Tax breaks as development tools a tougher sell

With the economy in disarray, should government give more money away to encourage economic growth, and if so, how much more?

Those are basic questions that officials in DeKalb County are trying to answer before they invest more public money in private businesses.

Last week, under pressure from residents and elected officials, the county Development Authority put a request for an unprecedented tax break on hold.

Florida-based Sembler Co., citing the economic downturn and financial hardship, had said it would have to scale back the retail part of its mixed-use “Town Brookhaven” project unless the authority waived all property taxes for 20 years on most of the 54-acre site.

The authority voted on Thursday to defer the request and decided instead to do some broad thinking about subsidies.

Outside the Development Authority, though, many have already made up their minds: A 20-year property-tax waiver, they say, would be excessive.

A majority of county commissioners had signed a resolution opposing the Sembler deal, and the school board went to court to determine whether the tax break was legal under the state constitution and whether the authority could grant it without school system consent. Then, county CEO Burrell Ellis stepped into the fray, saying Sembler’s development deserved government support — but not to the extent the company wanted.

Sembler was asking for a tax break worth $52 million, but Ellis noted in a memo that the authority had already given the company a 10-year tax abatement worth $20 million. He said he’d seen no evidence supporting the need for the larger abatement.

Ellis asked the agency to reconsider its policy on subsidies in light of the current economy. In an interview, he said the authority should study what other governments are offering, and develop competitive incentives.

He offered no opinions on how much the county should give, or to whom. But others did.

County Commissioner Jeff Rader said DeKalb County should only subsidize companies that bring money from elsewhere, such as factories and corporate headquarters.

Town Brookhaven would generate tens of millions of dollars in sales tax revenue, according to analysts. But Rader noted that no one studied where the shoppers would come from. He suspects most of those sales tax dollars would be diverted from existing businesses in DeKalb.

Others, including school board vice chair Zepora Roberts, were concerned with location. She said the new policy should foster development only in blighted areas and added that she doesn’t think Brookhaven fits that description.

Another school board member, Don McChesney, said government should not subsidize developers who lack cash. “If you don’t have the money to develop and open your business, then why are you doing it?” he said. “It’s not the taxpayers’ job to bail people out.”

But Ed McBrayer, the treasurer of the authority’s board, said the public benefits when developers improve property.

In this economy, even full tax waivers should be considered, he said. “These are unusual times that require extraordinary solutions to the problems developers are having.”