Documents reveal how SCAD amassed a billion-dollar empire in Savannah

This story is part of The Art of Gentrification, an investigative series looking at how the Savannah College of Art and Design has impacted the city’s downtown neighborhoods.

In 1977, an Atlanta public school art teacher decided to open an art college in Savannah. Her decision changed the city forever.

Credit: John Carrington / For Savannah Morning News

Credit: John Carrington / For Savannah Morning News

Paula Wallace (neé Poetter), the school's co-founder and president, narrates her family's journey to transform a derelict building in downtown Savannah into the Savannah College of Art and Design in the 14-minute SCADStory — an interactive, 4-D presentation about a dream transformed into reality that's shown to prospective students and the public.

“It was 1977,” Wallace’s animated narrator begins. “All around us dreamers were dreaming up new ideas.”

With the financial help of her parents and then-husband Richard Rowan, Wallace converted the rundown armory in the Landmark Historic District into the Savannah College of Art and Design.

“I dreamed of creating a new type of school, a place of positive encouragement that welcomes every student. A place filled with vibrant verbs: design, draw, invent, dream,” Wallace recounts.

The Savannah of SCAD’s origin story is markedly different from the tourism hub it is today. Blighted properties riddled the Historic District. Drugs and crime plagued the squares. People of color largely made up the demographics of downtown neighborhoods.

“Back in those days,” Wallace recounts in the SCADStory narration, “much of downtown Savannah was practically apocalyptic.”

The Armory building is cast as a dark omen. The city is plagued by crime and storms. Lightning, thunder, and the piercing sound of shattering glass punctuate the curated display room.

“We devoted everything we had to a dream and a building in a ghost town,” Wallace narrates. “Will students show up? Will anyone be there to teach them? With just a few weeks 'til opening there was no time to dwell on doubts. We had a school to open.”

Then, the sun returns, washing the red-bricked Poetter Hall replica in golden light and the chimes of unseen bells.

“All of them had come and more.”

In 1979, the school welcomed its first class in the renovated red brick building on Bull Street. In 2021, 42 years later, SCAD graduated nearly 1,800 students in 43 degrees of artistic study.

According to its most recent enrollment figures of the freshman class, SCAD's student body is diverse: 12% Black and 57% white. More than 2,000 students (13%) are from Georgia. The second highest enrollment comes from China, from where more than 1,600 students hail. SCAD enrolls students from more than 100 countries and all 50 states.

Credit: File photo / Savannah Morning News

A Brief History of Savannah’s Gentrification

To understand how SCAD has contributed to the city’s revitalization and gentrification, we must travel back to the 1950s, decades before Wallace dreamed up her billion-dollar idea.

Credit: Robert McDonald/Savannah Morning News

Several historic structures were demolished in downtown Savannah during the mid-century, including the original City Market. The destruction spurred a group of seven wealthy ladies to preserve what they had, leading to the first historic preservation project in the city: restoring the Davenport House.

Their activism transformed the ghost town. Savannah became a place where old buildings were valued, restored and lived in. The Historic Savannah Foundation was created in 1955 and the organization’s groundbreaking and innovative revolving fund is still used today to restore and renovate blighted, historic properties. Tax credits the foundation helped pass are widely used to this day, as well.

“At HSF, we unapologetically say, ‘the Revolving Fund is the program that saved Savannah.’ It is our primary tool for saving and protecting endangered, blighted, historic properties. In truth, the organization was founded to save just one house, the 1820 Isaiah Davenport House, but went on to save an entire city,” reads a quote from HSF’s website.

Around the same time, the Supreme Court ruled school segregation was illegal in Brown v. Board of Education (1954), which prompted the disinvestment in public schools, triggering white flight from downtown into the suburbs where private schools such as Savannah Country Day (1955), Calvary Day School (1961), Hancock Day School (1957) flourished.

Interstates sliced up communities with lower land values, specifically swaths within historic Black neighborhoods on Savannah’s west and east sides. Poor folks were corralled into public housing projects. Young Blacks migrated north and west for education and employment opportunities to escape the cycles of poverty, crime and desperation that mirrored their enslaved ancestors’ conditions.

Credit: Ross Parsons, Savannah Morning News

As downtown was rehabilitated, surrounding Black neighborhoods fell into ruin. Crime, prostitution and drugs took root in the decaying houses lining East and West Broad streets, from Liberty Street to Victory Drive.

Credit: Archived photo

This confluence of events paved the way for those with a bit of money, a lot of bravery and the vision to see a revitalized downtown to begin restoring properties. Jim Williams, the infamous antiques dealer who was tried for murder four times and the inspiration for the international bestseller “Midnight in the Garden of Good and Evil,” was one of the early pioneers in restoring historic homes.

