Atlanta Mayor Keisha Lance Bottoms’ office on Tuesday released new terms for a proposed public financing package for the $5 billion development of downtown’s Gulch that removes a controversial extension of a special taxing district.
The new deal reduces its dependence on bond financing, reducing long-term borrowing costs - including interest - that future tax dollars would cover. By ending the taxing district extension, developer CIM Group won’t be able to tap into future tax revenue created by the site for as long, meaning CIM will have an incentive to build faster to create the future tax revenue it can use to recoup some of the project costs.
“With this revised agreement, there continues to be no financial risk to the City,” said Richard Ressler, CIM Group chairman in an email on Tuesday. “Taxpayers will pay nothing for this development and will benefit in the near-term through the public benefits package and in the long-term through the future tax revenues that this project will create…CIM is committed to Atlanta for the long-term.”
Critics of the proposal say despite the changes the public benefits of the deal — including commitments to affordable housing, job training, an economic development fund and a future fire station — don’t match the commitment of future tax dollars.
CIM Group wants to build a mix of office towers, apartments, hotels and retail over the parking lots and railroad tracks between Mercedes-Benz Stadium and the Five Points MARTA station. The site is complicated and requires a massive $500 million steel and concrete platform spanning the tracks to create a new street grid.
In August, Bottoms unveiled a proposal for up to $1.75 billion in bonds, not including borrowing costs. The bonds would have been backed by future sales and property taxes created within the 40-acre downtown property. Tuesday’s proposal includes a package valued at up to about $1.9 billion, but the deal will not rely as heavily on bonds and therefore the total long-term costs to taxpayers will likely be less than the original proposal.
Bottoms and CIM were forced to alter the deal for lack of council support, and after Atlanta Public Schools balked at extending its participation in the Westside Tax Allocation District to 2048.
The changes remove some technical complexity in addition to reducing future interest costs. By ending the TAD in 2038, its original sunset date, rather than the proposed 2048, the city, county and schools are likely to see tens of millions of dollars in revenue annually from the new Gulch development 10 years sooner if the project is successful.
“By eliminating the request to extend the life of the Westside TAD, CIM is taking on additional risk that creates further motivation for CIM to deliver this exciting development at a faster pace,” Ressler said.
On Tuesday, Bottoms released about 700 pages of new agreements with the developer. Several council members said they hadn’t yet had time to review the new terms.
Councilman Howard Shook, who represents Buckhead, said he expects a special work session in the days ahead for council to get answers on the new deal terms.
“I’ve heard it’s all lemony fresh and all these subsidies have been knocked way down and it’s pay-as-you-go, and CIM assumes all this risk and they’ve got to get all this done in a short time frame,” he said. “That’s what I’m hoping to see when I read through it.
Shook, an opponent of the original deal, said the changes could get CIM closer to the eight council votes needed to approve the financing package at an expected vote Nov. 5.
Paying for itself
The project remains eligible to collect a portion of future sales taxes created within the Gulch. The city says five pennies of the local 8.9-cent sales taxes will be used to repay up to $1.25 billion in bonds through 2048.
Four of the five pennies are state dollars. CIM is on the hook for the debt, not the city, if the tax revenue fails to pay off the bonds.
Supporters say the project will help capture currently untapped spending from tourists, sports fans and concert-goers who come to downtown for events, but have nowhere go afterwards.
The other revenue stream still involves future property taxes created by the project through 2038. Instead of issuing hundreds of millions of dollars in bonds that would accrue interest, however, CIM will be eligible for reimbursement of costs of development after meeting certain development thresholds.
Under those terms, CIM could apply for reimbursement of up to 12.5 percent of qualifying development costs out of the TAD for two decades. Those reimbursements are based on a sliding scale of development — with more development meaning more potential recouped costs.
CIM also would be allowed to obtain about $32 million in bonds up front that also would be paid from future property taxes generated within the Gulch.
Under the new structure, CIM could recoup up to $625 million in development spending from property taxes through 2038, bringing the financing package to about $1.9 billion, but with a lower total cost with three decades of financing costs included.
Gulch backers say the development will effectively pay for itself because of the new revenue created.
But critics say the project will siphon tax revenue by directing development to the Gulch that would have happened in other parts of the city that contribute to the public coffers.
“Our team has worked nonstop over the last several months to structure a deal that would not just bring much needed development to the Westside of downtown, but most importantly, would benefit communities throughout Atlanta,” Bottoms said in a news release.
A public benefits agreement with CIM remains largely unchanged and includes a $28 million donation into a citywide affordable housing fund, and creation of the greater of 200 residential units or 20 percent as workforce housing. CIM also has committed to spend $12 million in a city economic development fund, $2 million for workforce training and a $12 million donation for a new fire station.
An original plan for $70 million to $125 million in bond financing for other parts of the Westside TAD has been replaced by an $8 million bond issuance because TAD bonds are no longer as large a part of the funding stream.
A.J. Robinson, president and CEO of downtown business coalition Central Atlanta Progress, which supports the deal, said the Westside would still benefit because increased property values within the TAD near the Gulch deal will create new TAD revenues to support new projects there beyond the $8 million.
At a press conference outside City Hall Tuesday morning, members of the Redlight the Gulch Coalition, which opposes the project, said the public benefits of the deal are still dwarfed by the subsidy.
J.C. Bradbury, a Kennesaw State University economist who contributed to an outside analysis of the deal, said Gulch supporters do not consider opportunity costs for using taxpayer dollars in the Gulch rather than in other parts of the city.
He said buildings constructed in the Gulch likely would have been built elsewhere in fully taxable areas, depriving the city, county and schools of future revenue they would have gotten if those buildings were built in Buckhead or Midtown.
“This is just the shuffling of dollars,” he said.
The anti-Gulch group released an analysis prior to the release of the new Gulch terms, but which included the removal of the TAD extension. The group approached four university professors, including Bradbury, to examine the deal. The professors, coalition members said, were not paid for their analysis.
Bradbury called projections of future development and tax revenue “optimistic guesses and wishful thinking.”
Robinson said the new proposal enforces stronger terms on CIM to deliver, otherwise they won’t be able to recoup costs. They also must work faster, he said.
“It took a really good deal for the city and made it better,” Robinson said. “Most importantly it forces the development team into a 20-year time frame to build a whole bunch of density. From the city’s standpoint, that’s what they should be trying to encourage.”
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