Last week, the Georgia Supreme Court banned the use of school taxes in Atlanta’s Beltline project, which had been seeking financing through the popular TAD (tax allocation district) financing method. Essentially, a TAD establishes an area that qualifies for special financing. Within this area, the incremental taxes that are raised after redevelopment goes towards paying off bonds that were used to help finance the project. This is known as tax-increment financing or TIF.
Now living in the Smyrna Vinings area, you may not care a whole lot about the City of Atlanta and the Beltline project (although it is a really cool idea). But you should be aware that the City of Smyrna has long been a proponent of TADs and have been pursuing them for the redevelopment of Jonquil Plaza (to be named Jonquil Village)
and Belmont Hills.
Ultimately the TAD financing needed the approval of the Cobb County school board and the city and the school board have been fighting over this issue for a long time.
With the Supreme Court’s ruling, they’ve now taken the pressure off of the school boards. Since the school taxes make up the majority of property taxes, TAD financing is still possible, but certainly a lot less effective. Municipalities view TAD financing as a way to spur redevelopment in blighted areas that may take years to be redeveloped otherwise.
Under a typical scenario, a base is set which is the amount of property taxes currently generated on a property prior to redevelopment. Subsequent to the redevelopment the incremental property taxes (the new property taxes less the base amount) is used to pay off the bonds used to help finance the project. So everyone still receives the same amount of taxes they were receiving previously. Once the bonds are paid off, the schools, city and county governments get the full amount going forward.
If used properly, TAD financing projects are a win-win for everyone. The TAD projects not only turn blighted areas into vibrant areas that will generate more property taxes, but will also generate more sales tax which can be used for SPLOST projects. TAD financing has been around for a long time and is permitted in 49 states. Georgia was a little slower to understand the value of TAD financing, but has quickly seen the benefits of this form of financing. As comparison, the state of Georgia now has 27 TADs established versus the city of Chicago with 240!
With the Supreme Court decision, is TAD financing dead in Georgia. Not likely. Political pressure is already forming to revise the Georgia Constitution to allow school taxes to be used in future TADs. Expect to see a referendum on the ballot in November specifically allowing communities to include school taxes in TAD financing. If the legislation passes for the referendum, expect to hear a lot about this issue until November. You may be more inundated with TAD information than who’s going to be sitting in the White House.
As for the future of Jonquil Village and Belmont Hills? Jonquil Village has been moving along, with the initial demolition work completed and site work in process including the removal of dirt (has anyone noticed the caravan of dump trucks heading down to the future park on North Cooper Lake?) from the site to make way for the underground parking deck. Given that the project is already underway, I have no doubt that the city will use whatever means necessary to ensure it’s completion. As for Belmont Hills, expect further delays until the issue of TAD financing gets resolved.
Technorati Tags: Jonquil Village, Belmont Hills, TAD Financing, City of Smyrna, Smyrna Real Estate
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