Property tax breaks for the future $5 billion Rivian electric vehicle plant will now go into effect after a court order Tuesday ended a nearly yearlong battle over the largest component of the 10-figure incentive package used to woo the company to Georgia.
Ocmulgee Superior Courts Chief Judge Brenda Holbert Trammell validated the bonds central to some $700 million in property tax breaks for Rivian as part of its planned factory in southern Morgan and Walton counties. The Rivian validation process, normally a rubberstamp-like affair for big economic development deals, threw a wrench into one of Georgia’s biggest-ever jobs recruitment, when Trammell denied approval to the bonds last September.
The denial threatened the deal and sent shockwaves through Georgia economic development circles by levying new scrutiny against tax abatements — a common tactic used by governments to attract new development and industry. The ruling also triggered appeals all the way to the Georgia Supreme Court.
In April, a Georgia Court of Appeals panel primarily sided with state and local officials, ruling that Trammell’s initial denial was improper and that the bulk of the incentives should have been approved. Last month, the state Supreme Court declined to hear the case, allowing the appeals court’s ruling to stand, sending the matter back to Trammell’s desk.
Seven Morgan County residents, who opposed the Rivian project, asked Trammell earlier this month to hold new evidentiary hearings before issuing a new ruling. But the judge said that wasn’t necessary, validating the bonds in a three-page ruling.
Credit: Steve Schaefer
Credit: Steve Schaefer
The Georgia Department of Economic Development and the Joint Development Authority of Jasper (JDA), Morgan, Newton and Walton Counties, which own the 2,000-acre Rivian project site, applauded the reversal and said they’re looking forward to bringing the factory to fruition.
“With this obstacle behind us, Georgians can look forward to $5 billion of investment and 7,500 good-paying jobs that this innovative, American manufacturing company will bring to our state and the local community,” the agencies said in a joint statement.
Validating tax breaks
At the center of the controversy are the arcane legal mechanisms that Georgia governments use to offer incentives to companies.
Development authorities in Georgia often use lease transactions such as “bonds for title” to grant property tax breaks.
Bond for title deals are complicated legal transactions that act as a sort of legal workaround of the Georgia Constitution’s prohibition on gratuities, which forbids government from providing a good, service or property without an equitable return.
The bond for title deals amount to a real estate transaction where a development authority holds the title for the property while the company makes rent payments to the authority. Since development authorities do not pay property taxes, they can lease the property back to the project’s developer while providing a tax break.
In Rivian’s case, the authority sought the court’s approval to issue bonds totaling up to $15 billion, which represents the potential future value of the project, but not an amount of money that changes hands. The value of the bonds was chosen based on the potential value of Rivian’s finished factory and act as collateral in the arrangement. While the company’s plans amount to a $5 billion facility with 7,500 employees, the higher bond amount gives the company room to expand their facility’s scope.
Neither the JDA nor Rivian planned to publicly sell the bonds and taxpayers would not have been on the hook for them. Still, the bonds require approval or “validation” by a judge, but Trammell denied them.
In April, a panel of three appellate judges ruled in favor of the state and JDA on four of five aspects of the legal controversy.
Two of the three judges on the appeals court panel sided with the local judge on one item, ruling that Rivian may owe certain taxes on specific equipment within the factory. The value of those taxes depends on the assessed value of equipment that Rivian installs on-site, which has not been publicly released.
JoEllen Artz, one of the residents who intervened in the bond hearings, said she’s glad the legal battle resulted in higher local tax collections.
“We are grateful for our attorneys who fought this bond and lease issue and are proud that we did have a victory which results in Rivian being required to pay millions more in property tax than they would have,” she said in a statement.
Credit: HYOSUB SHIN / AJC
Credit: HYOSUB SHIN / AJC
Many of the same plaintiffs in the incentives case are involved in other legal efforts against the Rivian project, including two separate lawsuits accusing the state of taking over the Rivian site to avoid public scrutiny during rezoning discussions.
Rivian and two contractors enlisted to clear and grade the project site are also being sued in U.S. District Court by a nearby resident who claims muddy runoff from the site has choked streams and ponds downstream in violation of federal environmental law. That case is also still pending.
The state and JDA said they are about 90% finished with grading the site, adding that Rivian should begin vertical construction in the next few months.
Cox Enterprises, owner of The Atlanta Journal-Constitution, owns about a 4% stake in Rivian.
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