Atlanta city government and its residents are wrangling over how to finance development in some of its struggling neighborhoods.
Mayor Andre Dickens wants to extend the expiration date of tax allocation districts that support bonds for six neighborhoods by between six and 26 years, to 2056. He has said this would generate $5 billion to $7 billion for projects in the neighborhoods.
However, many say the extension would be either inadequate or a bad idea.
TADs have been in use for some of the city's neighborhoods since the '90s.
Atlanta has used TADs to support its Neighborhood Revitalization Initiative, which focuses on poor neighborhoods with strong resident leadership.
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As properties develop, tax revenue increases. The annual excess in revenue over the base amount is used for eligible projects to improve the districts. When the district expires, all the revenue goes to the government, in this case Atlanta's city government.
Last fall Dickens proposed extending the TADs deadline. Instead, the city council set up the
The commission said the Neighborhood Revitalization Initiative's "success requires the assembly of complex stacks of capital and operating funds that will vary by project and program. Public funds often function as catalytic capital that drives private and philanthropic investment."
"New sources of public funds to complement philanthropic and private funds must be identified to ensure that NRI truly represents sustainable and equitable investment in people and not just places," the report said.
Under Georgia law, TAD funds are available only for capital investment but the neighborhoods also need funding for social services, early education and efforts to mitigate displacement from gentrification, the commission said.
"We recommend that new local programmatic funding sources be explored to support capital, programmatic and operating costs, such as Special Service Districts and Economic Development millage."
In SSDs there are additional taxes on certain classes of properties within certain geographic boundaries.
Economic Development millage would involve increasing property taxes. State law allows cities to collect up to 3 mills for financial assistance to development authorities. Each mill is a tenth of a penny per $100 assessed value and would be collected annually.
"Extending the timeframe of some or all TADs can be an important tool in generating sufficient revenues to achieve NRI's goals," the commission said,
"We recommend exploring returning a portion of each taxing jurisdiction's increment in the form of payment in lieu of taxes payments," the commission said.
The city government's City Auditor's Office is auditing the TADs to determine their impact on assessed property values.
Some city council members have said they want to wait for the audit to be released before voting on the mayor's proposed extensions.
Assuming the city council approves the extensions, the Atlanta Public Schools Board of Education and the Fulton County Board of Commissioners would also have to approve the TADs extensions.
On Monday the Board of Education voted to create a committee to study the TADs and come up with recommendations for them, said Seth Coleman, director of media relations for Atlanta Public Schools.
According to the mayor's bill introduced in May, TADs for two neighborhoods that have seen the most economic expansion in recent years wouldn't be extended. These are TADs for Beltline and Perry-Bolton, which expire in 2031 and 2041.
TADs for Campbellton Road, Hollowell/MLK, Metropolitan Parkways and Stadium neighborhoods would be extended to 2056 from their current expiration in 2050.
Also extended in the mayor's proposal would be the Eastside district, currently scheduled to end in 2030, and the Westside, currently scheduled to end in 2038.
The money would be used to increase affordable housing, improve public transit, help build areas for affordable groceries and other goals.
Since the start of the TADs, about 90% of the tax increment revenue generated has gone to the Beltline, Westside, and Eastside TADs. Atlanta's economic development agency, Invest Atlanta, has issued $848 million in bonds for these TADs against projected property tax growth, according to the
Observers believe the mayor's proposed extension will pass, though perhaps with modifications.
"I think they will extend some of the TADs and/or redraw them so that the benefits are more broadly distributed throughout the city," said Sherman Golden, Jr., senior counsel at the Atlanta office of law firm Thompson Hine.
"Like most neighborhood reinvestment plans, Atlanta's have grown in proposals," said John Mousseau, executive vice president and chief investment officer at Cumberland Advisors. He said he thought the TADs would gain some sort of approval but there might be a movement to curb the mayor's proposal "a bit."
"I think the financing package will look much like Atlanta's past neighborhood reinvestment activities — a combination of tax allocation district revenues (including extending the expiration date on a few) along with a small amount of general obligation borrowing and some additional investments to kick-start private development, like grants, loan guarantees, ground leases and other targeted investments," said Justin Marlowe, research professor at University of Chicago's Harris School of Public Policy.
"Can a place-based financing model designed around traditional physical infrastructure work for the mayor's more expansive view of 'infrastructure?'" Marlow said. "We'll find out soon."
Golden said, "The city needs a locally controlled and generated source of subsidy in addition to the TADs. They should look seriously at an upzoning charge, a formulaic fee imposed upon all rezonings that increase density, except affordable housing developments."
Mousseau said if municipal bonds are used to promote the development of the neighborhoods they will probably include at least a limited general obligation pledge from the city.
"If the elections in November lead to flipping one or the other house in Congress, other financing could be available," Muni Credit Today Publisher Joseph Krist said.
Golden said he expected bonds would play a role in any financing as a means to reduce the cost of capital.
Tax allocation districts have proven controversial elsewhere. In California, then-Gov. Jerry Brown led a successful 2011 charge to
A part of the mayor's new legislation would create a Neighborhood Revitalization Initiative Trust Fund to fund infrastructure and development in neighborhoods outside of the TADs. The trust fund could be used for social services as well as capital projects and be controlled by the city council.
Invest Atlanta manages the TAD funds.
Among the U.S.A.'s 30 largest metropolitan areas, Atlanta has had the fastest five-year compound annual gross domestic product growth rate since 2020, Moody's said. It has also led these areas for employment growth.
In April Moody's said the city's high level of income inequality was a credit negative.
