In 2012, this newspaper took the time to document a rare event — a company passing up free public money.
State Farm was expanding in Dunwoody and the company was doing it on its own dime. Stop the presses!
But last month, the insurance giant and its site developer did an about-face on a followup project. This time they asked for a retroactive tax break for a tower almost finished. The $48.6 million in tax breaks they are seeking would help defer the costs of one office tower already standing and a couple more that exist only on sketch pads.
An exec from the development company told my colleague Mark Niesse the retroactive cash infusion would let them speed up construction of the next two buildings. City officials figure that greasing the skids might get the buildings up before the inevitable recession hits. The Dunwoody Development Authority could vote this month on the incentives, which would last for 17 years.
I admire the gumption of State Farm and its developer. Nothing ventured, nothing gained. It’s a bold request, one akin to calling State Farm after an auto accident to ask for a back-dated policy.
State Farm officials say the company campus, when completed, would employ 7,500. It’s attached to a MARTA rail station, near I-285 and in a valuable business location in metro Atlanta. You’d think companies would fight each other to get into a prime spot of real estate like this and would not have to be incentivized.
But you’d be wrong. In fact, companies are unembarrassable when it comes to asking to get a little extra off the top when it comes to not property taxes or getting a little something kicked back to them.
“We went from a Robin Hood strategy to just robbin’,” said Brent Lane, an economic strategist at the University of North Carolina. Governments set up these development authorities to cut deals and draw in business, he said, so that’s what they do — they cut deals. Politicians support the schemes because they like to appear at ribbon cuttings. Also, they worry potential businesses will skip to a neighboring towns if they don’t open up the coffers.
Originally, tax incentives or abatements on future property taxes were ways to get developers to build in areas where they normally wouldn’t, like on contaminated land or in run-down neighborhoods. Now, tax relief is baked into business plans. Even my bosses at Cox Enterprises used tax incentives to build and expand their headquarters in Sandy Springs.
I asked Professor Lane why folks get so upset when sports teams get millions for stadiums but there’s barely a peep when deep-pocketed corporations get tax money as a normal course of operations.
“People really don’t understand it; we are inured to such things,” he said. “It’s usually done in a way to obfuscate it in complexities. Or there’s an argument that if we don’t do it, someone else will.”
There’s an Us against Them mentality as governments vie for companies and try to steal each others’ prime corporate catches.
Everyone is doing it, pols and business types contend. They call it being at a “competitive disadvantage,” if they don’t. It’s like being one of the Major League Baseball players not juicing back in the 1990s when Mark McGuire and Sammy Sosa dented outfield walls with Herculean shots.
Across the street from the State Farm building, and also adjacent to the prime MARTA stop, would be an office tower planned by a company called Transwestern, which appears to be a speculative project, meaning the building is not designed for one specific tenant. But Transwestern is seeking $14.5 million in tax incentives, according to a report in the Reporter Newspapers, which covered the development meeting.
Why do they need a break? Well, across I-285 in Brookhaven is Perimeter Summit, a similar project being aided by a $6.3 million tax break. The Transwestern exec told the Dunwoody development guys the company needed the “edge” to compete.
The funny thing about that is Brookhaven didn’t even know it was giving away some of its future taxes because DeKalb’s development board inked the deal that cut taxes to the city, as well as DeKalb’s schools and the county government.
“How does something like this happen?” asked an exasperated Rebecca Chase Williams, Brookhaven’s mayor at the time.
Good question, so I called Williams, who remains conflicted on the issue.
“Intrinsically, I’m against giving taxpayer money to developers,” she said. “If they say, ‘We can’t build it without the break, then what the heck are they building it for?”
Another good question.
But then she answered herself: The system is set up to play cities and counties — states for that matter — against each other. If you don’t play the game, you fall behind.
Former DeKalb Commissioner Elaine Boyer used to call it “corporate welfare” — at least for projects she didn’t like.
Commissioner Boyer ended up going to prison for siphoning off public money. But it doesn’t mean she wasn’t wrong when it comes to giveaways.
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