Leaders misuse development tools

Cobb County municipal officials and developers and their bond-attorney friends keep giving redevelopment a bad name.

In fact, their abuse of the system makes it difficult for those of us who believe government has a legitimate role in helping to finance redevelopment in parts of the county where it is desperately needed.

MIKE KING
MY OPINION

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Four weeks ago, Georgia voters took a giant leap of faith along those lines by changing the state Constitution to allow school taxes, in very specific cases, to be deferred on property under redevelopment. (The amendment was needed after a state Supreme Court ruling in February that school taxes could not be used for such purposes.)

Since then, word has surfaced that city officials in Kennesaw quietly took a 34-acre tract on North Cobb Parkway off the tax rolls last year and gave a $13.5 million tax break to a company that wants to build a $100 million office-hotel and retail development on the site.

The city cut the deal by having the Kennesaw Development Authority take ownership of the site and then issue public bonds to offset the cost of the development. Those bonds must be paid back over what could be as long as 33 years, and until they are paid off, no tax revenue from the new project will flow to the coffers of Cobb County government or the Cobb County School District.

The backdoor maneuver was designed to skirt the state constitution’s previous bar against deferring school taxes for redevelopment. City officials admitted as such Wednesday when the Cobb County Board of Tax Assessors called them on the carpet for not informing county tax officials of what they had done.

Two years earlier, Kennesaw had tried to get the school board to agree to a tax allocation district — another mechanism for deferring taxes — so that the same project could get off the ground. The school board balked and the project appeared dead. That’s apparently when someone came up with the payment-in-lieu-of-taxes scheme. (Who wants to bet it was a bond attorney’s idea?)

It’s unclear whether Kennesaw will actually get away with its scheme, although its financing mechanism it used — essentially transferring the city’s no-tax status to the developer — appears to be rare but legal in Georgia.

County commission chairman Sam Olens believes Kennesaw should be able to pledge its own property taxes against the bonds necessary for the redevelopment, but it should not have committed taxes that would have gone to county government or the schools. State Rep. Earl Ehrhart (R-Powder Springs), chairman of the Legislature’s powerful House Rules Committee, called Kennesaw’s action “abusive” and said he will sponsor legislation prohibiting one government entity from stripping another of tax revenue.

While Ehrhart and the Legislature are at it, they ought to look at the transparency of all local development authorities around the state. They are unelected boards that have broad powers to issue bonds and affect taxes, but rarely get the scrutiny they deserve.

Unfortunately, the Kennesaw scheme is hardly Cobb’s only example of bungled redevelopment financing. Several years ago, Smyrna got the school board to sign off on tax allocation district plans to subsidize two major redevelopment projects. However, the first project ate up most of the allocation, and neither project got fully implemented before they were halted by the Supreme Court ruling. And Marietta foolishly tried to give tax allocation money to developers after they had already started building their projects.

Cobb County has huge tracts of land along major thoroughfares — vacant strip malls, rundown residential neighborhoods, decaying, crime-riddled apartment complexes — that cry out to be redeveloped. Even in a healthy economy, some of them might never attract conventional financing. Instead, developers will locate projects on more affordable open tracts a few miles down the road, continuing a cycle of sprawl that has infected Cobb County and metro Atlanta for decades.

Judicious use of government financing for the most worthwhile projects could halt that cycle, but unfortunately, we’re not getting that kind of leadership.

• Mike King, a Cobb County resident, is a member of the editorial board.