“Can you not do this project without the abatement?” Carstarphen asked one developer, Selig Enterprises, which received a recommendation for a $16 million abatement on a $303 million development on West Peachtree and 12th streets. She called it a “bustling area,” noting that any tax break offered would mean less money for the school district. City and county taxes also would go to help support the deal.
Critics say local development authorities often grant incentives for projects that would have been built anyway. And, they add, the benefits of tax breaks are not always what is promised.
Atlanta Public Schools Superintendent Meria Carstarphen helps a Peyton Forest Elementary School student with a math question on the first day of school. Carstarphen recently joined the board of the Development Authority of Fulton County, and on Tuesday had sharp questions about offers of incentives for large real estate projects. AJC FILE
An Atlanta Journal-Constitution/Channel 2 Action News investigation of commercial property values in November found Fulton assessors often significantly undervalued commercial properties compared to the values of recent commercial sales, meaning homeowners and other business owners must pick up a greater share of the cost of municipal, county and school services.
Those Fulton homeowners have seen their taxes jump in recent years as property values have risen and cities, the county and school districts scratch for more revenue.
Carstarphen’s questioning was a change of pace for a board that often doles out tax breaks with little dissent.
Still, the authority board gave final approval to more than $18 million in property tax breaks and recommended an additional $77.7 million in abatements that will return to the board in coming months for final approval.
The incentives are intended to recruit jobs to Fulton and help ensure development in areas where it would not happen otherwise. But three of the eight projects given preliminary or final approval for tax breaks Tuesday were in Midtown, the hottest neighborhood for development in the city and the one commanding the region's highest office rents.
J.C. Bradbury, a Kennesaw State University economist, said incentives can be employed effectively to encourage businesses to expand where they otherwise wouldn’t. But all too often, development agencies incentivize activity spurred naturally by demand.
The proposed Selig mixed-use project would include more than 600,000 square feet of office space, a 178-room hotel and retail space. Attorneys for the project estimated that it would bring more than 5,000 jobs to the area.
But any jobs located at the site would be created by tenants, not the project. There’s also no guarantee all or most would be new jobs to the region, as new office towers are often filled by businesses that currently lease in other parts of metro Atlanta.
In fact, Selig’s first major tenant, the law firm Smith Gambrell & Russell, plans to relocate from existing offices in Midtown.
“This is just a transfer of wealth in this community,” Bradbury said. “There are winners and losers, and in this case the losers are the taxpayers.”
A rendering of a planned mixed-use project in Midtown by the development arm of Selig Enterprises. The project is expected to begin construction in mid-2017 and include a Class-A office tower, a boutique hotel and residences. Rendering courtesy of Selig Enterprises and Rule Joy Trammell & Rubio Architecture Interior Design
Authority board member and state Sen. Brandon Beach, R-Alpharetta, said the state was in talks with a company that would bring some of the new jobs, and that “time is of the essence” in getting the project approved.
Chris Ahrenkiel, a Selig executive vice president, said the project wasn’t economically feasible without tax breaks. He touted between $8 million and $9 million in community benefits that were being added to the project, including the realignment of 12th Street and the reinforcement of a MARTA tunnel that would run under the project.
Ahrenkiel is a board member of Invest Atlanta, the city’s development arm, which grants similar incentives to attract jobs.
Carstarphen also questioned a $57.6 million tax break for global insurance giant MetLife, which has proposed a $1.1 billion mixed-use project along 17th, Spring and West Peachtree streets. MetLife said the tax break is necessary because the city of Atlanta requires construction of a new road in the development.
The development authority uses a “but for” test — but for the incentive, would the development fail? — and Carstarphen was skeptical that the need to add a road would derail the development.
“In a red-hot market like Midtown, how do you explain the ‘but for?’” she asked. “It seems to me this doesn’t meet the ‘but for’ test.”
Carstarphen declined to elaborate on her concerns after the meeting, saying she would honor the will of the board.
The superintendent’s entry on the nine-member board and the healthy skepticism she brought Tuesday is long overdue, according to Fulton County Commission Vice Chairman Lee Morris, who appointed Carstarphen to the board.
“Until this meeting, nobody asked that question,” he said. “They’re fundamental, threshold questions.”
Morris suggested there were better ways to pay for the road needed at the MetLife project than through tax breaks, and suggested transportation impact fees or local sales tax dollars dedicated to transportation could fund such needs.
“Should we be using Atlanta Public Schools’ property tax revenues to build roads?” he asked.
Development authority CEO Al Nash said the board had taken steps to be more transparent. He called Carstarphen’s questions astute, but said there is always a risk that if incentives aren’t approved, projects don’t get done.
“It’s an effort to increase our tax base, bring jobs, clean up areas,” he said. “I don’t think we’re perfect all the time, but what we try to do is grow the tax base.”