The city of Atlanta announced Friday it has reached a deal with Atlanta Public Schools to use school taxes to help redevelop downtown’s Gulch, ending an impasse that threatened public money crucial for the up to $5 billion project.
Mayor Keisha Lance Bottoms’ office released broad outlines of the proposed deal. In it, APS would agree to forgo future property taxes created within the Gulch development site through 2038 in exchange for ending its involvement in another major redevelopment incentive, returning millions of dollars each year to the schools.
The city also would pay APS $15 million through 2023. The schools, meanwhile, would agree to help fund redevelopment in four other special taxing districts that touch much of the city’s Southside.
The proposal, expected to come before City Council and the school board on Monday, also is expected to resolve the school district’s legal objections to bonds the city wants to issue to finance a portion of the development.
It's unclear from the figures released late Friday by the city how much the schools will save or lose under the agreement. Superintendent Meria Carstarphen in October blasted an earlier version of the Gulch deal, sending the city back to the drawing board. When the City Council approved a revised Gulch package in November, the school district objected with a legal challenge to Gulch bonds in December and approved a resolution requiring future school board consent for using school taxes in redevelopment deals on the city's Westside.
The city-APS agreement was savaged Friday by Gulch critics as a giveaway to developers and by community leaders on the city’s Eastside, which will lose some of the firepower in a redevelopment program that has so far failed to lift historic neighborhoods such as Sweet Auburn, the birthplace of civil rights icon the Rev. Martin Luther King Jr.
“The APS board is throwing the school kids, the teachers and the taxpayers under the bus here,” said Gulch opponent Julian Bene. “They did not need to do any of this.”
In November, City Council approved an up to $1.9 billion public financing package for developer CIM Group to transform the Gulch, a 40-acre tangle of parking lots and rail beds between Mercedes-Benz Stadium and the Five Points MARTA station, into a mix of apartments, office towers, hotels and a regional mall's worth of retail space.
Up to $1.25 billion would come from future sales taxes created on site that normally would be collected by the state, county and cities in Fulton County.
The complex transaction also relies heavily on future property taxes to be created by the new development and collected by the city, Fulton County and the schools through 2038. The school system's future tax dollars would account for about half of the up to $625 million in Gulch property taxes CIM could tap into over the next two decades, while the city and Fulton would contribute the other half.
But last month, APS challenged bonds the city plans to issue during a legal process known as “bond validation” that’s required under Georgia law before the debt can be issued. The school board also approved a resolution requiring its consent before school tax dollars could be used to help pay for the new development.
School district officials contend APS must protect its tax base to support students and schools. They had called for the city to renegotiate how school taxes are used for redevelopment projects throughout the city.
The sabre rattling led APS and the city to the negotiating table.
The city issued the news release Friday announcing the deal after being contacted by The Atlanta Journal-Constitution, which had obtained draft resolutions outlining the agreement.
APS spokesman Ian Smith declined to comment after the city announced the deal. School board chairman Jason Esteves declined comment.
Earlier Friday, Smith declined to answer questions about the draft agreement, dated Dec. 31, that included the same provisions outlined in the city’s announcement plus others not specified by the city. Smith described the draft as “outdated.”
“APS will not comment on these discussions with the city while they are ongoing,” Smith said, in an email.
The unsigned draft obtained by the AJC states that the school board has determined “it can balance its support for economic development” with its educational mission “by ensuring a predictable, foreseeable, and time-bound plan” to use school tax dollars to support redevelopment.
The agreement announced Friday affects powerful redevelopment incentives known as tax allocation districts or TADs in nearly every part of the city. TADs are areas where property tax collections for cities, counties and schools are frozen for a period of time to help support projects in areas that may not otherwise be redeveloped.
Future increases in tax collections from rising property values as the area redevelops are used to help pay for development.
APS currently participates in five of the special taxing districts, giving up about $434 million in school tax money from 1999 through June.
In theory, after the TAD expires, the participating government bodies — such as school systems — reap the financial benefit of new, higher property values.
The deal would allow the city to continue to use school property taxes to pay for the Gulch as well as begin using school taxes to pay for redevelopment over the next 30 years in four additional areas: along Campbellton Road; Donald Lee Hollowell Parkway and Martin Luther King Jr. Drive; Metropolitan Parkway; and in the area around Georgia State Stadium.
In exchange, the city would agree to end the school system’s participation in the Eastside TAD, which covers Sweet Auburn, Memorial Drive and parts of downtown. The city would pay APS millions of dollars to help reimburse the school district for costs in the Westside TAD, where the Gulch is located.
The draft obtained by the AJC states the city also would agree to new restrictions to limit APS’ financial risk in two other existing TADs covering Perry Bolton and Atlantic Station, though it’s unclear if those provisions remain in the agreement announced Friday.
After reviewing the draft agreement, Bene, a leader of opposition group Redlight the Gulch, said the school system caved. Bene's group is challenging bonds the city wants to issue for the Gulch. They have alleged dozens of issues with the bonds, including that the city approved the deal, but needed the schools' consent to use school tax dollars.
APS, he said, had a strong hand to extract better terms.
As a result, Bene said the schools could forego more than $660 million in property taxes over coming decades and get only about $175 million in return, a net loss of nearly $500 million.
“What they’re getting back is pitiful compared to what they’re giving up,” he said.
Mtamanika Youngblood, who chairs the nonprofit Sweet Auburn Works, said community activists on the Eastside were heartened when the city backed off an earlier push to close the Eastside TAD in order to win APS support for the Gulch.
The new proposal would keep the TAD open but would cut future incentive funding for Eastside projects in half, she said, because school taxes make up about half of the funding increment in a TAD.
Youngblood said city leaders promised her Sweet Auburn and other struggling neighborhoods would get priority from those funds.
“We don’t have friends in high places that can just give us millions of dollars,” she said. “We need this money.”
THE STORY SO FAR
On Nov. 5, the Atlanta City Council approved an up to $1.9 billion public financing package for downtown’s $5 billion Gulch project. Atlanta Public Schools and a citizens group have since challenged bonds needed to help finance the deal. On Friday, the city announced it has reached a deal with APS for the school district to potentially commit $300 million-plus in future school property taxes to the downtown project. Legislation is expected to come before the council and school board on Monday.
Gulch Meetings
The Atlanta school board has called a special meeting Monday at 9:30 a.m. at district headquarters at 130 Trinity Ave. The Atlanta City Council will meet for the first time this year beginning at 1 p.m. Monday at City Hall, 68 Mitchell Street SW.
