DeKalb County’s economic development agency recently made a splash by approving millions of dollars in tax incentives for two businesses in Brookhaven.
There was just one glitch: No one told Brookhaven officials that those tax breaks would come, in part, at the city’s expense.
That lack of communication is alarming to Brookhaven Mayor Rebecca Chase Williams.
“We want to know what’s going on when somebody is giving away our taxes,” she said Tuesday. “How does something like this happen?”
At issue are $7.4 million worth of tax breaks that the Decide DeKalb Development Authority approved Oct. 8 for two companies. Developer Seven Oaks Company plans to build an office tower at Perimeter Summit along I-285, and Source One Direct is expanding its credit card customization facilities.
Decide DeKalb, like many authorities, provides tax breaks through complicated bond deals to encourage business growth.
Both of the companies are expected to pay taxes to local governments, but not as much as they would without the incentives. After accounting for the tax discounts, the projects are projected to generate more than $26 million for local governments over the next 20 years, according to studies conducted for DeKalb’s authority.
Brookhaven will forego more than $500,000 in revenue over that time. The rest of the incentive comes from DeKalb County’s government and its public school system.
Decide DeKalb Development Authority President Ray Gilley said Tuesday he will improve communications to ensure that all governments involved are well informed.
“We’ll talk to them to understand their concerns and how we can better work together,” he said. “We need to help everyone understand that these investments are strategically important for the county.”
But DeKalb Commissioner Nancy Jester said she’s concerned when one part of the government can take money from a city without any review or safeguards.
“I’m very disturbed to learn that everyone is not informed thoroughly and hasn’t had time to vet these projects,” Jester said. “If we don’t have some boundaries, at what point should the Legislature get involved?”
Seven Oaks CEO Bob Voyles said in an interview Tuesday that he spent much of the day calling Williams and other Brookhaven officials to help ease any concerns.
The incentives approved this month by the authority are the fifth such bond issue on the Perimeter Summit project since it began. Previous bond inducements and tax breaks were involved in the development of earlier office towers and a Hyatt hotel on-site, he said.
These bond and incentive deals are routine for major office developments and other big real estate projects that generate jobs in metro Atlanta, Voyles said. The incentives are vital to making the finances work, he said.
In the case of the Perimeter Summit project, the bonds are not being used to finance construction. But the tax incentives imparted by the arrangement are “a critical piece to the financing of our project,” Voyles said, as it will help offset rising construction costs.
The tax savings on a new 16-story office tower will be passed along to the office tenants, Voyles said. Construction is scheduled to start in November, and Seven Oaks is in discussions with two companies about locating their offices in the new building.
This type of tax break is one of Georgia’s most powerful economic development tools, used as part of incentive packages for companies like Mercedes-Benz USA and the future Midtown headquarters of financial technology company NCR. The incentives also have been doled out by local development authorities for projects such as speculative office towers and even luxury apartments.
Development authorities can impart a property tax break through so-called bond and lease-purchase agreements. In essence, the authorities issue bonds, take title of the buildings or properties, then lease them back to the developers. It's under that structure that the developers get the tax break.
The bonds typically are not sold as debt, but are more a legal maneuver to be able to provide the tax savings. The public is not on the hook for any debt.
The miscommunication between Brookhaven and DeKalb isn’t the first controversy between development authorities and cities. Atlanta has been at odds with the Development Authority of Fulton County over similar incentives granted to luxury apartment developers.
Last year, Mayor Kasim Reed took issue with DAFC when it granted tax breaks within the city limits without imposing an affordable housing requirement. Atlanta’s development authority, Invest Atlanta, requires developers set aside 10 percent of rental units as “affordable” in order to obtain a property tax break.
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