Decatur Will Have TAD Referendum on November Ballot
Decatur Metro | July 6, 2010Back in 2007 when the economy still looked quite rosy, Georgia state representatives and senators introduced a bill for the City of Decatur that would give the city the power to exercise the powers under the “Redevelopment Powers Law”.
While the “Redevelopment Powers Law” itself may not ring a bell, the tax allocation districts (or TADs) created by the law certainly might. TADs are most famous for single-handedly funding the creation of Atlantic Station and the lawsuit that struck down the Beltline’s TAD requiring the passing of a constitutional amendment in 2008 to put the funding option back on the table for many communities.
Then the economy intervened and these days, many TADs are turning sour since they depend on increasing property values to pay off bond debt.
Through all of this bond fun, Decatur has been trying to get the Georgia Legislature to pass a bill that would give the city the option to pursue a TAD district.
At tonight’s city commission meeting, City Manager Peggy Merriss informed the commissioners that after four legislative sessions, Senate Bill 279 was finally passed. According to Mayor Bill Floyd, the process was initiated back in 2007 at the request of East Decatur Station property owners.
This means that Decatur residents will see this on the November ballot…
Shall the Act be approved which authorizes the City of Decatur to exercise redevelopment powers under the ‘Redevelopment Powers Law,’ as it may be amended from time to time?”
With the current state of the economy, neither the city manager or the city commissioners at tonight’s meeting seemed particularly eager to create any TADs in the near future. In fact, the main concern of the commissioners in hearing this news was that it would be clear to voters that the November vote would not authorize any specific TADs in the city, only giving the commission the power to create districts if they saw fit in the future.
I definitely am still on the learning curve about this concept. Is this related in any way to using school system property or funds for local development? I’m probably mixing up several concepts.
Yeah, it’s a fun subject.
TADs are areas where the increase in property taxes – as a result of the bond-funded redevelopment – is used to pay off those initial bonds. That means instead of the increased property taxes going towards larger payments to the city, schools and county, they instead go to paying off the bond. Once the bond is paid off, taxes go back to being paid to the city, schools and county.
So yes, TADs are the way governments can use school property TAXES for local development.
Obviously the sticking point is that the property must increase in value after it’s been redeveloped for it to work. Atlantic Station’s value increased 6000% after it was redeveloped, so those bonds are already paid off. However in today’s economy, some other local TADs – like ones in Marietta – are in an awkward position of potentially not being able to make the payments on their own bonds, since there hasn’t been a property value increase.
Hope that helps clear things up a bit.
So the down sides from the point of view of City Schools of Decatur (CSD) services for children would be? Is it:
1. By increasing school property taxes that go towards bond payments, Decaturites might become more tax-aversive and object to any increases needed for schools, e.g. if state education funding continues to plummet and jeopardize CSD’s survival, or maybe even ask for a decrease in the amount going towards schools.
2. There’s a miscalculation and property values in the redeveloped area don’t increase and the TAD is not able to make the payment on bonds. What happens then? Does that hurt local funding for CSD?
Just wondering. I’m generally supportive of developments like East Decatur Station, Talley Street Lofts, the proposed Columbia Park development etc. etc. but not at the expense of the basic community services–fire, police, water, sanitation, schools, library, etc.
It’s really not an increase in school property taxes going towards bond payments, since the only school tax money that goes towards paying off the bond is the amount attributable to the increase in the redeveloped property’s value.
So, if East Decatur Station is worth $10 million today and after redevelopment it’s assessed at $30 million, only the property tax on the amount between $10 million and $30 million would be applied to the bond payment. So even while the bond is being paid off, CSD, the city, and county still receive tax payments on the initial $10 million value.
The problem is when property values don’t increase enough to cover the cost of the bond payments. I’m not sure whether all parties take a bath in that situation or just the city. I would have to assume the city would pick up the tab.
I’m pretty sure that TADs (and bonds) don’t raise money, they raise debt.
Noting the spectaular failure of relying on property values to generate municipal revenue. Maybe we should be looking at other means to raise/conserve revenue instead of creating new ways to borrow ?
Every time there’s an economic downturn these things start to look like something Bernie Madoff would sell. As you say the problem is property values have to always go up and they don’t.
So maybe the taxpayers end up on the hook for these payments to the bondholders. Heaven forfend that they should take a haircut.
Bad deal all the way around.
Bondholders do take haircuts. They’re called defaults.
