ATLANTA - Atlanta is wrapping up the first bond sale for its Westside Tax Allocation District today with $14.9 million of variable-rate revenue debt that will be used to help renovate the heart of the city's downtown.
Jackson Securities Inc. is book-runner for the deal. The syndicate includes Wachovia Securities and Apex Securities. Hunton & Williams and Howell & Associates are co-bond counsel.
Standard & Poor's, the only agency to rate the deal, gave the debt an A-plus, with a short-term rating of A-1.
Sam Bacote, a senior vice president with Jackson Securities, said the rating was based on a letter of credit from First Union National Bank.
The Series 2001 bonds were priced yesterday and were expected to be placed with four or fewer institutional investors. The bonds will initially offer short-term interest rates for a weekly period.
"The market was a little rocky for us," Bacote said. "The bond market was down but the Dow was up; but generally with short-term debt, it's repriced so quickly that we did not have any hesitation about proceeding because we think the market will have bounced back when the bonds are repriced."
The bonds received a yield close to 3%, which included the costs of credit enhancement.
The debt is secured by ad-valorem tax increments derived from the TAD, which encompasses a large part of downtown Atlanta. Since it was created in 1998, more than $2.3 million in taxes have been collected.
Like tax increment finance districts, the TAD freezes property assessment collections at a determined level. As properties develop and increase in value, the additional taxes paid by property owners are reinvested in the district and used to pay tax allocation debt.
The redevelopment plan will transform roughly 1,500 acres in the city's downtown.
Over the past few decades the area, once dominated by thriving businesses owned by African-Americans, has deteriorated. Bacote said the effort is one of the largest in the nation for a predominantly African-American district. He said that it is about 60% to 65% residential, with a mix of single-family homes and new condominiums.
Already located within the TAD's boundaries are Turner Broadcasting System and its CNN operations, as well as Georgia Pacific. The district also includes Centennial Olympic Park, the Georgia Dome, and the Georgia World Congress Center.
The Atlanta Development Authority on Tuesday signed off on the projects in the TAD. The authority serves as the redevelopment agent responsible for the administration of the TAD, explained Mark Price, financial manager for the city.
Proceeds from this sale will be used for several commercial and residential projects, which will be located in approximately five separate sections.
One of the more extensive projects in the TAD is Historic Westside Village, which will eventually include a 40,000-square-foot grocery store, a 200-unit residential loft project, a 150,000-square-foot office building, a 127-unit apartment building, and 150,000 square feet of hotel, retail, and office space. Proceeds from this week's sale will be used for infrastructure, parking, and utilities at the village.
Northyards Business Park entails redeveloping a historic rail house into a call center and a former yard house into a loft office. Bond proceeds will be used to upgrade the sewer system for this project.
Centennial Hill will have 130 condominiums, a 30,000-square-foot museum, and a 280,000-square-foot office building. A later phase will include an apartment tower with more than 200 mixed-income units and street-level retail businesses. Most of the proceeds for this portion will go toward the museum.
A Westside TAD section called Atlanta Centennial House will feature residential housing, 25% of which will be sold at reduced prices for moderate-income buyers. Bond proceeds for this section will be used to build a park and for landscape projects.
The mixed-income housing provision stems from efforts to discourage segregation. As diverse as Atlanta's population is, it remains segregated by class as well as race. Outgoing Mayor Bill Campbell championed the Westside TAD as a way to reverse that process, especially in the downtown areas.
Over the years, affluent neighborhoods north of the downtown area have been the place of choice for businesses, as well as commercial and residential developers.
With help from the Westside TAD, Atlanta officials hope to make downtown Atlanta more attractive.
In recent years the downtown area and its surrounding neighborhoods have experienced an economic boom. Condominiums sell for as much as $1 million, and 30-year-old houses with two bedrooms and one bath easily sell for more than $200,000.
While the deal marks the first bond sale for the Westside TAD, it is not the city's first tax increment deal. In October, the city sold roughly $70 million of bonds for the Atlantic Station TAD. That development is also a private-public effort.
The Atlantic Station TAD hit a snag last week when the city had to draw on its reserve fund to make the first debt service payment following a property tax snafu. Price said some of the properties listed in the TAD were not on record with Fulton County's property tax office and those tax proceeds were not properly accounted for.
While officials worked to get the properties on the tax rolls, the first debt payment came due, so officials drew on the debt service. Price, the financial manager, said the money was restored to the debt service fund four days later, when property taxes from the additional properties came in.
"It was a first-year glitch, and we don't expect it will happen again," Price said.
Price said the city is not sure how much debt the Westside TAD will generate. He added that the project could need additional bond funding in about two years.
