After several months of review and debate, the Fulton County Board of Assessors has resumed its under the radar role in the approval of multimillion-dollar property tax breaks to businesses and developers.
The BOA earlier this monthapproved multiple appraisals requested by the Development Authority of Fulton County, including one for a controversial data center project at the former Tilford Yard in west Atlanta. The appraisal approvals are part of a complicated and arcane process of granting property tax breaks also known as tax abatements.
In the case of the Tilford Yard data center, the appraisals approved by the BOA are part of a deal that will reduce the developer’s tax bill by an estimated $32 million over 10 years.
The BOA last year became the latest battleground over the contested method local governments use to offer tax savings in the name of economic development. Taxpayer advocates contend local development governments play fast and loose with tax abatements, granting them to projects that would have come without the incentive.
A 2018 study by the Michigan-based W.E. Upjohn Institute for Employment Research found that local and state incentives rarely are the deciding factor in a company’s decision to locate or expand. The study estimated that 75% to 98% of the time, a company granted incentives would have made the same choice without local or state subsidies.
The ongoing expansion of Ponce City Market and an apartment project near Piedmont Road are two recent examples in Atlanta of developers moving forward with projects after the Fulton authority decided not to grant incentives.
Proponents say the tax breaks are a vital tool to attract jobs and investment.
The BOA plays an ancillary, albeit important, role in these agreements, but its board members tabled all such appraisal requests at the end of last year under the threat of legal action.
A county resident and his attorney alleged Dec. 5 the five-member board was violating its bylaws and state law by not properly appraising those properties granted tax breaks, instead acting as a “rubber-stamp” for the incentive deals. In short, they argued the BOA is compelled by law to value properties at what the free market will bear, but these deals force the board to value incentivized projects for less.
Since then, the BOA reviewed its processes and voted in early April to draft a specific policy for how to approach development authority appraisal requests. The pause prompted nine Fulton mayors, including Atlanta’s Andre Dickens, to pen a letter urging the board of assessors to quickly resume approving these appraisals.
“We must not allow a few detractors of economic development make it appear that Fulton County and our municipalities are closed for business,” the letter said.
At its April 18 meeting, the BOA approved the Tilford deal and a smaller tax break for a warehouse project in Union City.
“This board is only responsible for the valuation and not the merits of any of these projects,” Melinda Kaplan, the BOA’s chair, said before the votes.
The board voted 4-0 to approve both appraisal requests. Board member Lee Morris, who previously told The Atlanta Journal-Constitution he was unconvinced these appraisals are proper, was absent.
Providing tax breaks
Georgia’s unique system of granting property tax breaks to developers and expanding companies was crafted to get around the state Constitution, which forbids government entities from providing a good, service or property without an equitable return.
The workaround is commonly called “bond-for-title,” “phantom bonds” or “lease-purchase” agreements. It often involves bonds that aren’t really real, leases that don’t act like typical leases and a government body — a development authority — holding title to a project that they often don’t really own.
Under this system, development authorities take title to the property granted the tax break and lease it back to the company. Development authorities are government entities that don’t pay property taxes. When they take title, they pass along the tax savings.
The title is eventually returned to the company at the end of the tax break period. In Fulton, that period typically lasts 10 years under what’s known as a “ramp-up valuation.”
In that time, the project owner or developer will pay a reduced tax bill of 50% based on what’s supposed to be the assessed fair market value the first year with the tax burden rising each year until it reaches the full tax value in year 11.
The BOA is asked to approve that ramp-up valuation, but critics argue that appraising a property at a market discount is a violation of their duties.
Tim Franzen, a board member with Housing Justice League, an affordable housing and tenants’ rights advocacy group, said these appraisals are unfair, because they’re typically only offered to large businesses and developers. He said many residents would benefit from reduced property taxes instead of companies looking to make a profit, especially those in hot industries like data centers.
“There’s no incentive needed when Atlanta is in the midst of what real estate pros call a data center gold rush,” he told the BOA on April 18.
Credit: Development Authority of Fulton County
Credit: Development Authority of Fulton County
Mike Bodker, the Development Authority of Fulton County’s treasurer, said delaying these incentives could cost the county investment and jobs. He told the BOA that his authority, which recently rebranded to Develop Fulton, has at least 15 projects that are considering Fulton sites but are waiting for clarity on the county’s incentive process.
He said those projects would total $3.7 billion in new investment and $220 million in net new property taxes for the county, its cities and schools after the value of the tax breaks is taken into account.
“We do not want to lose any of these opportunities for our county,” he said.
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