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Lawmakers to bypass court on tax districts
Constitutional fix aims to save redevelopment tool

By Dave Williams

dave.williams@graypub.com

ATLANTA - A shudder went through city planners last month when the Georgia Supreme Court rejected the financial underpinning of many of the state's most promising urban redevelopment projects.

But just three weeks after the justices ruled unanimously against using school property taxes to fund tax allocation districts, a proposed constitutional fix is sailing through the General Assembly with little opposition.

If lawmakers approve the constitutional amendment as expected, Georgia voters will decide in November whether school taxes can go toward TADs, an increasingly popular tool for revitalizing blighted neighborhoods.

Tax allocation districts were authorized by statewide referendum way back in 1983. But the concept only began to catch fire during this decade.

A year ago, the last time figures were compiled, there were 27 TADs in Georgia, primarily in metro Atlanta. The best known is Atlantic Station, a huge live-work-play community west of Midtown Atlanta built on the contaminated site of an abandoned factory.

Buy they've begun to spread across the state, from Gwinnett and Clayton counties in Atlanta's suburbs down to South Georgia, where Albany officials plan to use tax allocation bonds for projects in the Downtown Riverfront District.

TADs are created by city or county governments, subject to voter approval. Once authorized, officials borrow money to pay for redevelopment projects inside the districts.

Then, the loans are paid off from the additional tax revenue that is generated when the improvements result in higher property values.

"If they are done correctly and in appropriate areas, were it not for TADs, the development would not happen," said Rep. Chuck Martin (R-Alpharetta), chief sponsor of a House version of the proposed TAD constitutional amendment. "And if the development did not happen, there wouldn't be the incremental revenue for that district."

BeltLine lawsuit

The concept has proven so popular in Atlanta that 10 TADs were up and running, or in the planning stages as of last March.

Perhaps the most ambitious is the BeltLine, a series of projects planned along an old rail corridor around the city.

But as costs mounted for the BeltLine, it drew the attention of a lawyer from the city's Buckhead neighborhood, who filed a lawsuit challenging the use of school property taxes to pay for the work.

Last month, the Supreme Court ruled unanimously that school taxes may not be spent for non-educational purposes.

"The BeltLine plan ... provides a benefit to all citizens," the justices said in their written opinion. "[It] has little, if any, nexus to the actual operation of public schools."

The ruling dealt a major blow to planned TADs across the state because school taxes typically make up about half of property tax bills.

Local officials and lawmakers criticized the decision as a narrow judgment that missed the bigger picture of what TADs are doing to both rehabilitate deteriorating communities and grow local tax bases.

"I understand the spirit of the court decision," said Douglas Manning, director of community development in Riverdale, which is working on a TAD-funded mixed-use project in the city's downtown. "But I don't understand how we do the things to move forward if we're not innovative."

"It's a constitutional argument," added Sen. Curt Thompson (D-Norcross), referring to the ruling. "It's up to us and voters to decide policy."

Thompson's district along Interstate 85 in western Gwinnett County is fertile ground for TADs. The area's deteriorating housing stock and commercial buildings are driving down property values, hurting local tax digests.

One area that Norcross officials are working to turn around by making it a TAD is the OFS plant site. Thompson said the property there is probably worth only about $40 million now, and city officials can't collect on that.

"You're talking about turning something from a loss ... to potentially $2 billion worth of property taxes, if it's developed right," he said.

Not schools' job

But Rep. Steve "Thunder" Tumlin (R-Marietta), said it shouldn't be the responsibility of school districts to help bail out blighted neighborhoods with tax money that is supposed to be going directly to education.

"It takes a toll on the board of education and their financial resources," said Tumlin, one of the two members of a House subcommittee who voted on the losing side against Martin's constitutional amendment.

But supporters of the House amendment and its Senate counterpart said that in the long run, the additional taxes TADs generate benefit schools.

"If you want students to get out of trailers and get proper books and equipment, how do you do that if you don't increase the tax burden on businesses and residents?" Manning asked.

Manning said officials in Riverdale may be forced to scaled down their Town Center TAD because of the court ruling. However, he said not being able to use school taxes for the project wouldn't be a "deal killer."

Eventually, Manning and other city planners may not have to worry about losing school tax revenue.

An amendment added to the Senate version of the constitutional amendment stipulates that no school taxes could be spent on TADs unless the local board of education agrees.

Supporters say that should take care of any lingering concerns and pave the way for lawmakers to pass the amendment.

Both the House and Senate versions of the measure breezed through committees last week and should get floor votes this week.