Business incentive deals
catch Brookhaven off guard Local Govt &
Politics By Mark Niesse and J. Scott Trubey - The Atlanta Journal-Constitution,
10/20/15
DeKalb County’s
economic development agency recently made a splash by approving millions of
dollars in tax incentives for two businesses in Brookhaven.
There was just
one glitch: No one told Brookhaven officials that those tax breaks would come,
in part, at the city’s expense.
That lack of
communication is alarming to Brookhaven Mayor Rebecca Chase Williams.
“We want to
know what’s going on when somebody is giving away our taxes,” she said Tuesday.
“How does something like this happen?”
At issue are
$7.4 million worth of tax breaks that the Decide DeKalb Development Authority
approved Oct. 8 for two companies. Developer Seven Oaks Company
plans to build an office tower at Perimeter Summit along I-285, and Source One Direct is
expanding its credit card customization facilities.
The Decide
DeKalb Development Authority board voted unanimously Oct. 8 to approve bond
financing deals to support the Perimeter Summit and ... read more
The Decide DeKalb Development Authority board voted unanimously Oct. 8 to
approve bond financing deals to support the Perimeter Summit and Source One
projects. MARK NIESSE / MARK.NIESSE@AJC.COM
Decide DeKalb, like
many authorities, provides tax breaks through complicated bond deals to encourage business
growth.
Both of the
companies are expected to pay taxes to local governments, but not as much as they
would without the incentives. After accounting for the tax discounts, the
projects are projected to generate more than $26 million for local governments
over the next 20 years, according to studies conducted for DeKalb’s authority.
Brookhaven will
forego more than $500,000 in revenue over that time. The rest of the incentive
comes from DeKalb County’s government and its public school system.
Related
Decide DeKalb
Development Authority President Ray Gilley said Tuesday he will improve
communications to ensure that all governments involved are well informed.
“We’ll talk to
them to understand their concerns and how we can better work together,” he
said. “We need to help everyone understand that these investments are
strategically important for the county.”
But DeKalb
Commissioner Nancy Jester said she’s concerned when one part of the government
can take money from a city without any review or safeguards.
“I’m very
disturbed to learn that everyone is not informed thoroughly and hasn’t had time
to vet these projects,” Jester said. “If we don’t have some boundaries, at what
point should the Legislature get involved?”
Seven Oaks CEO
Bob Voyles said in an interview Tuesday that he spent much of the day calling
Williams and other Brookhaven officials to help ease any concerns.
The incentives
approved this month by the authority are the fifth such bond issue on the
Perimeter Summit project since it began. Previous bond inducements and tax
breaks were involved in the development of earlier office towers and a Hyatt
hotel on-site, he said.
These bond and
incentive deals are routine for major office developments and other big real
estate projects that generate jobs in metro Atlanta, Voyles said. The
incentives are vital to making the finances work, he said.
In the case of
the Perimeter Summit project, the bonds are not being used to finance
construction. But the tax incentives imparted by the arrangement are “a
critical piece to the financing of our project,” Voyles said, as it will help
offset rising construction costs.
The tax savings
on a new 16-story office tower will be passed along to the office tenants,
Voyles said. Construction is scheduled to start in November, and Seven Oaks is
in discussions with two companies about locating their offices in the new
building.
This type of
tax break is one of Georgia’s most powerful economic development tools, used as
part of incentive packages for companies like Mercedes-Benz USA and the future Midtown
headquarters of financial technology company NCR. The incentives also have been doled
out by local development authorities for projects such as speculative office
towers and even luxury apartments.
Development
authorities can impart a property tax break through so-called bond and
lease-purchase agreements. In essence, the authorities issue bonds, take title
of the buildings or properties, then lease them back to the developers. It's
under that structure that the developers get the tax break.
The bonds
typically are not sold as debt, but are more a legal maneuver to be able to
provide the tax savings. The public is not on the hook for any debt.
The
miscommunication between Brookhaven and DeKalb isn’t the first controversy
between development authorities and cities. Atlanta has been at odds with the
Development Authority of Fulton County over similar incentives granted to
luxury apartment developers.
Last year,
Mayor Kasim Reed took issue with DAFC when it granted tax breaks within the
city limits without imposing an affordable housing requirement. Atlanta’s
development authority, Invest Atlanta, requires developers set aside 10 percent
of rental units as “affordable” in order to obtain a property tax break.
About the incentive deals
The Decide
DeKalb Development Authority, the county’s economic development agency,
unanimously approved incentive agreements Oct. 8 that provide discounts on future
property taxes for two projects in Brookhaven.
·
Seven Oaks Company plans to build a $143 million office
tower with space for 1,350 employees as part of the Perimeter Summit office
complex. Seven Oaks will receive an estimated $6.3 million tax break spread
over the next 15 years, according to an analysis conducted for the authority.
The development is projected to generate $25.5 million in property tax revenue
over the next 20 years.
·
Source One Direct, a credit card customization company,
is spending $30 million to expand its facilities, resulting in the hiring of
about 130 employees. Source One will receive $1.1 million in tax incentives and
generate $829,000 in property tax revenue over the next 10 years, according to
an analysis for the authority.
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