It was book- and movie-related tourism that led to the first boom of visitors to the Hostess City, which started in the mid-1990s with 50 million visitors flooding the streets of Savannah over a 10-year period. That’s when people who had never heard of SCAD before began seeing those four letters posted on properties throughout the downtown, where they toured to catch a glimpse of Mercer House, Forrest Gump’s bench, and Paula Deen's downtown eatery, The Lady & Sons.

The university’s narrative, however, was and is singular.

“In a very real sense, SCAD saved Savannah. In the 1970s, downtown was empty of life and commerce, with a surplus of unoccupied and neglected structures,” a statement from the university reads.

Credit: Herb Pilcher / Savannah Morning News

Mayor Van Johnson acknowledged the university’s contributions, stating that SCAD “probably was the single biggest entity in helping to save Historic Savannah.”

SCAD’s arrival to Savannah marked an uptick in the historic preservation frenzy, with the university taking on bigger and more expensive projects than any other organization in town. As an accredited university, SCAD could and does leverage hundreds of millions of dollars in municipal bonds to take on these capital projects, a tool not available to other businesses.

In the late-part of the 20th Century, the city and SCAD’s preservation renaissance turned south into the residential communities adjacent to and south of Forsyth Park in near-tandem. The arrival of a new class of homeowners, businesses and SCAD facilities drew developers and investors to the surrounding neighborhoods, bolstered by the school’s steady foot traffic. Investors, landlords and real estate developers are typically the parties directly responsible for the displacement of residents in a gentrifying neighborhood. This is where the past two decades – and current – displacement of locals is occurring.

John Joe Schlichtman, a sociologist at DePaul University who studies displacement in small U.S. cities, said a “savior mentality” is often adopted by universities that play an outsized role in neighborhood gentrification, which is the process of a new, wealthier class of people moving into a neighborhood while the former, poorer community is pushed out by rising cost-of-living.

“That is a very, very common theme… ‘There was nothing going on here and there was nobody here,’” explained Schlichtman. “And once you have established this narrative of ruin, then you have carte blanche. Because anything's better than nothing."

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Wallace takes the lead

After serving in various leadership positions since she co-founded the university, Wallace took over as president in 2000. Her reign launched SCAD’s expedited growth.

IRS tax filings show the university owns $897.9 million in land and buildings across three campuses. While a portion of that value resides in Atlanta and Lacoste, France, where the other two SCAD campuses are located, the bulk of the school’s real estate assets sit in Savannah and Chatham County.

Credit: Richard Burkhart/Savannah Morning News

SCAD owns 179 parcels, according to Chatham County public property records. This does not mean the school owns that many buildings, as some properties are spread out over multiple parcels or are vacant lots.

Most, if not all, of those parcels are exempt from the levy of local property taxes because they are used for educational purposes, leaving an estimated $31 million in local property tax dollars annually on the table.

Property tax dollars are only one variable in a complicated equation, however.

Credit: Richard Burkhart/Savannah Morning News

SCAD’s properties dot neighborhoods from the Landmark District to West Savannah and Bingville, in some cases driving down appraised values of adjacent buildings, which acts as a magnet for investors and developers. While SCAD improves the value of buildings they renovate, which increases property values over time, the properties’ tax-exempt status lowers the assessed value of surrounding parcels in the near-term. This drives down the assessed values of neighboring properties, which make the price tags cheaper for developers or investors looking to open a business next to a property where hundreds of students and faculty walk in and out daily.

A review of 39 university facilities shows how the school spread its footprint over the past four decades. Most of the properties SCAD took over were vacant and crumbling, needing thousands in restoration work before students could fill the historic halls.

The school acquired and renovated six buildings in the 1980s, including Anderson, Eckburg and Clark Halls, signaling the school’s first arrival to the neighborhoods south of Forsyth Park.

The next decade saw an influx in real estate operations, with SCAD buying at least nine properties, including the former Motor Inn on Oglethorpe Avenue, which was converted into a residence hall for students.

Credit: Richard Burkhart/Savannah Morning News

When Wallace took over as president in 2000, property acquisition increased by 53%, compared to the school’s first 20 years of operation.

Between 2000 and 2012, the university purchased and opened 13 properties, according to the school’s website and Chatham County property records.

SCAD expanded to at least nine more properties in the past decade, growing its visible footprint to 63 buildings and 13 parking lots. In the SCADStory, that number is “more than 75.”

