ATLANTA - Georgia lawmakers have approved a resolution for a referendum that will allow voters to say whether they think school property taxes should be used to help support tax allocation districts in the state.

SR 996 allows Georgia voters to decide in November whether or not to give public school boards the choice to invest a portion of their future tax revenues in TADs.

The legislation comes in the wake of a Georgia Supreme Court ruling in February that reversed a Fulton County Superior Court decision in 2007 that validated bonds for the BeltLine TAD being planned for Atlanta. In Woodham v. Atlanta a taxpayer argued that school district funds can only be used for school projects, as per the state constitution. The high court agreed that school taxes in the future could not be used to back TADs.

A group of business leaders and lawmakers quickly came together to work out legislation that addressed the issue, as there are dozens of TAD projects planned throughout the state. The referendum resolution is the result.

Sharon Gay, a partner with McKenna Long & Aldridge, said TADs build much-needed infrastructure and form public-private partnerships to build commercial centers, business parks and mixed-use developments.

She points to the Atlantic Station development in Atlanta where TAD bond funding was used to fund the costs of building much of the infrastructure needed to transform a former steel mill into a community of shops, restaurants, offices and homes.

Gay also countered arguments that taxpayers are on the hook for TADs.

"A TAD bond issue cannot be backed by the general taxing power of the county," she said. "Only the tax increment resulting from increased values within the TAD boundaries may be used to pay the debt service."

The Atlanta Development Authority manages Atlanta's 10 TAD projects for which about $400 million in bonds have been issued.

The authority maintains it was important for voters to decide whether or not to give public school boards the choice to invest a portion of their future tax revenues in TADs. In Atlanta's case, the taxing jurisdictions of the Atlanta Public Schools District, Fulton County, and Atlanta would work together to attract private sector investment to areas in the city that had been ignored by the marketplace, according to a release put out by the ADA this week in response to the resolution's passage.

Observers point out that it could be up to a year from now before the issue is finally settled. That's because lawmakers will have to review the resolution as it relates to the Redevelopment Powers Law, which makes TADs possible in Georgia. The problem is lawmakers won't review the law until they meet for their 2009 session, which does not begin until January.

Cheryl Strickland, the director of TAD programs for the Atlanta Development Authority, said that it could be four to six months into 2009 before Atlanta Public Schools' increment is once again available for Atlanta projects.

In the meantime, Strickland said officials from the Atlanta Development Authority and the city of Atlanta will continue to work on redevelopment efforts in each of Atlanta's ten TADs.

In the meantime, the Fulton County tax commissioner, Arthur Ferdinand, had stopped distributing school tax revenues for the outstanding TAD bonds after the state high court ruling.

Atlanta officials, in a recent disclosure notice pertaining to Ferdinand's action, stated that the tax commissioner had misinterpreted the Georgia Supreme Court's recent decision in Woodham v. Atlanta.

The high court's decision applies to any future TAD bond issues, the city pointed out. The decision does not apply to outstanding court-validated bonds for which these property taxes held in trust accounts, including the portion from the schools, are pledged as security to the respective bond holders. Therefore, the city argued, Ferdinand could not stop issuing the school revenues for outstanding TAD bonds.

The city appealed.

Calls to Ferdinand were not returned by press time.

A bond attorney familiar with TADs pointed out that the ruling, if allowed to stand, could very well cut a significant amount of dollars the city has to fund future TADs.

He said he could not estimate the loss to the city because he'd not seen feasibility reports. However, the Atlanta Development Authority has acknowledged that without the school district funds, the incentive benefit would be cut in half and it could slow redevelopment in the city's targeted areas.

Strickland said that 50% of Atlanta's TAD revenues come from school districts.

The court's ruling will not impact projects funded by TADs where validated bonds are outstanding. It will affect future bond offerings in all of the TADs the city is currently planning. Those include the much talked-about BeltLine, as well as TADs known as the Perry-Bolton TAD and the Westside TAD.

"We still think that TADs are a best practice tool and we will continue to use them," Strickland said. "We believe it is a tool that can be used for some projects."

Others considering issuing TAD debt might not be so lucky, because their projects would not be able to proceed without the incentives that lure developers.

Strickland said that the plans are underway to issue debt this year for the BeltLine, Perry-Bolton and WestSide TADs. Officials are ironing out the details of how much debt that will be.

In Gwinnett County, north of Atlanta, officials were pleased with another TAD-related piece of legislation that was passed by the General Assembly during the 2008 session. That bill allows the county to ask voters to approve creating TADs under the Redevelopment Powers Law.

Alfie Meek, the director of the county'seconomic analysis division, said that officials want to get the issue on the ballot for the July primary elections.

"If voters approve the question in July, we will look at areas that would benefit from having a TAD," Meek said.

One TAD plan entails redeveloping a fiber optics plant.

Gov. Sonny Perdue is expected to sign the bill allowing for Gwinnett voters to approve or disapprove the measure.


Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.