Questions have emerged about whether Mayor Kasim Reed's administration acted improperly last week when, trying to resolve a dispute over Atlanta Beltline funding, it made a nearly $9.1 million "good faith" payment to Atlanta Public Schools without first going to the city council for approval.
Reed officials say they didn’t need to consult the council before cutting a check, but a few council members are questioning the move.
City and school leaders hailed the payment as evidence both parties are close to reaching a deal after years of negotiations. The conflict stems from a 2009 agreement over the Beltline’s funding model in which the city uses a portion of school taxes to pay for its parks and trails. In exchange, it is supposed to make annual payments to APS. The city got behind on those payments as a result of the recession and has pushed to strike a new deal.
Last year, the council authorized $4 million to be used to help settle the dispute as the city and school negotiated a new agreement. But to make the Dec. 30 payment, Reed officials pulled another $5 million from the general fund while the council was on holiday recess.
Council members Felicia Moore and Mary Norwood say they’re pleased a Beltline accord is within reach, but are concerned about what they see as an end-around. Moore points to city code that she says requires such expenditures to go before council first. She said that without legislation, it’s unclear whether the $5 million will be returned to the general fund.
“If we don’t question the ability of the executive branch to write a $5 million check without public knowledge, with no transparency and without authorization of council, then we have a big problem,” Moore said.
Norwood said the council should have been consulted, noting: “We should have been informed so that we can make a decision.”
A spokeswoman for Reed’s office said the administration had all the authority it needed because of the twice-amended 2009 agreement with APS that established the Beltline’s tax allocation district, or TAD. City Attorney Cathy Hampton said that agreement, which the council approved years ago, provides the legal authority to make necessary payments. Reed officials have also said the final deal will go before council.
“The $9 million payment demonstrates the city’s commitment to finalizing a resolution as quickly as possible,” Hampton said in a written statement. “We remain cautiously optimistic that settlement will be reached very soon.”
Reed’s office did not, however, specify the language in the 2009 agreement and its two subsequent amendments that made clear its authority to use general fund dollars. Nor is it clear why the payment was categorized as a “good faith” payment, as opposed to a payment-in-lieu-of-taxes as described in the contract.
Reaching a deal is critical to the future of the Beltline, an ambitious plan that calls for developing a 22-mile loop of parks, trails and transit around the city, as most agree the current agreement is unsustainable.
Under the existing contract, the city is required to fork over $162 million in a series of fixed annual payments through 2030. The conflict arose when Atlanta said it couldn't afford to do so using the tax revenue collected within the Beltline TAD. It withheld the past two years of payments, worth a combined $13.5 million, as it has sought to strike a new deal with APS.
The city was facing a $7.5 million payment on January 1. If it hadn’t paid, it would have been in material breach of the 2009 contract. (Reed has noted the city has four years to resolve that debt.)
Carolyn Bourdeaux, director of Georgia State University’s Center for State and Local Finance, said it’s clear the city had an obligation to make the most recent payment, but doing so out of the general fund “violates the spirit of TAD financing,” as tax allocation districts were designed to be self-supporting. It also raises the question as to whether taxpayers will be “on the hook” for other TAD investments, she said.
Councilman Alex Wan, chair of the city’s finance committee, said he understood the need for the $9.1 million payment, even if the council wasn’t first consulted.
“In principle, I don’t think this should come out of the general fund. I think this should be structured as a loan to the Beltline TAD until such time they pay it back,” Wan said. “However, just to continue the negotiations, if it means the city has to front it for now, I’m willing to be open to that as a short term posture.”
Council President Ceasar Mitchell, who sparred with Reed last year after the mayor slammed his suggestion of using city money to pay APS, declined to comment on the recent use of general fund money. He said he's focused on the city and schools reaching an accord.
“I’m really encouraged, and I think there’s a lot of good faith effort towards getting this settled,” he said.
About the Author
