Opponents of the planned $5 billion Rivian electric vehicle factory asked a judge this week to overturn a Morgan County board’s approval of a rental agreement with the company, alleging the deal violates the state constitution.
If the court agrees, it could threaten the project and invalidate some $700 million in future property tax savings that local officials offered to lure California-based Rivian to build its second factory in Georgia.
At issue is a rental agreement between a local development authority and Rivian on about 2,000 acres along I-20 that straddles Walton and Morgan counties where the factory will rise. Last month, the Morgan County Board of Tax Assessors ruled the agreement constituted a usufruct, a type of lease that does not make Rivian’s interest in the property taxable.
The decision would allow Rivian to rent the land and future factory buildings without paying typical property taxes. The deal is the biggest component of the $1.5 billion package of state and local incentives offered to the company, the largest in Georgia history.
Credit: ArLuther Lee
Credit: ArLuther Lee
Instead of paying typical property taxes, Rivian and officials with the Joint Development Authority (JDA) of Jasper, Morgan, Newton, and Walton counties, reached a payment in lieu of taxes agreement or PILOT in which the automaker would pay a reduced tax bill of more than $300 million to local governments and school systems over 25 years.
Lawyers for seven Morgan County residents contend in a court filing dated Tuesday that the Morgan board erred in granting its approval, and that deal isn’t a usufruct but another type of lease that would be subject to full taxation.
The state constitution prohibits gratuities or providing government resources or funds without an equal return for taxpayers.
“The erroneous approval of the PILOT Agreement and the erroneous determination that … (the agreement) constitutes an untaxable usufruct constitutes an unconstitutional gratuity,” the filing says.
In a statement, the JDA blasted the legal action as “entirely without merit.”
“Once again, this activist group that does not represent the opinion and thinking of the majority of our community is attempting to sabotage a generational economic development opportunity,” the JDA statement said. “This legal challenge will cost the taxpayers of Jasper, Morgan, Newton and Walton counties by engaging in a frivolous legal action that won’t have any impact on the project’s success. The JDA looks forward to the project’s groundbreaking later this summer.”
A Rivian spokeswoman declined comment.
Andrew Capezzuto, chief administrative officer and general counsel for the state Department of Economic Development, said the incentive structure for Rivian “is consistent with countless other economic development deals done across Georgia over the years.”
He called the challenge “nothing more than a stall-tactic by a small group of individuals who have tried to stop this project from the very beginning.”
Rivian and Gov. Brian Kemp announced plans for the factory in December. The company said recently it expects to begin production in Georgia of a new crossover, known as the R2, starting in 2025.
But the project has been opposed by a vocal grassroots group called Morgan County Land, Sky & Water Preservation that’s backed by residents fearful of environmental impacts, traffic and the loss of rural farmland.
The appeal of the board of tax assessors’ ruling to the Morgan County Superior Court was not unexpected. John Christy, an Atlanta attorney for the opponents, had signaled in recent weeks that the group was evaluating legal options.
Much of the complaint centers around the difference between two arcane terms in real estate: Whether the lease is a usufruct, a common type of lease in which the tenant has limited rights and isn’t subject to property taxes, or what’s known as an “estate for years,” in which the tenant has more complete control of the property and is subject to taxes.
Rivian opponents say the company would have substantial control over the site and the terms are “inconsistent” with the board of tax assessors’ finding that the agreement is a usufruct.
Opponents also argue the board of tax assessors’ May 25 meeting, in which the deal was approved by a 4-1 vote, was riddled with procedural errors. The group’s chair also refused to allow public comment at the meeting, which the 17-page complaint said was not in accordance with board policy.
“The complaint speaks for itself, but we look forward to having the matter heard before the Superior Court and are confident in our analysis of the law and conclusion that the Rental Agreement is not a non-taxable usufruct,” Christy said in an email.
-Staff writer Kelly Yamanouchi contributed to this report.
A note of disclosure
Cox Enterprises, owner of The Atlanta Journal-Constitution, also owns about a 4% stake in Rivian and supplies services to the company. Sandy Schwartz, a Cox executive who oversees the AJC, is on Rivian’s board of directors and holds stock personally. He does not take part in the AJC’s coverage of Rivian.
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