ATLANTA - Atlanta and Georgia have hit another hurdle in their efforts to use tax allocation districts to redevelop blighted areas.
Fulton County tax commissioner Arthur E. Ferdinand is refusing to dole out school property-tax dollars that court-validated agreements specify be used to help pay debt service for about $400 million of tax allocation bonds issued by Atlanta for various redevelopment projects.
Ferdinand points to a state Supreme Court ruling earlier this year that dictates that educational ad valorem taxes can only be used for school purposes. The city and supporters of Atlanta's tax allocation districts contend that the ruling does not apply to the existing TADs.
In February, the state Supreme Court ruled in the case of Woodham v. the City of Atlanta that school property taxes could not be diverted to pay bonds planned for Atlanta's BeltLine project, for which the city has established a TAD that encircles its entire urban core. Ferdinand subsequently has refused to distribute such taxes for any of the city's other TADs.
Atlanta obtained a Superior Court ruling in late February ordering him to do so, but Ferdinand has appealed that decision to the state's high court.
While Ferdinand did not return phone calls seeking comment, he has posted information on his Web site explaining his logic. In the statement, Ferdinand acknowledges that TADs are areas designated as underdeveloped or run down and requiring a commitment of property tax revenue to jump-start development. He notes that there are 13 TADs in Fulton County and Atlanta. Furthermore, he states that in most of the districts, Fulton County, Atlanta, and either the Fulton Board of Education or the Atlanta Public Schools commit their share of any growth in tax revenue generated in the designated area to the TAD.
According to Ferdinand's office, almost $30 million of Fulton County's and the Atlanta School Board's tax revenue was slated to go to the TADs.
"As a constitutional officer of the state of Georgia, I am obligated to follow the simple language of the court," Ferdinand wrote on his Web site. "Consequently, all school tax revenue, which, in the past, the tax commissioner's office forwarded to TADs, is now sent to the school boards. If the school boards feel obligated to continue to give tax revenue to TADs, they are free to do so."
Atlanta officials in a disclosure notice released last week pertaining to outstanding TAD bonds said that Ferdinand was misinterpreting the Georgia Supreme Court decision in the Woodham case. They stressed that the Woodham case applies to future TAD bond issues, such as those envisioned for the BeltLine, but it does not apply to districts in place before the Woodham decision.
Atlanta's bond attorneys said bonds issued for the existing TADs have been validated and that those approvals cannot be reversed.
Without directly acknowledging that premise, Ferdinand's statements posted on the county's Web site indicate that he has a problem with funds for schools being diverted from education.
"Taxpayers are generally unaware that over 50% of the funding for TADs comes from taxes thought to be going to educate children," he wrote. "There is public disclosure of how much money each school board wants every year, but there is no annual public disclosure of the amount diverted to fund development. The drafters of the Georgia Constitution felt the education of our children was so important they prohibited the use of school revenues for purposes other than education."
Ferdinand goes on to say that schools are understaffed, with underpaid teachers who often foot the bill for supplies. There are not enough textbooks and the result is students who rank lower on a national scale in terms of SAT scores.
"Not a month goes by without us hearing of how cash-strapped the schools are," he said. "TADs may be contributing to this shortfall."
Ferdinand believes that his position on this issue is clear based on the state's constitution.
"I will follow the ruling of the Georgia Supreme Court and no longer willingly forward school tax revenue to TADs," he wrote on the tax commissioner's Web site. "I expect there will be court action, some of it hostile, to compel me to do so."
In the disclosure notice released by Atlanta, officials focused on the validation orders for the TADs that have been approved.
Phone calls to city officials were not returned by press time. A finance official said that the legal department had to determine if the city was at liberty to comment beyond what was stated in the disclosure notice since there was litigation pending from Fulton County.
In that disclosure notice, city officials said they had informed Ferdinand in February that the use of school tax revenue for non-educational purposes did not violate the state's constitution. A Fulton County Superior Court judge agreed and instructed the tax commissioner to make the payments.
Ferdinand then appealed to the Georgia Supreme Court, which has not announced a date as to when it will consider the matter.
In the meantime, Atlanta continues to make debt service payments on its outstanding TAD bonds. They include about $15 million of variable-rate bonds sold in 2001 for the Westside project, $83 million of variable-rate bonds sold in 2005 for the Westside Project, and $47 million of bonds sold for the Eastside Project. Another $167 million of TAD bonds sold in 2006 and $85 million of refunding bonds sold in 2007 went for the Atlantic Station Project, a massive redevelopment effort near downtown that converted the former site of a steel mill to retail, residential, and commercial use.
The state's high court ruling has created a cloud over the future of such redevelopment efforts in Georgia. In response, lawmakers who support the use of TADs have scrambled to propose a referendum for a constitutional amendment that would put the issue before voters.