Map source: Eric Curl, Savannah Agenda, https://savannahagenda.com/

From 2008 to present, the school has added 15 properties to its Savannah campus, including Victory Village, a residence and dining hall that takes up two city blocks on Victory Drive that resulted in the demolition of several businesses, homes and a church, and Ruskin Hall, the site of a former hospital and law school that sits on the northeast corner of Forsyth Park.

“I think pre-2008 recession, SCAD was a valued partner (with the city). Its growth was steady, but not explosive,” said Chuck Feagin, a local gadfly and political activist who co-runs the organization Better Savannah, which pitched a PILOT (Payment in Lieu of Taxes) Program for the school to enter in with the city, county and school district. The university offered no comment on the proposal, but several elected officials voiced their support for it.

Credit: Richard Burkhart/Savannah Morning News

Bolstered by a growing student body and tourism bloom, SCAD expanded its footprint into the Victorian and Metropolitan neighborhoods south of Forsyth. And as the university moved south, parents bought homes for their students, which was often cheaper and made

The impacts on locals are tangible.

Virginia Mobley, a longtime resident of Thomas Square, remembers when the change happened. The working-class renters she’d called ‘neighbors’ for two decades were pushed out for students and their friends. The arrival of off-campus housing marked the beginning of Thomas Square’s re-segregation, Mobley explained.

“My neighborhood is more segregated now than it was in the 1970s,” she said.

Since 2000, Savannah’s downtown has seen a 160% increase in home values, a 36% increase in median household income and a 40% decrease in the Black population, according to U.S. Census data.

Many followed SCAD and the Historic Savannah Foundation’s lead and began renovating historic houses, often at a fraction of the price they’re selling for today.

Mayor Johnson said SCAD’s removal of blight — rundown, uninhabitable buildings — in the downtown neighborhoods led to a decrease in a lot of crime.

“And so where you have abandoned buildings, and this is (in) downtowns across the country, where we have abandoned buildings and where you have continued neglect, you have criminal elements that take his place,” he said. “Obviously, if we have buildings that are occupied and are renovated, you have improved a community. Then, the criminal element goes away.”

Preservation is lauded as a tool to revitalize neighborhoods in Savannah and other historic cities. It’s a tool, like conservation and infrastructure improvements, to change the fabric of a community.

“Since the time that SCAD opened its doors to students in 1979, Savannah has transformed from a place with a run-down historic district and boarded-up buildings to an international business and tourist destination,” according to an explanation provided in 2020 IRS documents.

The intentions are noble, but the unintended outcomes have consequences. According to a city-funded study, tax credits, catalytic developments and investment activity all spur displacement in the neighborhoods this activity takes place.

Schlictman, the sociology professor, said preservation is often used as a way for universities to disguise how much they’ve hollowed out the social and communal heart of neighborhoods.

“So, one thing that institutions oftentimes like to do, especially when they pitch themselves as providing the solution, is they talk about preservation as if it means one thing, and has this absolute meaning of an absolute good,” Schlictman said. “And we have to distinguish between building preservation and social preservation.”

Financial impact

According to SCAD, the university owns 2% of the city’s tax-exempt properties. The majority of those tax-exempt properties are the most valuable real estate in the city.

Credit: Richard Burkhart/Savannah Morning News

The city’s two other large universities – Georgia Southern University - Armstrong and Savannah State University – both own millions of dollars’ worth of tax-exempt property. The difference between the two public colleges and SCAD, though, is location. GSU is tucked into the southwest corner of Savannah in an enclosed campus of roughly 200 acres while SSU is on the eastside of Savannah, just off Skidaway Road, in an enclosed campus of about 50 acres, according to public property records.

SCAD, in contrast, is a decentralized campus spread throughout the Landmark Historic District (the central business district) and the surrounding neighborhoods. Because SCAD is a private school, it does not release annual financial reports or voluntarily release information related to its finances, growth or internal operations. Employees must sign non-disclosure agreements, there is no student government, and professors are locked into one-year contracts with no option for tenure. SCAD defends this practice, it says, so that teachers are able to pivot instruction to meet market demands and remove the distraction of research so they can focus on teaching.

The school’s growth is a financial and tourist boon to Savannah, where the school generates a self-professed $577 million in economic impact and $30 million in local government revenue, according to a university-commissioned 2019 study. The study is not clear on the methodology of how SCAD arrives at these conclusions, but a little math can get close enough to the real picture.

SCAD stated it directly generates $37 million in state and local tax dollars every year. With a sales tax rate at 7%, the state draws a little more than half of that amount, or 4%. The remaining 3%, or $15.8 million, is divided between Chatham, Effingham, Bryan and Fulton counties and their respective school districts and municipalities. Each county splits their local revenue among their municipalities, county operations, and their Special Purpose Local Option Sales Tax (SPLOST) and Educational SPLOST funds.

