The Atlanta City Council is joining the call for the Development Authority of Fulton County to stop granting tax breaks to developers within city limits, reviving a major, metro-wide political controversy that went dormant during the early months of the pandemic.
City Councilmember Matt Westmoreland on Sept. 8 introduced a resolution, co-sponsored by 13 of his 14 colleagues, calling for such deals to be provided only by Invest Atlanta, the city’s own development authority, and in accordance with a recently adopted “Economic Mobility, Recovery and Resiliency Plan.” That plan is focused on policies to create middle-income jobs and affordable housing and to support small businesses.
The resolution specifically cites DAFC’s Aug. 25 approval of tax abatements valued at over $11 million for three projects, including two in the hot areas of Atlantic Station and the Atlanta BeltLine. All three are in tax allocation districts, or TADs, where developers already get a different kind of tax break where they are allowed to keep the value of their property taxes for use in infrastructure on the site. The granting of tax abatements within TADs is especially controversial, with critics calling it a form of double-dipping that also delays the conclusion of the TAD deal.
“Tax abatements should be used to support projects committing to deeply affordable housing and projects in disinvested neighborhoods in need of middle-wage jobs, grocery stores and other amenities,” says the council resolution, whose co-sponsors include Buckhead-area Councilmembers Jennifer Ide, J.P. Matzigkeit and Howard Shook. Such breaks affect the budgets of Atlanta Public Schools and all city departments, including police and firefighters, and homeowners and renters pay an increased burden in property taxes, the resolution says.
The resolution has yet to be voted on, but its future approval appears clear given the vast majority of co-sponsors, and its unofficial political message is obvious. Westmoreland noted on social media that the council cannot legislate such a prohibition on DAFC activities, but said that “we can speak with a unified voice” about it.
“This resolution does not tell the whole story,” said DAFC CEO Al Nash in a written statement on behalf of the agency. He said the council fails to mention that such projects are “bringing tech jobs from Microsoft and Google when tech office space in other cities are losing leases”; that they create “more affordable housing that meets all city guidelines they have put in place”; that they may involve infrastructure improvements, such as a sewer line in Peoplestown; or that the deals mean “millions of dollars in taxes collected on blighted properties” that would have stalled due to cleanups or other challenges.
“These are harder stories to tell as they go beyond what can be shared in a tweet or a headline, so we’ve always offered to meet with city and school leaders to review the comprehensive reports we provide to their staff,” Nash said. “We want them to gain a deeper understanding of these projects, including why incentives are needed and the overall benefits. During these unprecedented times, it’s even more important for us to look for ways to solidify and strengthen our partnership to ensure economic development continues within the city of Atlanta and Fulton County.”
But controversy continues to rage over when tax abatements are appropriate and who should grant them.
Criticism from such high-profile figures as former APS Superintendent Meria Carstarphen drew increasing scrutiny to tax abatements over the past three years. The heart of the controversy is that many abatements go to luxurious projects in such hot real estate markets as Buckhead and Midtown, where it appears that projects would be built without any incentive. Such tax breaks, critics argue, pad the pockets of wealthy developers with money that should go to public schools and other civic needs, and which must come from tax increases on homeowners and renters instead.
Amid debate late last year, the DAFC for the first time in memory rejected a tax break request. The denial was for an estimated $2.2 million tax break for a tower proposed by the Loudermilk Companies, one of Atlanta’s largest developers, in Buckhead, which is possibly the hottest real estate market in the Southeast. That project at 359 East Paces Ferry Road moved ahead without the incentive and is now being leased by the company as “high-powered, boutique-style office spaces.”
The recent scrutiny led DAFC to institute some reforms, including publicly revealing the estimated value of the tax breaks it grants. DAFC also has arranged deals to get some public benefits in exchange for tax breaks, such as creation of affordable housing units, but also has no mechanism to confirm such goals are met or to get the money back if a developer fails to meet them.
Another controversy is whether county development authorities should be granting such tax breaks in cities that have their own development authorities, often with differing policy goals and standards. Invest Atlanta itself last year told DAFC to stop operating within the city, which the county agency refused to do; the City Council is now joining that call. Also last year, the city of South Fulton and DAFC got into a major conflict over which agency should grant a tax break for a commercial development, which led some state legislators to file a bill preventing DAFC from operating within cities.
Atlanta is not the only city experiencing tax break controversies. A major dispute is underway between DeKalb County and the city of Brookhaven over the city development authority’s recent approval of a $13.5 million tax break for a mixed-use project under the code name “Project X.” County Commissioner Jeff Rader has blasted the deal as an unnecessary giveaway for a project that would have been built anyway. The city says the overall value of the project makes it worthwhile.
Correction: A previous version of this story gave an incorrect title for Nash.