Development districts benefit few, critics say

Amid a worldwide collapse of real estate and credit markets, it may seem like an odd time to amend the state constitution to help developers finance luxury gated communities.

A well-heeled coalition of developers and construction firms argues that Georgians should vote for just such an initiative to secure the state’s competitiveness when the economy does turn around.

Amendment 3, on the ballot Nov. 4, lets counties and cities create infrastructure development districts — special areas where developers can sell tax-exempt bonds and pass the cost on to people and businesses who buy into the developments.

Traditionally, developers either take out loans themselves or had a local government issue bonds, with taxpayers paying it off over time.

For many poorer, rural sections of the state, neither kind of financing has been an option, the amendment’s supporters contend.

“This is a mechanism that will encourage economic development in rural Georgia at no cost to the property taxpayers,” state Sen. Eric Johnson (R-Savannah) said.

But a loose band of environmentalists, consumer advocates and a few Democratic politicians strongly opposes the measure.

They believe these districts will create “private cities” where governmental powers are used to expand sprawl, diminish green space and subsidize private gain, with little benefit to the local taxpayer.

The districts require creation of local boards, where people get more votes depending upon how much land they own, that would control the project’s bond money, but not government operations.

“It basically usurps local authority,” said state Senate minority leader Robert Brown (D-Macon), who has opposed the legislation since it was proposed in 2006. “It allows private individuals to take on government operations with very little oversight.”

This development concept is already law in 17 other states, including Florida and Alabama. Florida has about 450 such districts, many of them retirement communities.

Developers have used such laws to secure large tracts of undeveloped land from counties, then build all the infrastructure, such as roads, lighting, water and sewer lines, schools, firehouses and police stations.

The money raised by the bonds can be used only for development-related public needs.

By not having to pay for infrastructure costs, however, developers have more money to spend on amenities to make the projects more attractive to potential buyers.

The Association County Commissioners of Georgia and the state Chamber of Commerce set up an organization, Georgians for Quality Economic Development, to push the idea. It raised more than $330,000, according to mid-September state campaign filings. The group has put up a Web site and sent speakers around the state.

People with strong ties to the Republican Party are working to get Amendment 3 passed, including former Gov. Sonny Perdue staffers Derrick Dickey and John Watson. Lobbyist Jay Walker, former chief of staff for Speaker of the House Glenn Richardson (R-Hiram), worked for passage of the bill.

Leading Democrats also have backed the plan, including House Minority Leader DuBose Porter (D-Dublin). Atlanta City Council President Lisa Borders, who once worked for developer Cousins Properties, has spoken in favor of the districts.

Clint Mueller, legislative director of the Association County Commissioners, helped draft the bill, basing it upon Florida’s law. He said the law requires that 20 percent of any project must be green space. He also said that if a project fails, the cost would not be borne by taxpayers, but by whomever bought the bonds, the developers and the people who bought property in the development.

Pfilip Hunt, of Mobile-based developer Gardnyr Michael Capital Inc., a financier and manager of similar projects in other states who has been lobbying for the new law in Georgia, said such districts have been a boon to rural sections of neighboring states. Watson, a developer with TPA Realty Services, said Georgia needs this amendment to compete with other states for development dollars.

“When the economic cycle comes back around, I think Georgia needs to be, and hopefully is, on an equal footing,” he said.

Opponents, who have no organized, funded campaign, tell a different story.

Neil Herring, the Sierra Club’s lobbyist, said such special development districts have a host of problems. They have no clear ethics rules regulating how they operate, he said, and they can be established without countywide referendums, just hearings and commission approval. Commissioners also could sit on boards and partner with developers, he said.

“If you read the statute, it’s not nearly as clear as they pretend it is,” he said. Herring contended that several people lobbying for the bill violated state ethics code by not registering properly. He has filed a formal complaint with the state ethics commission.

It will be heard in December, after the amendment vote.

Michael Dobbins, a city and regional planning professor at Georgia Tech, said he thinks such districts are a bad idea because “they are basically socializing the risk and privatizing the profit. … It’s another way of tapping public resources.”