The state of Georgia and a development authority overseeing the site of the future Rivian electric vehicle plant announced Friday they filed a notice that they will appeal a local judge’s ruling that struck down property tax breaks for the $5 billion factory.
In a September ruling, Ocmulgee Judicial Circuit Chief Judge Brenda Holbert Trammell declined to validate bonds at the center of the incentive package. She said a local development authority “failed to establish” that the bonds were “sound, feasible and reasonable.” She also agreed with residents who challenged the Rivian incentive deal, ruling that the type of land lease negotiated with Rivian is one subject to property taxes.
The ruling struck down local property tax incentives totaling some $700 million that were the largest component of a $1.5 billion inducement package state and local leaders offered Rivian to build a vehicle and battery plant along I-20 in southern Walton and Morgan counties.
In a Friday statement, the Georgia Department of Economic Development and the Joint Development Authority of Jasper, Morgan, Newton and Walton Counties (JDA) said they filed a notice of appeal with the state Court of Appeals and briefs will be submitted once the case has been docketed.
“We absolutely disagree with Judge Trammell’s ruling regarding the structure of incentives for this project, and we are confident in the merits of our appeal,” Pat Wilson, Georgia’s commissioner of economic development, said in a news release.
Credit: Curtis Compton / Curtis.Compton@
Credit: Curtis Compton / Curtis.Compton@
He called the Rivian deal “a transformational investment” and said “the bond structure for this project is consistent with numerous other bond deals that have previously been validated across this state and even in Morgan County.”
Seven members of Rivian opposition group Morgan County Land, Sky & Water Preservation challenged aspects of the local property tax incentives offered the automaker in exchange for its investment and 7,500 promised jobs.
The state of Georgia offered Rivian the use of 2,000 acres of land essentially for free through 2047. As part of the deal, the JDA entered into a long-term rental agreement on the property, which is about an hour east of Atlanta.
Critics say incentives are often not needed or are overused because corporations base location decisions on other factors such as available workforce and infrastructure.
Development authorities in Georgia use lease transactions such as “bonds for title” and usufructs to grant property tax breaks as a legal workaround of state law, which has no constitutional or statutory mechanism to provide property tax incentives.
The JDA contends the Rivian lease is a usufruct, a common type of lease in which the tenant has limited rights and isn’t subject to property taxes. The Morgan County Board of Tax Assessors ruled the lease as such earlier this year.
Instead of paying typical property taxes, Rivian and the JDA 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.
Last month, Trammell sided with opponents who contend that the deal isn’t a usufruct but an “estate for years,” in which the tenant has more complete control of the property and is subject to taxes.
John Christy, an attorney for the Rivian opposition, expressed confidence the judge’s order will be affirmed.
Credit: robert.andres@ajc.com
Credit: robert.andres@ajc.com
“Judge Trammell’s order was supported by established legal precedent and her factual findings well-supported by ample evidence in the record,” he said in an email.
Wilson said the state secured one of the strongest economic development agreements in its history, including mechanisms to force Rivian to repay taxpayers if jobs and investment goals are not met.
He called it “categorically false to suggest that the state and local JDA did not perform due diligence before offering discretionary incentives.”
“Bonds for title” deals are complicated transactions that act as a sort of legal workaround of the Georgia Constitution’s prohibition on gratuities, which forbids government from providing a good, service or property without an equitable return.
These deals amount to a real estate transaction where a development authority holds the title for the property while the company makes rent payments to the authority. In Rivian’s case, the JDA sought the court’s approval to issue bonds totaling up to $15 billion, which represents the potential future value of the project, but not an amount of money that changes hands.
Neither the JDA nor Rivian planned to publicly sell the bonds and taxpayers would not have been on the hook for them.
Development authorities do not pay property taxes, and they can lease the property back to the project’s developer while providing a tax break. The bonds require a judge’s approval under Georgia law, and it is rare for a judge to strike them down.
On Tuesday, Hyundai Motor Group held a ceremonial groundbreaking for a $5.54 billion EV factory near the Georgia coast. Hyundai received a record-breaking $1.8 billion incentive package structured similarly to the Rivian deal.
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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