Torpy at Large: Tax giveaways, the price of building with the Big Guys

A new “boutique” hotel would be built adjacent to the Beltline across from the popular Krog Street Market. The development authority said the project needs a tax break to make a go of it. BILL TORPY / BTORPY@AJC.COM

A new “boutique” hotel would be built adjacent to the Beltline across from the popular Krog Street Market. The development authority said the project needs a tax break to make a go of it. BILL TORPY / BTORPY@AJC.COM

The Eastside Trail of the Beltline as it nears DeKalb Avenue is about as hot a section of terra firma as you’ll find in Atlanta.

Carpenters just can’t swing their hammers fast enough to keep up with the demand of all the new restaurants, pubs, apartments and yoga studios going in along that concrete ribbon.

So it might seem a bit odd that developers of a new "boutique" hotel proposed for that area last month came to the Development Authority of Fulton County looking for a little love, as in getting $3.5 million off their property taxes over the next 10 years.

An exec from Portman Holdings, which is behind the $80 million, 200-room hotel, said the firm is taking on risk building a hotel outside of the city’s normal hotel spheres. The development authority’s fact sheet for the project — which would be wedged onto land at Auburn and Irwin streets and adjacent to the Beltline — says the hotel will encourage “social interaction,” have “regionally inspired menus,” and create a new hub for “culture and exploration.”

Now, you can’t blame Portman — the firm started by iconic developer John Portman, who is equally loved and hated by urbanists and architecture buffs — for asking. The company is merely playing by the modern-day development rules that say, Hardly Anything Gets Built Around Here Without a Gimme.

In the same meeting, two Goliaths of the hotelier game, Marriott and Westin, said they are going in together to build a 282-room, $96 million creation in Midtown, an area where it’s hard not to spot a crane.

The fact sheet says the structure will be built “on the only undeveloped corner at the historic intersection of Peachtree and Ponce de Leon, the other corners being occupied by the historic Ponce Apartments, the Georgian Terrace and the Fabulous Fox Theatre.”

You might notice the previous sentence employed the word "historic" twice before using "Fabulous." So why would two deep-pocketed companies with a project on such a premier and historic intersection need to come with their hands out and seek $4.8 million in property tax breaks before turning soil? Well, just because.

Recently, Maggie Lee, a reporter at the Saporta Report, estimated that so far this year, Fulton's development authority and the city's Invest Atlanta doled out $163 million in property tax breaks for development inside the city limits — taxes that go to the county, the city and the city's schools. The schools have historically frowned on such giveaways.

(I determined that the Fulton authority gave $131 million in tax cuts and then started poring through Invest Atlanta minutes before deciding that life is too short. So I will go with Maggie’s total.)

Fans of such inducements like to say something is better than nothing, that these developments would have remained weedy lots without the tax scheme.

This year, Fulton County Commissioner Liz Hausmann wrote an editorial in the Atlanta Business Chronicle praising the system, saying, “The ‘lost revenue’ is non-existent as it would not have been generated at all without these developments.”

According to the development authority, the lot near the Fox now generates $37,592 a year in property taxes and would pull in $891,766 with hotels there. The higher tax will also grow over the next decade.

Just to the south of where a hotel would be built near the Beltline is a string of new pubs, eateries and a yoga studio. BILL TORPY / BTORPY@AJC.COM

icon to expand image

Al Nash, the development authority’s CEO, said the projects at Portman’s Beltline site have fallen through in the past and so some help is warranted. He said “job creation, neighborhood and community support, and recruiting tenants” is considered when deciding to help a project and that Fulton’s incentives “are often more conservative” than other jurisdictions.

The question is, "Would stuff get built without the giveaways?" The answer — from those building stadiums, shark tanks, the Gulch mega-project downtown and just about any new gleaming tower in Midtown — is generally, "Heck, no!"

Developing is a risky game, they say. So the answer is to socialize the risk.

But it is a tough question to answer. It’s a chicken-or-the-egg circular discussion.

Such a system is not popular with the public. Marion Zucchi, who was walking near the site of the future Beltline hotel, said, “They’re giving away the shop to new people on the backs of those of us already here.”

Zucchi, an tech consultant and CBD shop owner, just saw his taxes on two properties in Midtown double in the past two years. The tax abatements to developers, he said, are “just gravy on top of profits.”

Matt Janke (left), who for 20 years has run a glass shop near what is now the Beltline, said, “It’s beyond me why they’re getting a tax break.” Arthur Wilson is on the right. BILL TORPY / BTORPY@AJC.COM

icon to expand image

Matt Janke runs a glass studio in an old industrial building around the corner from where the Beltline hotel would stand. He’s been there for 20 years, back when “forlorn” and “forgotten” would describe the area.

“It’s beyond me why they’re getting a tax break,” he said, as he turned a heated ball of molten glass. “I can see giving one 15 years ago. If they get a tax break, everyone should get one.”

Mister Glassblower makes a point — a lot of tax abatement schemes were set up as inducements for developers to invest in areas where they wouldn’t normally go. You know, the poor, underserved side of town.

But as you roll though the projects currently being incentivized, you’ll keep seeing Midtown, Buckhead, Midtown, Beltline, with a few distribution centers in South Fulton tossed in for good measure.

icon to expand image

I called Joe Stewardson, who 20 years ago renovated a loft in the Old Fourth Ward, the area near the MLK center that is now as red hot as development goes. He has renovated three old buildings in the area, averaging 10,000 square feet each.

He got a little historic district tax incentive years ago and has helped push Invest Atlanta to give out grants for businesses in the area to rebuild their facades, and keep them looking old-timey.

“My problem is not with Portman getting an abatement,” Stewardson said. “I just wish there was more balance for businesses across the board. One challenge is that for sole proprietors like myself, we don’t bring enough to the table. (Development authorities) are looking for impact projects.”

That’s why they love the big guys, he said.

“There’s essentially no structure in city bureaucracy to deal with uniqueness,” he said. “That’s why we end up with so much homogeneous (crap).”