments, 3390 Stratford Road, Buckhead.
- Sobu Flats condo redevelopment, 374 East Paces Ferry Road, Buckhead.
- Square One apartments, Hammond Drive and Roswell Road, Sandy Springs.
- Three Alliance office tower, 3550 Lenox Road, Buckhead.
- Tower Place office/retail renovation, Tower Place Drive, Buckhead.
–John Ruch and Dyana Bagby