Leaders consider how to pay for North Point Mall mixed-use adds

Alpharetta city leaders are looking at a controversial financing tool to build a mixed-use behemoth at North Point Mall — a step they say could extend the life of a powerful tax engine for the county.

Their plan would redirect all property taxes from 900 acres at the mall and nearby businesses. It could put a redevelopment of the mall into hyperdrive — but if the city goes forward, delicate negotiations are needed: The tax plan would need approval from both Fulton County and the Fulton County Schools. It’s unclear whether those elected officials will see the value of new retail space and high-end apartments at the mall.

Alpharetta heard a presentation last week about how a tax allocation district (TAD) could finance their new vision for the old mall.

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Alpharetta's City Council voted in February to approve what is basically a cyborg enhancement attached to North Point where Sears used to be at the mall. It's an effort to save what was once a shiny mall that has been dulled by the drain of tenants and shoppers — a problem affecting many suburban malls as consumers shop more and more online.

If a TAD were established, property taxes that would have gone to the the city, county and schools would be funneled right back into preparing roads, sewer and other infrastructure for the coming new development. A TAD means residents won’t get the benefits of property taxes from that area for as long as 25 years in order to give the development a shot in the arm.

The question is whether the county and school district are willing to give up tax dollars in the short-term to support a 24,000-square-foot mixed-use development that could bring them more tax money later. The area’s Fulton County commissioner and a Fulton County Schools spokesman were non-committal when asked by the Atlanta Journal-Constitution.

Credit: John Spink/AJC

Credit: John Spink/AJC

A large reason for the TAD is so it can improve walkability to the current 266-acre sea of asphalt in the North Point area, which includes the 26-year-old mall, Geoff Koski told the Alpharetta City Council last Monday.

Koski is president of the real estate consultant firm Bleakly Advisory Group, which created a 45-page analysis of how the TAD would work for North Point. The parcels listed represent 5% of the city’s 5.39 billion gross tax digest, and he estimates that could double to 10% by 2030 if all goes well.

When presenting to the City Council, Koski said the thing every northside politician needs to hear to support something: “This is not about a new tax.”

Stalling mall

The proposal to use a TAD at North Point is unusual because TADs are traditionally are used when an area that is financially depressed needs help. TADs are the same economic incentive that turned a contaminated former steel mill site into 138-acre Atlantic Station and an unused rail line into the Beltline.

Despite what appears to be flourishing retail business at and around the mall, Koski’s real estate consulting firm found mall vacancy recently rose above 20% and average sales per square foot have been “declining at a significant annual percentage rate since 2014.” North Point meets the state’s definition of being a “deteriorating area,” he said, making it a candidate for a TAD.

But the three-letter acronym can cause a five-alarm fire in some political circles.

A TAD to fund Atlanta’s Beltline spurred a 2008 Georgia Supreme Court decision that property tax funds dedicated to schools couldn’t be used in TADs. That was later reversed by the General Assembly, and now school districts must consent to participate.

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A proposed TAD was also at the center of a contentious political fight between the city of Atlanta and Atlanta Public Schools that lasted nearly half a year.

For decades, school districts have felt like they didn’t get enough payoff from TADs, considering how much they pay into them. This came to a head as the Atlanta school system took the city to court over the TAD that included the Gulch. The battle ended in the school’s favor just as the year began.

Credit: City of Alpharetta

TADs are often accompanied by bonds that are used to help fund the project. Investors are less likely to purchase bonds if Alpharetta doesn’t have backing from the schools, Koski said. School taxes generally account for more than half of all property tax revenue.

“They’re going to know what the schools and county are in for,” he told council members. “You got to have all those things worked out before you go for bond issuance.”

‘Scrounging through the cushions’

A city spokesman said no projected cost for the overall North Point development has been released, and the developer wasn’t immediately available for comment Monday. But there are predictions for how much tax revenue the government agencies will forgo if they participate in the TAD.

According to forecasting numbers from the analysis, over a 25-year life of the special tax arrangement: Alpharetta would miss out on between $9 and $12 million; the county would lose between $19 and $26 million; and the schools wouldn’t see between $36 to roughly $48 million.

When asked for comment about its role in the future of the TAD, a Fulton County Schools spokesperson declined to make the superintendent or a school board member available for interview, instead sending a link to the district policy about how to handle TAD proposals. Spokesman Brian Noyes said the school system "would not be in a position to make a statement on the potential TAD under discussion by the City of Alpharetta."

Fulton County Commissioner Liz Hausmann said it would “have a definite impact” if the schools didn’t participate.

Hausmann, whose district includes North Point, said she’s excited for the mall’s redevelopment but said getting the county on board with a TAD isn’t a sure thing.

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“I hope that the redevelopment happens, I really do, because I think it would create such a strong environment, but I think there’s some challenges, and I hope they explored all their other options for incentives,” she said.

Alpharetta Mayor Jim Gilvin said they couldn’t fund the pedestrian and trail improvements without help.

“When we look at our coffers, we have no money available,” he said. Gilvin added that they were “scrounging through the cushions” to find funds to finish transit projects.

Jon Wiley, director of Georgia State University’s masters in commercial real estate program, said some view TADs as a way to help out developers and hurt existing residents.

“There’s risk of wealth transfer from people who benefit from the development to the residents who have to carry the load,” Wiley said.

As for North Point, he sees the mall in a knife-fight with nearby Avalon — which in 2014 brought lots of retail along with a hotel and 250 apartments to the city — and just over the border in southern Forsyth County lies Halcyon, an upcoming 135-acre mini-city with 650 residential units. Between those two developments is a million square feet of upper-end retail.

“It’s kind of change or die” for North Point, Wiley said.

Aside from the bonds and political capital in play, Wiley said there’s a larger question that can’t be ignored.

“How many really high-end shopping destinations can Alpharetta support? Time will tell.”