One of Atlanta’s main tools to encourage redevelopment in blighted areas with millions of dollars in taxpayer money needs a dose of extra accountability — as well as more oversight by city politicians — a soon-to-be-released audit finds.
The audit focuses on the 10 tax allocation districts overseen by Invest Atlanta, the city’s economic development arm. The districts help finance redevelopment costs through the pledge of future increases in property taxes generated by new development. The money helps fund such projects as new buildings and retail centers.
But the audit found Invest Atlanta has no way to determine when a redevelopment plan is finished and no longer needs public subsidy. Those projects that seem complete, like Atlantic Station, still collect more tax dollars than needed to pay off their debt, according to the audit.
And the city has no policy for handling the extra tax money once the main projects are paid off, according to the 94-page investigation, which was obtained by The Atlanta Journal-Constitution ahead of its planned release today at a City Council meeting.
“In the absence of a policy, the city could spend more than necessary on soft costs, continue to subsidize development when public support is no longer needed, or let resources sit idle,” the report said.
Tax allocation districts, or TADs, have sprung up across Atlanta in recent years and now cover nearly 27 square miles — a fifth of the city’s land area — and about 15 percent of the city’s assessed property values. During boom years, they were seen as the savior of dilapidated strip malls and struggling city centers, but they have come under more scrutiny after the economic downturn.
“It’s a very good tool if it’s used moderately,” said Chris Leinberger, a senior fellow at the Brookings Institution in Washington, D.C.
Critics of TADs say more oversight is long overdue. John Woodham, an Atlanta attorney who has challenged the legality of the districts in court, said the audit’s recommendations could help the blighted areas that need the money the most keep more of the funding.
“The city is shooting itself in the foot every time they anoint Invest Atlanta as the redevelopment agency, since they lose control and accountability over the funds,” Woodham said. “We don’t need another condo high-rise. We need Vine City to get the tax funds it deserved and it was promised.”
The audit recommends giving the Atlanta City Council more control over how the districts work by requiring city lawmakers to consider voting on changes to the redevelopment plans. It also wants the agency to report annual evaluations of each of Atlanta’s 10 districts to hold them more accountable and to more clearly define the administrative costs of running Invest Atlanta.
“While Invest Atlanta has processes in place to control developer costs, it does not subject its own operating costs and those of its affiliate Atlanta Beltline Inc. to the same scrutiny and oversight,” according to the audit.
Invest Atlanta’s chief executive, Brian McGowan, said in a statement the agency is already working to address many of the recommendations outlined in the audit, including drafting a “more proactive” evaluation strategy. Any new reporting requirements, he said, will show the program “is the most powerful and successful jobs and economic growth program the city has at its disposal.”
The agency also said in a written response to City Auditor Leslie Ward that it has expanded its accounting staff to help monitor spending but worried that some recommendations could place new burdens that would distract it from its mission.
It said giving City Council members more authority to oversee specific use of funds each time a new project could receive funding “would slow down the process considerably and make the TAD program a less attractive redevelopment tool for developers and community organizations.”
City leaders signaled they are confident Invest Atlanta is moving in the right direction after a recent overhaul of the agency, once known as the Atlanta Development Authority. Duriya Farooqui, the city’s chief operating officer, said the city will “formalize greater oversight going forward” to ensure the TAD funds are spent appropriately.
Millions of dollars are at stake, with nearly $640 million in bonds issued for five of Atlanta’s 10 tax allocation districts between 2001 and 2009. The council also has approved up to another $35 million in bonds to finance projects in west Atlanta’s Perry/Bolton district.
Funding from the tax districts has helped fund new bridges, expanded sewer systems and roadways, hundreds of new condos and more office space and retail for local businesses. But near Turner Field and in some impoverished communities in south and west Atlanta — including the Metropolitan Parkway, Campbellton Road and Hollowell/M.L. King districts — only a few projects have benefited from the districts, the audit found.
“It just may not be economically viable,” Leinberger said. “You can’t force it.”
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