Without schools’ support, GM site redevelopment may be downsized

The developers believe governments would begin to make money as soon as in 2017 if the TAD is approved, according to an analysis by Bleakly Advisory Group. While property taxes on the GM site would be frozen, personal property tax revenue and sales tax collections would rise.

But the school district’s analysis shows less favorable figures. DeKalb schools Chief Financial Officer Mike Bell said the school system wouldn’t turn a profit until 2050.

Redevelopment hopes for Doraville site

Source: City of Doraville

As hopes dwindle for financial support from the DeKalb school system to help rejuvenate the abandoned Doraville General Motors site, developers could seek other avenues to tap tax money for the project.

Their original plan for the barren 165-acre property envisioned that the school district and local governments would contribute future growth in tax collections to pay for infrastructure on the site, but education officials have balked at the idea.

If DeKalb school leaders don't change course by June, developers have warned that business realities will force them to move on with scaled-down plans. Instead of a mini-city with office towers, mixed-use housing and parks, the area could be used for strip retail stores, car dealerships and suburban housing.

“We would downgrade our vision for the site,” said Egbert Perry, the CEO of Integral Group, during a recent interview with editors and reporters of The Atlanta Journal-Constitution. “That doesn’t leave the school board any better off. It’s worse off.”

And tax money could still end up helping to pay for it.

The owners of the site could pursue tax breaks without needing elected officials’ approval. Economic development boards in Georgia have the power to erase property tax obligations as an incentive for business growth.

Perry has been seeking the school board's participation in funding infrastructure improvements such as a pedestrian walkway to MARTA, a street grid and water and sewer installations.

These projects would be funded through a mechanism called a tax allocation district, which would use expected growth in tax collections created by the development to repay bonds for infrastructure. When the project is finished, local governments collect new and theoretically higher tax revenue from businesses that locate on the site.

DeKalb school leaders haven't agreed to the plan, saying they want to spend money directly on student education after the district's accreditation was put on probation in 2012. The district earned full accreditation from AdvancED, the group that accredits schools, earlier this year.

Under the tax allocation district proposal, the school district would preserve its current tax base, while future increases in property tax revenue would go toward roughly $200 million for infrastructure.

But tax breaks from a development board could remove current funding from the school system. The Doraville Downtown Development Authority has the ability to grant tax abatements up to the amount the developers pay in property taxes for the site — $915,000 in 2014, with $460,000 of that amount for schools.

The school board should approve the tax allocation district plan because it would raise the most money for infrastructure and have the highest pay-off in the long run, said Jack Halpern, chairman of the Doraville Downtown Development Authority.

“If ultimately the school board chooses not to do the right thing, we’ll explore other possibilities to assist the project in moving forward,” Halpern said. “If they continue to ignore the situation … then they are neglecting to understand the consequences of their actions, and the children of DeKalb County are the ones that will suffer.”

The developer, Integral Group, hasn’t yet requested assistance from the development authority while trying to persuade the school board to participate in the tax allocation district, Halpern said.

“To make a lesser development happen, we have to take resources away from the school district, and we have the tools to do that,” said Doraville City Manager Shawn Gillen in the meeting with the AJC. “We don’t want to do that because these are our schools.”

The threat to the school system’s bottom line didn’t convince DeKalb schools Chief Financial Officer Mike Bell.

He doubted that the developer could obtain substantial loans for infrastructure based on the amount of the tax breaks, and the process could be challenged in court.

“I have heard the developer himself say it would be very difficult to put together this type of project using tax abatements,” Bell said. “It’s very improbable that could be strung together and that it would pass legal muster in DeKalb.”

Several experts on public financing of private development said tax breaks could be an option for the developer if the tax allocation district falls through.

These kind of incentives are one of Georgia’s most powerful economic development tools, and they’ve been used to attract businesses including Mercedes-Benz USA, financial technology company NCR and many other companies looking to relocate or expand.

“Yes, they can do that without the school district’s approval,” said Carolyn Bourdeaux, associate director of the Georgia State University Fiscal Research Center. “They could do that and cut right through the different tax digests.”

Dick Layton, an expert in municipal finance for PFM Group, said the school board would at least maintain its current tax base through the tax allocation district, but it would lose money with a tax abatement.

“It would be a net gain for the school district rather than leaving a hole in the ground, which is what they have now,” Layton said.

Ed Wall, who specializes in public finance investment banking for Piper Jaffray, said he doesn’t think either the tax allocation district or tax abatements would raise enough money for the kind of infrastructure improvements envisioned by developers.

Lenders have grown wary of speculative developments since the Great Recession. The developer hasn’t announced any committed office tenants for the site, though a movie production facility, Third Rail Studios, is scheduled to open in September.

“The best thing the school board could do is approve the tax allocation district, and the developers would be the dog that caught the car,” Wall said. “They could approve the TAD but it isn’t going to help them. You can’t sell TAD bonds on promised development.”

DeKalb Board of Education Chairman Melvin Johnson didn’t return phone calls seeking comment, but he has previously said the board’s primary role is to promote student achievement rather than economic development.

But Doraville Mayor Donna Pittman has been pleading for the school board to give the developers a chance to make their case. So far, she said the board hasn’t allowed a presentation on the tax allocation district.

“I just don’t think they understand what’s at stake,” Pittman said. “That’s why it’s so important that they hear the options.”