Major redevelopment of old GM site depends on public support

A demolition company chopped, smashed and crushed most of the 3.6 million square feet of buildings at GM’s former assembly plant in Doraville. MATT KEMPNER / MATTHEW.KEMPNER@AJC.COM

Credit: Matt Kempner

Credit: Matt Kempner

A demolition company chopped, smashed and crushed most of the 3.6 million square feet of buildings at GM’s former assembly plant in Doraville. MATT KEMPNER / MATTHEW.KEMPNER@AJC.COM

How tax allocation districts work

A tax allocation district, or TAD, is a financing mechanism by which local governments can support development projects.

With a TAD, governments agree to freeze the amount of property tax revenue they each receive from the area.

Any additional tax revenue generated by rising property values is used to fund the redevelopment project.

In the case of the Assembly project in Doraville, up to about $247 million in bonds would pay for infrastructure improvements to make the site ready for businesses to locate there. Then the increase in tax revenue derived from the development would be used to pay off the bonds.

The TAD would expire after 25 years, and then participating governments would receive the entire tax base created by the development.

DeKalb County officials could soon decide with a series of votes whether to support the redevelopment of the torn-down General Motors factory in Doraville with many millions of dollars in public funds for infrastructure.

The site along the high-traffic Perimeter is seen as a diamond in the rough, and the public aid is viewed as critical for the site's future development.

The DeKalb County Commission may consider an agreement Tuesday with the city of Doraville to create a mechanism for public financing known as a tax allocation district to help fund infrastructure such as a street grid and a tunnel to connect the 165-acre parcel to the Doraville MARTA station. The county’s school system could be asked to join the tax allocation district and pledge its financial support to the ambitious project.

The votes could allow for the issuance of $247 million in infrastructure bonds to be repaid over decades. No existing tax money would be used, but revenue derived from future increases in the area’s property values would pay off the infrastructure bonds.

Doraville boosters and other backers say jobs created by the project, known as Assembly, could compensate for the thousands lost when GM shuttered the plant. The project also could help Georgia recruit major corporations and lead to high-density development that ties into transit.

But if the county and the schools don’t join Doraville leaders in devoting some of their projected property tax revenue from the project to needed infrastructure, developers might be forced to downsize their ambitions. Others fear the project could be delayed.

The infrastructure work is vital to jump-starting development, said Eric Pinckney, an executive for the developer, Integral Group. Public financing would pay for parks, transportation connectivity, pedestrian walkways and street grids. Already, the project is attracting interest from major corporations looking to relocate.

Pinckney said he’s confident the county government will give its approval Tuesday or in the weeks ahead, though some county commissioners have expressed reservations. The Doraville City Council voted last week to participate in the plan.

“This is the chance to create a world-class city from scratch,” Pinckney said. “Atlanta doesn’t have a neighborhood that is 100 percent done right and takes into consideration the best practices of what’s been learned both locally and far way. It would be a shame to have to ratchet back and have to compromise.”

The developers say that Assembly will be a catalyst for growth that will boost not only the tax collections from the Assembly site, but also in areas, bringing immediate benefits to Doraville, the county and the schools.

Located near the transportation crossroads of I-285, I-85 and MARTA, Integral bought the property for $50 million last year. The land was used as a GM production plant from 1947 until it closed in 2008, when the last minivans rolled off the assembly line.

“We know there are people interested, but their first question is, can the infrastructure get built in a timely fashion?” said Doraville City Manager Shawn Gillen. “You’re looking at a total buildout of $1 billion or more in private investment, and that money isn’t going to spent unless there’s access to the site.”

The stakes are high for the project to succeed, said state Sen. Fran Millar, R-Atlanta, during a breakfast meeting at the DeKalb Chamber of Commerce last week. He said if local governments fail to approve public financing, other businesses would also hesitate to move to DeKalb.

“If this doesn’t happen, if we don’t have this tax allocation district, you can forget about any significant economic development in DeKalb County over the next decade,” Millar said. “This is a huge project. This could jump-start DeKalb. Without that tax allocation district approval by the schools and the county, it will not happen.”

But government leaders are wary of dedicating public resources to the project until they’re confident it will pay off.

They’re being careful not to dedicate too much taxpayer money to the project, and they want to be able to review its progress with an option to withdraw future public support if it’s not moving according to plan, said DeKalb Commissioner Jeff Rader.

“What are the details, and how do you protect the county’s interest in not over-funding the project but at the same time funding it sufficiently so they can be able to do the improvements?” asked Rader.

The DeKalb school district, which would need to provide more than half of the project’s public funding, also may be reluctant.

DeKalb schools have never before participated in tax allocation districts, which have been used for other developments in the metro area including Atlantic Station and the Beltline, though the latter has been at the center of a dispute because of missed payments to Atlanta Public Schools.

Developers have discussed the potential to relieve student overcrowding by setting aside land or building schools on the property, but DeKalb school board Chairman Melvin Johnson said the area needs new facilities more quickly than they could be constructed at the Assembly site.

“We have not made any definitive decisions at this point,” Johnson said. “I’ve been meeting different individuals to review and assess without making a hasty decision.”

Without school district backing, the development might not be practical as it’s currently envisioned, said Luke Howe, Doraville’s director of economic development.

“Absolutely, we’re concerned,” Howe said. “We can’t even begin to start recruiting before the tax allocation district is in place. … We’re losing people who are interested in it right now.”

So far, Integral has sold a 20-acre parcel of the site to car dealer company Asbury Automotive, which plans to put two Nalley-branded dealerships there. The sale of the land, for about $19 million, helped Integral refinance debt for the site and extended maturity of the loan into late 2017.

The only named tenant for Assembly is Third Rail Studios, a movie studio campus to be built by developer Capstone. The studio project, which is expected to open in the third quarter of 2016, is likely to be joined in its development by retail, restaurants and office space.

Eva Horton, a managing director for commercial real estate brokerage Newmark Grubb Knight Frank, called the project “critical” to revitalize Doraville and provide a vital link between the surge of development in Brookhaven and Chamblee north to Peachtree Corners.

“That stretch has been forgotten,” she said.

The only Doraville council member to oppose the tax allocation district, Trudy Jones Dean, said the project is being rushed without any guarantees of success.

“It seems to me to a whole lot of smoke and mirrors,” she said. “It’s such a huge amount of money for something that seems to be so flimsy.”