Friday, August 19, 2016

Risky Business

Commercial development is being done with tax subsidies, government grants and borrowed funds to develop mixed-use sites.  If these were not available, the investors who bought these sites would have paid less for these properties. To know if this will fail, you need to do an economic evaluation of the property as if no subsidies were available.

The former Doraville GM plant operated for decades as a single, large manufacturing facility and could function again as an industrial park, but not until we are able to regain our manufacturing base. Our current stagnation offers a zero-sum game of moving retail jobs around to multiple sites with expensive apartments.  This is unsustainable.

Tax money may be diverted for Doraville redevelopment. Local Govt & Politics By Mark Niesse and J. Scott Trubey - The Atlanta Journal-Constitution

A rendering of the corporate campus portion of the proposed Assembly development in Doraville. The Integral Group and partners propose converting the former General Motors plant in Doraville into a $1.6 billion mixed-use development. Posted: 12:00 a.m. Monday, July 18, 2016

The developer trying to revamp the abandoned General Motors plant in Doraville may be allowed to redirect tax money from the school system and other governments to pay for a concourse linking the site to MARTA.

Integral Group — along with other land owners on the site — could be given control over how to spend a portion of their property taxes. That money, roughly half of the taxes paid, would be dedicated to a covered street connecting the site to MARTA at a cost between $50 million and $75 million. If approved, the arrangement could be unprecedented in Georgia, said experts familiar with public financing of private projects. It also could be used to fund other infrastructure on site.

The DeKalb school system, which has resisted contributing to the project, wouldn’t have a say over the diversion of tax money for the Doraville site. A spokesman for the district expressed concerns about education taxes being devoted to a private venture.

The Doraville Downtown Development Authority, like economic development boards across Georgia, has the power to provide tax financing incentives to encourage business growth. The authority hasn’t yet finalized the incentives for the plant’s redevelopment or determined how much they’ll be worth.

Doraville Mayor Donna Pittman walks through the construction site of Third Rail Studios, one of the first developments at the former General Motors site, Monday, May 2, 2016. Taxpayers could still be responsible for funding redevelopment of the old GM factory in Doraville, even if the DeKalb County school board won’t sign on. The project could advance if developers seek tax breaks through local development authorities. That kind of public financing can be done without the school board’s say-so and cut nearly $400,000 from annual education revenue.

Backers of the project, called Assembly, want to make the 165-acre area a mini-city along I-285, with the potential for high-rise office towers, retail and housing. DeKalb schools didn’t sign off on an earlier incentive package, and this new arrangement will mean the project will move forward at a slower pace, said Eric Pinckney, an executive with the developer, Integral Group. “We are committed to the full vision,” he said. “The only thing that is in question is how quickly we can put (the infrastructure) in place.”

The street from the site to the MARTA station is essential, Pinckney told the development authority last month. Once businesses see that they’ll have access to public transportation, they’ll commit to building on the site.

After Labor Day, an unnamed out-of-state company plans to announce a relocation to the Assembly site, bringing between 300 and 500 jobs to a facility that's as large as 200,000 square feet, he said. An office developer is considering a half-million-square-foot speculative development. Tax incentives are a potent tool to attract businesses to relocate or expand in Georgia, but none has previously been structured like the Doraville project’s.

The site’s three property owners plan to create a community improvement district, or CID, to impose a tax on themselves to raise public money exclusively for the MARTA connection and future infrastructure improvements. The Commons, a park within the proposed Assembly development, on the former General Motors factory site in Doraville. The Doraville authority, meanwhile, would provide a tax abatement to eliminate local taxes equal to the CID tax, keeping the total tax burden for businesses on the site cost-neutral.

Taxes paid on the site totaled nearly $915,000 in 2014, with more than $460,000 going to the county school system. The Assembly project incentive plan is unprecedented, said Sarah Larson, a senior researcher at Georgia State University’s Fiscal Research Center and expert on CIDs. The structure would effectively give Integral, which controls the bulk of the site, an outsized say over millions of dollars in public funds.

There are currently about 25 active CIDs that tax themselves a little extra for items like infrastructure, parks, security and beautification, she said. The Assembly CID would charge its businesses 25 mills in property tax, the maximum allowable under state law. Most CIDs levy about three to five mills.

CIDs provide an important way for businesses to raise money for specific upgrades, without having to wait on local governments to determine spending priorities, said Yvonne Williams, president and CEO of the Perimeter CID.

“It’s a new system rather than waiting on government to 100 percent finance everything,” Williams said. “We want to have skin in the game. We want to be part of the opportunity to create opportunities that add value to our properties.” The Doraville Downtown Development Authority could vote in August on the specific value and terms of the abatements. The developers and the city of Doraville would have preferred to work with the DeKalb school system on a different financing mechanism, called a tax allocation district, or TAD.

Unlike the current funding proposal, a TAD would have preserved the current tax base for the school system and other governments, and future growth in property tax revenue would have been used to pay for infrastructure improvements.

The school district could still participate in a TAD for the parts of the tax base that aren’t abated by the development authority, said Doraville City Manager Shawn Gillen. “We’re not giving up. The TAD is the best path forward,” Gillen said. “The school district is losing out on tens of millions of dollars. … We’re redirecting the tax dollars to a specific purpose to allow the development to happen.” The school system asked the developer to answer detailed questions about the TAD but hasn’t received answers, said spokesman Quinn Hudson.

“It takes resources to give kids a great education, resources to hire and retain the best teachers, resources to provide the best professional development, and resources to grow the best talent,” Hudson said. “The district is always concerned when these resources, necessary to educate DeKalb’s 102,000 students, are put in jeopardy.”

School board Chairman Melvin Johnson said the board hasn’t discussed the TAD proposal or the tax abatement plan. Tax incentives wouldn’t be the only funding source for Assembly’s infrastructure.

The project recently received a $1.5 million state grant, and developers plan to also seek federal Transportation Investment Generating Economic Recovery (TIGER) grants worth millions of dollars. In addition, the city of Doraville already approved a tax allocation district for the site, and it could grow in value if the county government and school system sign on.

Doraville development financing
Property owners of the 165-acre former General Motors site have formed a community improvement district, a partnership that allows them to tax themselves to pay for infrastructure.

The community improvement district plans to impose a tax on itself to pay specifically for a covered street and other infrastructure connecting the site to the Doraville MARTA station. Two of the businesses in the CID, Doraville Sixty and Studio Sixty, are majority owned by the developer, Integral Group. The third business is Atlanta Real Estate Holdings, which is building auto dealerships on the site.

The Doraville Downtown Development Authority could vote next month to provide tax breaks worth as much as the community improvement district’s tax, resulting in no net increase in taxes for the businesses. That would have the effect of diverting tax dollars from the city, county and local schools to infrastructure projects on the property.

The tax breaks could amount to roughly half the property taxes collected from the site. In 2014, taxes on the site totaled nearly $915,000.

Related

http://www.myajc.com/news/news/local-govt-politics/tax-money-may-be-diverted-for-doraville-redevelopm/nryzB/


Norb Leahy, Dunwoody GA Tea Party Leader

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