DeKalb County Commissioner Jeff Rader has been feuding with the city of Brookhaven for years. He calls it “Pirate Ship Brookhaven,” based on its penchant for scooping up prime commercial land to build up its tax base at the expense of others.
But in a recent tax giveaway with a developer, you might call Brookhaven “The Good Ship Lollipop,” with the builder getting one heck of a sweet deal.
The deal in question gives the developer of some apartments and luxury townhouses on Dresden Drive a 92% tax savings on most of his property in the first year. And the tax breaks are set to last for at least 22 years. Yes, someone not yet born might graduate college the year the arrangement ends. In all, the developer could save $13 million-plus in property taxes.
Now, I’ve often beat up on the Fulton County Development Authority for giving tax-saving deals to developers to build stuff that would have been built anyhow in places such as Buckhead, Midtown and on the Beltline.
But Brookhaven, which is also a hot real estate market, aims to teach Fulton a thing or two about showing developers some love. In Fulton and elsewhere, developers get 50% off their property taxes the first year, and that savings drops until Year 10, when they finally must pay full freight.
Again, let me repeat: Brookhaven, 92% to start. And 22 years. Also, the drop-off in the abatement is nowhere near as swift as elsewhere because 22 years into the deal, the Dresden crew will only pay about half the taxes on the property in question, according to a chart spelling it out.
“This might be the winner” when it comes to tax giveaways, DeKalb School Board Chairman Marshall Orson told me. By winner, he means Brookhaven because DeKalb schools are the big loser here. More than half of the $13 million in future tax savings will come from the kids.
“There’s something broken when the donor — DeKalb County schools — has no say in the disposition of money they should be receiving," Orson said, repeating a complaint often muttered by Atlanta’s school officials.
Brookhaven Mayor John Ernst pushed back at the notion that there is a 92% giveaway the first year. He’s right. The abatement goes to about $42 million of the $61 million project, according to records, meaning that about $19 million of the project will be taxed at 100%.
So, with his reckoning (and I’m pecking at my calculator), the 92% tax savings in Year 1 is really about a 69% abatement for the total project, and Year 22 would be a 37% savings. Still, not bad. Not bad at all.
Ernst said that “all governments will get more money from Year 1 than they are currently paid," referring to the city, the county and the schools. That indeed is a common refrain of those giving out the tax deals. They say the new development, even with a cakey abatement, will generate more tax revenue than what is being paid now.
Of course, many of these projects would have been built without the enhancements. Dresden Drive is already a popular destination of high-end apartments right down the block from a MARTA station. One can argue, and I am, that the place could have been built without the tax scheme.
“We’re actually getting the project built,” said the mayor, adding that this was supposed to start in 2017 but DeKalb held it up.
Once again, there is more to the story. Part of the holdup was the county’s Dresden Drive car tag office sits on that property, and getting another spot to relocate it was all part of a swap with the builder. Also, Commissioner Rader demanded that the land where the tag office sat not be part of an abatement, hence Brookhaven’s aggressiveness in doling one out for the rest of the property.
Ernst argues this is just the second abatement since he has been mayor. The other one? I must say it was as fine a pocket-picking as I’ve seen in government circles.
In that, the city’s development authority gave the Atlanta Hawks a 15-year property tax break worth $11 million to build a practice facility on land the city annexed on the other side of I-85. More than 90% of the $11 million would have gone toward schools and county governments.
In return, the Hawks agreed to pay the city’s development authority $302,900 a year for 15 years — or about $4.5 million.
At the time, Ernst boasted to the Reporter Newspaper that if the facility were built without the deal, Brookhaven would have only received $35,000 a year in taxes, and the rest would have gone to the other governments. They called the project “Operation Windmill Dunk,” which seemed like an apt description.
Commissioner Rader at the time called it a “kickback.”
“Tax abatement is a statewide issue,” Ernst told me. “I’m operating within the rules given to me by the Legislature.”
The county disagrees and has filed legal action to try to stop the Dresden deal, saying Brookhaven is being overly generous.
"Within this framework it should not be possible for wealthy companies and developers to create tax exemptions for themselves through a complex banking and legal transaction that serves no public purpose and provides little, if any, public benefit,” the DeKalb lawsuit states. The county’s lawyers added that Brookhaven tried to pull a fast one last month when it suddenly called for a special meeting to discuss a mysterious deal called “Project X.”
Development authorities are able to be secretive in order to complete complicated deals that other jurisdictions might be trying to steal. But this was a vanilla housing/retail development that had been very public for more than three years. And it wasn’t going to go anywhere else.
Also, the Dresden deal has the developer building a new road, making traffic signal improvements, a landscape trail for the community and a streetscape, all from the money the developer is saving in property taxes. But one might argue — and I am — that Brookhaven is using the school’s money to get free stuff.
Credit: Connolly/Gables Residential via City of Brookhaven
Credit: Connolly/Gables Residential via City of Brookhaven
It goes to the idea of being a good neighbor. Back in 2012, when they wanted to form a city, residents had a study done that showed the Brookhaven area had 14% of unincorporated DeKalb’s tax base but just 9% of the population. That tax-base percentage has surely grown after the city jumped I-85.
More proof that the rich get richer. And DeKalb County, again, gets left behind.