Not when the gov backs them, then they’re called bailouts. If we stay in the financial situation we’re in now nobodies going to bite on one of these without some of the peoples money in there.
Let the devs go to the free market if they want to build these things.
I don’t get this either- so who owns the property and benefits from rents and sales? Private enterprise or the city? If it’s a developer, then that means tax payers are subsidizing private enterprise with no guaranteed payback other than potential additional taxes. I don’t think I buy that or agree with this. Sorry. We have too much trouble funding basic public services – look at MARTA – now without throwing tax dollars at developers. Let developers turn to the sacred free market to fund their enterprises and keep their hands off my property taxes. Argue it any way you want, but the benefit it to developers not to me and do I get the increase on my taxes paid back with interest?
If I am understanding this wrong, please explain it to me- but make sure there is some data to show how it works so my little brain can grasp.
Have Atlantic Station bonds paid back their cost with taxes yet? Since the project isn’t going very well (other than the office buildings), I hope so.
The developer should take all risk when playing with public -MY- money. Of course they don’t, but they should.
By what standard can you possibly say that Atlantic Station has not been tremendously successful? It may not be your cup of tea, or have the right aesthetics or product mix, you don’t like the parking deck, or you just don’t like the clientele, but by all objective standards from an economic or redevelopment standpoint, it has been TREMENDOUSLY successful in turning a brownfield in the middle of the city into one of the most economically vibrant areas of the city.
The fact that the stores are struggling and the residential area flopped? Those are pretty much the standards I am going by. There was a fire sale on the condos last year – these “hot” properties went for less than $95,000 and many of them are still vacant. Just a year or so ago, DM himself reported that property values were down in the condos by 40%. Icon apartments did accept Section 8 for a while. My nonprofit had clients there. Occupancy rates are at about 87% in the retail -in retail, successful occupancy is closer to 95% – and a colleague of mine who runs a company that rents 6 floors in the Wachovia building told me in April that retail was struggling because people use the area as a cruise zone on the weekend. No one is buying anything. I am over there a lot for business, and if the empty parking garage and the empty streets are any indication, then yes, the place is struggling.
I don’t know how you read your interpretation into my comment, but you are pretty much wrong.
Smackdown! Chick fight! Who wants to see Nellie and Susan don the gloves and enter the ring?
Ding ding.
I wondered where you had been.
I’ve been lurking a lot lately…not much to say. But I’m always here for you (and cubalibre) because you’re my two favorite DM people. Seriously. I always enjoy reading your posts.
Decatur Metro: A snark-filled lovefest.
Snark-filled love fest: perfect crystallization of the blog. I might add “breaking news” about the 4 square miles of the City of Decatur.
Decatur Metro: Snark-filled breaking news love fest. Needs a t-shirt.
That you, Token. Did Cuba tell you we are going to audition for Mean Girls?
DM,
No snark was intended. I find Cuba and Nellie to be intelligent, witty and open-minded people, and I really do enjoy reading what they have to say. Our political leanings may differ, but that doesn’t mean we can’t have good conversation here. And I hope they get cast on MG 2. If they are as hot as I think they are, it will go on my Netflix queue immediately.
I wasn’t saying that your comment was snarky.
We are that hot.
LMAO! Why am I just seeing this thread?
Interesting– I’ve always dialed down the snark in my discussions on this blog (unless someone’s just begging for it, but even then, I don’t usually retaliate like I could– trying ot honor DM’s rules, etc.). I like it when we can disagree with each other but in a non-destructive, respectful fashion. Anf thanks, Token, for the shout-out– I dig where you’re coming from, even if I don’t always agree with your POV. Nell knows I think she’s the shiznit, and I can think of very few regular posters on here with whom I haven’t agreed or enjoyed their thoughts on at least one issue. So, yeah, I guess it IS a “snark-filled lovefest”, DM. If I haven’t said before that you get propers for keeping it from degenerating into an AJC-style slamfest, I’m saying it now. Love? Love! [Then again, I'm operating under heavy doses of cold meds, so maybe it's them talking...:-)]
No one is buying condos anywhere, Nellie. Haven’t you seen the signs at the Artisian advertising $200,000 off list price? In case you haven’t noticed (full buildings in Midtown and Buckhead are unoccupied and a townhouse complex on Oakview in Decatur has been online for 3 years and has remained unsold and unfinished), this is not a problem specific to Atlantic Station.
Is Decatur’s retail 87% occupied? That really doesn’t seem to bad in this environment.