So, assuming about 75% of SCAD’s tax revenue is collected in Chatham County (since 75% of its student body attends the Savannah campus), then the local tax revenue works out like this:

The city’s portion — $2.26 million — would account for about 5% of Savannah’s annual sales tax revenue, according to the 2022 budget. The university also paid $1.6 million for downtown’s ShotSpotter system, a network of security cameras that detects and pinpoints the location of gunfire.

The main sticking point many — including Mayor Johnson — have with SCAD is not its contribution to the sales tax fund, but the lack of property taxes it pays on its 179 parcels in city limits. Johnson said the school helped revitalize the city by restoring large, blighted properties others would not be able to afford. But that restoration is a double-edged sword.

“(SCAD) became very adept at being able to acquire and redevelop. The good news was that it created a downtown that people wanted to go see,” Johnson said.

“The bad news was that SCAD took it off the tax rolls. And as SCAD grows, then obviously they're gonna need to acquire more property. And the larger they got… they just were able to purchase property at prices that people could not buy.”

Several of the properties SCAD purchased in the past decade climbed well over $10 million, not including renovation costs, according to property records. The university bought Chatham Apartments, a former apartment complex for seniors and people with disabilities, for $25.6 million after a developer, Atlanta-based QR Capital, bought it and relocated the 250-plus people living there. Barnard Village was purchased from a real estate investor in 2015 for more than $15 million, and the Forsyth Park-adjacent Ruskin Hall in 2018 for $27 million, according to property records.

None of those properties contribute to local tax revenue, shorting the county, school and city out of millions in revenue every year.

But Johnson said SCAD isn’t the only institution that warrants scrutiny.

Credit: Richard Burkhart/Savannah Morning News

“You have other colleges here, you have houses of faith, the nonprofits who don't pay any taxes,” he said. “Well, I mean, it's really all of them.”

Johnson said the city is starting to have “courageous conversations” with officials from SCAD, the Georgia Ports Authority and more about their responsibility to the financial and social health of the city they own substantial amounts of property in.

A community benefits agreement apparatus has been in the works for years, Johnson said, and is finally picking up steam. A CBA is a mutual contract between a public and powerful institution that outlines expectations — financial or otherwise — for the institution to pay into the community.

“The reality is that for all those entities, we provide police services, fire services, which are buoyed on the backs of taxpayers who pay our general fund,” Johnson said.

“So, this is an opportunity to use our partnerships, our friendships and our influence to encourage them to voluntarily pay toward things that are important to us, which relieves the burden on taxpayers.”

In comments submitted to the Savannah Morning News, SCAD referenced several private universities who have gentrified the urban centers where they’re located, including Yale University in New Haven, Connecticut.

SCAD claimed that Yale and a number of other, larger universities across the country do more to impact low-income populations through real estate and development practices.

“SCAD, on the other hand, through its voluntary contributions to the revitalization of Savannah, has helped reduce crime and create safer neighborhoods in (sic) through pioneering public safety initiatives…”

Yale is a landlord in New Haven, owning 85 commercial properties and more than 500 homes. This allows the university to dictate who and what services are available to city residents. It is also one of the largest taxpayers in the city, contributing $141 million annually in property taxes, and pays a voluntary $13 million sum to the city in a PILOT agreement (Payment in lieu of taxes).

Credit: Richard Burkhart/Savannah Morning News

Feagin, along with his Better Savannah partner, John McMasters, pitched a PILOT agreement to be created for the city of Savannah and SCAD.

The proposed payment program would charge a $67 quarterly per student, which equals about $12 million a year. The money collected from the school would be distributed between the county, city and school district as a way to make up for the lack of tax revenue coming in from the school's real estate assets.

The university did not offer comment on the matter.

Schlichtman, the sociologist, said universities have been pushed into similar agreements in the past. Harvard University entered into an agreement with its neighbors in 2013, agreeing to a 10-year investment into education, the arts, health, housing and economic development for the local community. These programs are offered in an off-campus community center that Harvard built and owns. Harvard has invested more than $200 million into programs and grants that stemmed from the agreement.

“So, it's really incumbent upon the local community to demand some type of payment, whatever it be, from SCAD,” Schlichtman said.

Zoe covers growth and how it impacts communities in the Savannah area. Find her at znicholson@gannett.com, @zoenicholson_ on Twitter, and @zoenicholsonreporter on Instagram.

This article originally appeared on Savannah Morning News: Documents reveal how SCAD amassed a billion-dollar empire in Savannah