New legislation to outlaw tax shuffling

Rep. Earl Ehrhart (R-Powder Springs), the powerful chairman of the House Rules Committee, said Wednesday he’s working up legislation to prohibit any governmental entity from unilaterally stripping another of tax revenue.

The “abusive,” yet legal practice, according to Ehrhart, came to light recently when Kennesaw instituted a payment-in-lieu of taxes program for its economic development at the expense of Cobb County’s government and schools.

County officials claim they were blindsided by the tax shuffle and stand to lose millions of dollars in revenue over the life of the 33-year bond deal.

“It’s an absolute taking from one taxing jurisdiction to another without any elected oversight. It’s the kind of thing that really can be abused,” Ehrhart said. “All elected bodies and constituencies need to be part of the process rather than one group unilaterally doing the taking.”

Kennesaw presented its case to a skeptical Cobb County Board of Tax Assessors on Wednesday. The city also is requesting the 34-acre project on North Cobb Parkway be taken off the tax rolls. The board is expected to decide in January whether to grant the tax exemption.

Kennesaw has tried repeatedly the past few years to transform the strip-mall-heavy North Cobb Parkway into a more palatable entryway into downtown. The Columns at Kennesaw, an estimated $100 million office-retail-hotel project at the intersection with Kennesaw Due West Road, fits perfectly into the master plan, city officials say.

Two years ago, Kennesaw attempted to create a so-called tax-allocation district — another tax-deferment subsidy — to push the project along. Cobb’s school board turned it down and the plan died. Temporarily.

Last year the Kennesaw Development Authority took title to the property and issued $13.5 million in bonds, to be repaid within 33 years, to help the developer finance the Columns. The authority is a government entity and, therefore, not subject to taxes.

By transferring its no-tax status to the developer, a legal, yet rare maneuver used by a few governments statewide to foster development, the builder spends less money. County and school coffers, though, lose out on much-needed revenue, especially during a recession.

The property is assessed at $8.1 million. Its tax bill this year: roughly $125,000. Cobb schools would’ve received nearly half that amount.

Tax assessors Wednesday didn’t hide their displeasure over Kennesaw’s end-run around county taxpayers — and elected officials.

“As a matter of courtesy, why did the city of Kennesaw and the Kennesaw Development Authority avoid discussing the [financing] approach with the county and school board?” asked Jack Demarest.

While admitting they were less than forthright, Kennesaw officials said the project would’ve collapsed without the tax deferment plan. Bob Fox, the city’s community development director, added that the bonds likely will be repaid within 14 years and that sales, hotel and, ultimately, property taxes will prove worth any short-term drop in revenue.

“We feel, long term, the property tax benefits will be worth it,” Fox said. “Quite frankly, it would be a disservice to the county to not maximize the benefit of that key property on Cobb Parkway.”