I, frankly, get a little disgusted about people’s preoccupation about hating Atlantic Station and I think quite frankly a lot of it has to do with racial animus – if African Americans congregate at a place they must be crusing and not buying anything and, therefore, must be unsafe and not a good place for nice, middle class white people to go.
I came out of a movie there a few weeks ago on a Saturday night and Atlantic Station was packed with a very racially diverse crowd and the restaurants were packed. The retail space looked mostly occupied. It has Atlanta’s only IKEA, has the only H&M that I know of, has a 20 screen movie theater, a Publix, a Target, home to sold out every day Cirque shows, 2 nice office buildings, thousands of housing units.
By any objective standard, given that 15 years ago this place was a brownfield and a non performing economic asset to the city, Atlantic Station has been a huge success. To say it is not and that a TAD would not beneficial to the city in this case is a bit CRAZY!
Wow, you really are just running around attacking anything I post, aren’t you? You might want to back up a little bit and quit trying to create some sort war between us simply because I think you should have been a little more judicious in how you slammed historic districts. Did you go back and read my last reply to your comment in the Daulton House post? Chase me all you want, but I won’t reply to anything you say. Not worth it.
By the way- Harvey Newman at GSU has done a ton of research on the impact of the explosion of condo development on the sewers in Atlanta. The city council hired him as a consultant on the sewer issue in 2001 and he concluded that the explosion of mixed use, concentrated development was a primary reason for the massive strain on the sewer system. It’s basic logic that a concentrate group is going to increase strain on an established sewer system; there is also valid urban policy research that proves it beyond mechanics.
My hatin’ on Atlantic Station is well-documented, but I’m beginning to have a slight change of heart.
While I still think they shot themselves in the foot by putting a four lane highway through the center of the project, thereby hurting foot traffic of residents within the condos along that strip and use of the parks surrounded by the road, I now recognize the success of the dense, griddy commercial district. Heck, it has both a Publix and a Target within walking distance!
Incorporating so much big-box, national retail into an area which strives to be walkable seems a nearly impossible task without compromising community and the general walkability of a neighborhood. (And by “walkability” I mean the distance between destinations and how enjoyable it is to walk a particular stretch.)
I also think most of the condo architecture is pretty uninspiring – though I love the look of “The Atlantic” skyscraper. But I think that I have made the mistake in the past of assuming that once these projects are completed, they are set in stone, when in reality they will evolve and change like the rest of the world. If AS has more right than wrong with it and I’m not the only one that dislikes those condos, eventually they will be replaced with something better.
Just a few thoughts.
This may all be 100% true but much of it can be explained by the recession and crash in all housing, no? It’s not just AS condos that are hurting. Other condo buildings are also trying to all but give units away.
I think the debate around TADs is complicated because it’s a complicated redevelopment tool. There are a lot of assumptions that go into approving a TAD, but just because assumptions are made doesn’t mean that the program won’t work like it’s supposed to. Yes, this would be a terrible time to create a tax allocation district, but the TADs created when the economy was on the upswing have worked out well. As with all redevelopment plans, timing is everything.
Personally, I’m much more inclinded to support a TAD for the purposes of commercial or industrial redevelopment because of the impact that it can have on job creation and the city or county’s tax base. My main concern when using TADs to revitalize residential areas is what’s called the halo effect. Say you live one neighborhood over from the boundary of a TAD, and because the neighborhood next to yours has seen a spike in new and improved housing, your property taxes go up. And since most TADs are used to spur development and reinvestment in low-income neighborhoods, you were probably income-limited to begin with. Now you have higher property taxes, but didn’t see any direct investment on your street, or your block, or in your neighborhood. There’s this unintended effect of gentrification that worries me when it comes to TADs like the one around the beltline. Then again, the beltline is trying to offset this by using some of the bond revenue to keep and support affordable housing options, so I guess that’s a compromise.
For a more detailed look at this issue, you can check out a report written by the Livable Communities Coalition (http://www.livablecommunitiescoalition.org/services/studiesAndReports.cfm). They analyzed some of the area’s first TADs.
A few things to remember-
the city schools would have to opt in to the TADs (it isn’t automatic); they can always say that they didn’t want to participate
the funds used for a development area (usually an area, not a specific building, though the area can be limited to to parcels attached to a very defined area like East Decatur Station) have to go towards PUBLIC PURPOSE, like infrastructure, park land, etc. It isn’t going towards the developer’s condo or office building, other than maybe public utilities created/extended for the building, sidewalks, public parking, etc.
the city does not raise taxes to pay the TADs– it is the increased funds generated from (the hoped for) rising property values that pays off the bonds.
