S&P Affirms Atlanta TAD Debt

Standard & Poor’s on Tuesday affirmed its BBB rating and stable outlook on Atlanta’s $85.5 million tax allocation refunding bonds, Series 2007, in light of the Georgia Supreme Court’s ruling this week that tax increment revenues cannot include taxes from local school districts.

The refunding related to the Atlantic Station Project in downtown Atlanta where the city used a tax allocation district, or TAD, to fund improvements. Georgia’s districts use what is commonly referred to as tax increment financings, or TIFs.

“The court ruled that the state constitution prohibits the use of school tax revenue as security on the city’s BeltLine project tax allocation bonds, a different series of bonds,” Standard & Poor’s said in a statement. “However, the ruling does not appear to apply to Atlanta’s Atlantic Station bonds due to a previous bond validation action.”

“The Series 2007 bonds were validated Aug. 9, 2007, and, therefore, Standard & Poor’s does not currently consider the revenue pledged to the bonds affected” by the ruling, the agency said.

The Georgia Supreme Court in a unanimous decision on Monday ruled that the state constitution prohibits Atlanta from using school tax revenue to secure TAD bonds financing portions of its BeltLine project, a 22-mile transit, park, and redevelopment project that loops around the city’s inner core.

The ruling overturned a lower court’s validation of $200 million of TAD bonds sought by Atlanta with the support of Fulton County and the Atlanta Independent School System. Since justices ruled on a constitutionality issue, it applies to TAD bonds going forward.

Attorneys believe all TAD bonds in the state that were validated and sold with a school district revenue pledge before the Supreme Court ruling are protected.

Georgia law requires TAD bonds be validated by a court before they can be sold. Such validation usually protects the issuer from legal challenges.

The Supreme Court ruling is a setback for the nearly $2 billion BeltLine project as well as redevelopment efforts across the state dependent upon bond financing through TADs, city officials and attorneys said.

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