Select Fulton, the county’s economic development arm, has tightened its criteria for granting tax abatements — specifically when it comes to the return on taxpayers’ investment. County leaders say they want to make sure any office building, apartment complex or warehouse that is granted a break increases the value of a site by at least five times its current value.
They’re calling it a hurdle rate — in other words, a financial bar businesses or developers have to jump over before they can get the benefits.
However, there will still be exceptions to the rule, said Al Nash, Select Fulton’s CEO, as when a proposal might bring in less tax revenue but eliminate an eyesore, or other businesses would be expected to follow soon after. But the measure is a way to add more rigor to a process that can sometimes seem opaque. Additionally, Fulton plans to make short, plain-language deal sheets more common, so people can more clearly understand a company’s needs, and why it would benefit from incentives.
“What matters most to the taxpayer is, is that a good use of public money?” County Manager Dick Anderson said. “Looking forward, I think we are becoming more aggressive.”
Incentives have long been a hot topic in metro Atlanta, but recently, the focus has been even higher. The state offered Amazon more than $2 billion in incentives in an effort to lure the company’s second headquarters to Georgia. In Atlanta, a deal to give the Gulch project $1.9 billion in public subsidies has drawn a lot of scrutiny. Protesters begged members of city council to “redlight” the project, but it was approved Nov. 5.
And in Cobb County, the government is still struggling to understand how much has been spent to build SunTrust Park, the controversial Braves stadium. A recent AJC investigation showed the $3.4 million revenue Cobb has gotten from the stadium hasn’t been enough to cover nearly $30 million the government paid in the 2017 fiscal year. An additional $1.6 million in county sales tax is earmarked for education and transportation, and can’t be used to pay down the county’s debt.
Nash and Anderson, in Fulton, say the county seems to be getting about four times the current value for each project it abates, with some deals getting better returns than others. The county’s tax abatement goes for 10 years, and means a developer will only pay taxes on half the value during the first year, with 5 percent increases through the end of that period.
“I think it gives us a better tool to quantify and evaluate opportunities,” Nash said.
Still, the county has no way to recoup any money that has been abated if what a developer has promised in jobs, investment or improvements does not come to be.
Anderson said tightening the standard is meant to demonstrate that government is being prudent with taxpayer money. An Ernst & Young consultant brought in to help with the plan said not many jurisdictions are applying a similar test before approving incentives. Across the metro area, counties have different standards.
‘An interesting concept’
In DeKalb County, each incentive proposal undergoes a fiscal impact study, and Decide DeKalb President Ray Gilley said he tries to make sure every proposal results in more revenue for the county, even with the abatement. He said a company must invest about $10 million to make it worthwhile for the county to engage.
Gilley said he thought Fulton’s change was a good approach. It helps assure that tax incentives will generate revenue for the county, he said.
“That’s an interesting concept,” he said of Fulton’s plan. “That’s a good standard, I think.”
In Clayton County, development authority executive director Khalfani Stephens said wage growth is the most important factor. Stephens said while he won’t do a deal that will negatively impact the taxable income value in the county, most of the deals he seeks are predicated on raising the county’s average wage.
“We don’t look for a rate of return the way they look for a rate of return,” he said. “Everyone does it differently. We’re looking at a lot of different things.”
Stephens said by increasing wages, the county will increase residents’ disposable incomes, which will lead retailers to come to the area and then draw the development of single-family housing. Those long-term goals are more important for Clayton than short-term bumps in the tax base, he said.
And in Cobb County, economic development division manager Michael Hughes said the county revamped its incentive offerings in February to allow them to be more targeted across a number of business sectors Cobb is trying to woo.
Now, there are different incentives for entrepreneurs and for small businesses in the county, and for companies that might want to expand or relocate there. There are now nine incentive programs, where there used to be one.
Targeted industries, like aerospace or health care services, must pay an average salary of at least 1.25 times Cobb County’s average, add at least 25 jobs and have an estimated economic impact of at least $250,000 during the period of the incentive to be eligible. Other categories will have different requirements.
Hughes said he expects to reconsider what is and isn’t working every two to three years.
“It’s what you think is good for the future of your community,” he said.
A spokesperson for Gwinnett County said there was no one who could speak on what returns were expected from any incentives.
In Fulton, the new approach is an attempt to ensure what the county gets out of it is worth the investment.
“Our job is to grow the tax base, to help to create jobs and to retain jobs,” Nash said. “I think we can be competitive, and at the same time, be good stewards.”