DEM is quite right about bond defaults– most of these bond deals are structured as limited recourse, meaning if there isn’t the anticipated uptick in property values to pay the bonds, that is the bondholders’ risk, not the city’s. it is a very small, sophisticated group of investors that buys these types of bonds (they aren’t sold to mom & pop investors)
TADs don’t always work (Marietta example is a good one), but they can be a good tool to have in hand if needed & carefully used– ike maybe we could finally tempt the owner of the Oakhust shopping center to do something with positive impact, if TAD funds were dangled…
“….. maybe we could finally tempt the owner of the Oakhust shopping center to do something with positive impact, if TAD funds were dangled…”
….like put CSD admin offices in there! Win, win, win for all….Oakhurst gets responsible occupant of shopping center, CSD Admin gets spacious digs, great parking, walkability to food and most of its schools, and the place formerly known as Westchester can become a school, preK overflow, community center, park, arts or sports complex with gym and cafeteria, whatever without ruining the grounds, sprinkler system, and sidewalk with front lawn parking. Free Westchester!
Karass – that’s brilliant. I’d never thought of that!
I see very little risk to taxpayers for allowing TADS. They are used for a blighted area where you are not collecting very much revenue for schools or city government in the first place. If the property is redeveloped it often cleans up an eyesore and can be beneficial to the surrounding community and the entire city. The risk is largely with the bond holders. The worst case senario is a new development that places a large burden on the school system. However, in Decatur and most areas, condos and townhouses don’t place much of a burden on schools. Increasingly we are a nation of one and two-person housholds.
Be careful about the assumption athat condos and townhouses don’t place a burden on the school system. Certain condos DO yield a fair amount of public school students–e.g. the apartments on Coventry (west side of Scott) which have always had a fair number of Emory grad students and others with young families. I think most of the families are subletting from condo owners. And, in this struggling economy, I’m seeing more Decaturites subletting condos and townhouses, maybe covertly (against covenant rules). Families who have recently lost their single family homes either due to unemployment and/or separation/divorce will rent a condo/townhouse to be able to stay residents of Decatur so their kids can stay in CSD schools. I’ve been dropping off friends of my kids at some local townhouses that I have never seen with children before. I don’t know that this is a big enough phenomenon to burden CSD but all bets are off in this new world of perma-recession.
And what about the burden on the sewers and other systems? Concentrated development like condos puts massive strain on public works.
karass: that sounds like pretty anecdotal evidence. I’m aware of the issue of ‘rents renting condos so their kids can go to school at DHS, but I’m not sure it’s enough of a problem to stack it up against the potential benefit of a larger commercial tax-base. Also, the city has put the number of students in condos at 1%. Even if it’s slightly higher than that, I don’t really see how a few kids can off-set the benefit of more commercial property paying into the school tax pool.
nellie: what’s with the sewers? Is Decatur’s sewer system overburdened?
In the case of Atlantic Station and Atlanta, the taxes that concentrated development brings in, which I’m assuming would include retail, should go a long way to cover any infrastructure upgrade, no?
Just FYI, I’m not talking about people trying to game the system by renting condos and not living in them just so their kids can attend CSD schools. I’m talking about legitimate residents with kids who happen to be renting condos or townhouses inside CSD limits. Condos and townhouses across Decatur really vary in style and occupants. Emory Commons condos on Coventry has always had a lot of CSD kids there, I think around 10 at at time. There used to be a bus stop there, not sure if there still is. I agree that my personal observation that there’s several families that have left single family homes for condos or townhouses because of financial strain and/or divorce/separation is anecdotal. But the city’s estimates of number of children in condos is based on history.. I’m just warning that assumptions about condos/townhouses may not hold true everywhere in Decatur during unusual times. Anecdotes are occasionally part of a larger trend. E.g. “Despite the fact that your consultants say that CSD enrollment will decline based on their estimates, we see babies, toddlers, preschoolers and strollers all over streets that used to have few families……”
I don’t feel strongly that condos/townhouses are about to bust with kids; I just think we should be careful about assuming they will be packed with high-salaried YUMDies who pay high taxes but don’t use a lot of services.
No, no no, not yet- I am speaking in hypotheticals! I promise I don’t know something you don’t.
“Concentrated development like condos puts massive strain on public works.”
Not as much as sprawling, suburban-style, single family development.