Georgia de-annexation battle is heading for court

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Attorneys for Stockbridge, Georgia, filed a lawsuit in a state court Thursday challenging a new law that could strip the city of 51% of its assessable residential and commercial property value.

A separate complaint alleging civil rights violations will be filed in federal court in the coming weeks, the city’s legal team announced at a press conference.

“We are seeking a declaratory judgment that the recent legislation creating and seeking to create the city of Eagle’s Landing at the expense of Stockbridge is unconstitutional,” said Bob Wilson, a partner at Wilson, Morton & Downs LLC, referring to the suit filed in Henry County Superior Court.

The city has also hired the firms of Balch & Bingham LLP and Robbins Ross Alloy Belinfante Littlefield LLC to represent it.

The suit responds to two laws signed by Gov. Nathan Deal on May 8. It seeks to prevent residents who would live in the new city of Eagle’s Landing from voting on incorporation in a November referendum while the court considers state constitutional issues raised in the complaint.

Deal approved Senate Bill 262, which amends Stockbridge’s boundaries without the city’s consent, and SB 263 authorizing the new city of Eagle’s Landing to be created mostly from land that lies in the city of Stockbridge.

“We’re not interested in splitting the city of Stockbridge,” said Mayor Anthony Ford. “We’re not interested in losing our primary economic corridor.”

Stockbridge stands to lose much of its high-value commercial and residential property if the de-annexation occurs, officials have said.

“We are a very welcoming city, we’re a very diverse city and we want to embrace and will embrace every citizen of the city of Stockbridge no matter what their ethnic background is and no matter what your economic status is, period,” he said.

Until Thursday, the city had largely avoided saying the annexation issue is motivated by race and wealth.

According to the developer of Eagle’s Landing, which stretches across more than 3,500 acres in portions of Stockbridge and unincorporated Henry County, the new city would have much higher average income than Stockbridge.

J.T. Williams, who developed the community with his sons, told The Bond Buyer that household income in the proposed new city would average $128,000. That is twice as much as cities within the county and the county itself, he said.

Mike Bowers, a partner with Balch & Bingham, said an inequity of the de-annexation plan is its negative impact on the city’s finances.

“These bills, if they come into being, would reduce the annual revenues of the city of Stockbridge by about one-third, from about $9.5 million a year to about $3.3 million a year,” Bowers said. “That’s a huge financial impact.”

The bills would also reduce the total assessed property value in Stockbridge by about $370 million, “just like that,” he said.

The complaint is based on violations of the Georgia constitution, which prohibits the Legislature from passing a bill that contains more than one subject matter that differs from its title, according to Bowers.

“The constitutional purpose of that provision is to prevent covert and surprise legislation,” he said. “Well guess what. That’s exactly what we’ve got right here – sneaky, surprise legislation.”

Stockbridge has spent about $185,000 fighting the de-annexation plan this year, hiring lobbyists and attorneys and spending on marketing materials. The city collected $17.7 million in revenues, according to its 2016 audit.

Attorneys at the press conference Thursday said they could not estimate how much it will cost to pursue the state and federal lawsuits.

If de-annexation occurs, a smaller Stockbridge would be obligated to pay off about $13.02 million of privately placed Urban Redevelopment Agency lease-revenue bonds issued to build city hall, and $1.5 million of water and sewer notes issued through the Georgia Environmental Facilities Authority. The debt is unrated.

Moody's Investors Service said Monday the legislation passed by Georgia is credit negative for Stockbridge and local governments generally because it establishes a precedent that the state can divide local tax bases, potentially lowering the credit quality of one city for the benefit of another.

“This legislation marks the first time that portions of a city are de-annexed in Georgia to create a new city,” said Moody’s analyst Nisha Rajan.

Allison Halron, a member of Eagles Landing Educational Research Committee that pushed for incorporation, wrote to Moody’s on Wednesday saying why she believes the rating agency has been misinformed about Stockbridge’s finances, its $9 million general fund, and its ability to repay outstanding debt if de-annexation occurs.

“It has been disappointing to see the lack of research and effort asserted before offering credit commentary by all financial professionals concerning the financial viability of Stockbridge,” Halron said. “Attention given this situation by financial professionals and institutions, like Moody’s, has perpetuated, even embellished, an already exaggerated and false distress.”

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