John Woodham, a Buckhead attorney whose client threatened legal action against the BOA in December, accused the agency of acting as a “rubber-stamp” for these deals, also known as tax abatements. In short, Woodham argues the BOA is compelled by law to value properties at what the free market will bear, but these deals force the board to value incentivized projects for less.
A 2018 investigation by the AJC and Channel 2 Action News found dozens of apartment buildings, office complexes and shopping centers in Atlanta were valued for property tax purposes at far less than what buyers paid for them. Taxpayer groups have complained for years that Fulton undervalues commercial properties, putting a greater share of the tax burden on homeowners.
Commercial properties are key parts of city, county and school tax digests, and multiple residents vented to the board that these deals unfairly lessen taxes for large corporations.
“I haven’t minded paying my property taxes as long as I thought everybody else was paying their fair share,” said Bill Bozarth, a former board member of Atlanta’s development authority, Invest Atlanta. “In society, nobody really likes the free rider … and in our current practice, we definitely have some free riders.”
But after the show of force from top leaders across the county, a majority of board of assessors members indicated they’ll begin reconsidering development authority requests once again.
Vice Chair Lee Morris said he’s unconvinced the five-member board has approached these projects properly in the past.
Providing tax savings
Georgia’s unique system of passing along property tax breaks to developers and expanding companies was crafted to get around the state Constitution, which forbids government entities from providing a good, service or property without an equitable return.
The workaround is commonly called “bond-for-title,” “phantom bonds” or “lease-purchase” agreements. It often involves bonds that aren’t really real, leases that don’t act like typical leases and a government body — a development authority — holding title to a project that they often don’t really own.
Under this system, development authorities take title to the property granted the tax break and lease it back to the company. Development authorities are government entities that don’t pay property taxes. When they take title, they pass along the tax savings.
The title is eventually returned to the company at the end of the tax break period. In Fulton, that period typically lasts 10 years under what’s known as a “ramp-up valuation.”
In that time, the project owner or developer will pay a reduced tax bill of 50% based on what’s supposed to be the assessed fair market value the first year with the tax burden rising each year until it reaches the full tax value in year 11.
Credit: Curtis Compton / Curtis.Compton@
Credit: Curtis Compton / Curtis.Compton@
Unequal property values
The BOA is asked to approve that ramp-up valuation, but critics argue that appraising a property at a market discount is a violation of their duties. Woodham said the board has historically approved development authority appraisal requests without analyzing the leases or any supplemental documents, which he argues violates the BOA’s legal duties.
Citing recent sales data, Woodham pointed to several high-value Fulton buildings that sold at multiple times their appraised value due, in part, to the ramp-up valuation. Morris, the vice chair, sided with the challengers.
“Here you’ve got the sales, and to me that’s pretty damn conclusive evidence,” he said. “... I don’t know how in good conscience we can continue to do that.”
Mike Bodker, the treasurer of the Development Authority of Fulton County, said these incentives are intended to increase tax collections by attracting investment that would go elsewhere if they didn’t receive a tax discount.
“We help the taxpayers long-term by growing the pie, and I think these transactions by and large have grown the pie,” he said.
Much of Thursday’s work session focused on prior legal cases challenging the 50% ramp-up methodology and whether future challenges would hold up in court.
Woodham has challenged taxpayer-subsidized developments for years, including the Atlanta Beltline and Mercedes-Benz Stadium. While most of his cases have been unsuccessful, he argues the state’s high courts have not explicitly endorsed the ramp-up appraisal process. The county’s attorneys and a group of Fulton development authorities disagree.
“The present lease valuation schedule has been upheld by the Georgia’s appellate courts, thus providing assurance that the board is on strong legal footing,” said Invest Atlanta CEO Eloisa Klementich.
Bodker said Woodham’s clients have “venue-picked” the BOA because “they couldn’t get what they wanted in court.” Bodker said it was important for the board to resume its appraisal activities, because multiple projects are waiting.
“A decision needs to be made so that expectations can be properly set or reset for the sake of economic development within the county,” he said.