An agenda item at the Peachtree City Council retreat held Jan. 9 will have staff in the coming months analyze the idea of the city establishing one or more areas of the city as a tax allocation district (TAD). In a move required before the lengthy TAD process could begin, the council on Jan. 15 adopted a resolution for a November referendum that would restore the city’s development powers so that the TAD process could be considered.
Attending the retreat to provide information on the issues relating to a TAD was Fayette County Development Authority President Alan Durham.
Durham at the outset noted that Fayette County is running out of major office space needed for large companies, adding that “you can‘t have a corporate headquarters on septic.”
The council on Thursday adopted a resolution authorizing a November referendum that, if successful, would give the city the ability to explore the TAD process and put it up for a vote on a future referendum. The vote calling for the initial referendum was 4-0. Mayor Vanessa Fleisch was not at the meeting.
Councilman Eric Imker prior to the vote asked citizens to vote “yes” on the redevelopment powers referendum so the city can have options in the future.
City attorney Ted Meeker at the Jan. 15 meeting said the resolution would be sent to the local legislative delegation to enable the November referendum to be held.
Meeker at the Jan. 9 council retreat said the restoration of local redevelpment powers must be addressed prior to the time the TAD process can occur. Meeker said voters would first have to approve a referendum to “get back the redevelopment powers we once had before the state took local power away and has now restored it.”
If approved by voters, the city could pursue the public TAD process and, if desired, put it up for a vote on a separate referendum in the future.
Asked by Councilwoman Kim Learnard at the retreat why the topic was on the agenda, City Manager Jim Pennington said staff, in general terms, had been discussing areas such as Huddleston Road that have a potential for development. Pennington said the area is one of the last in the city, and one where there is no current sewer service, where such economic activity could come into play and where a TAD could work. Pennington said there might be other areas in the city that could also be investigated as TAD projects.
Durham said TADs are instruments of the state’s Redevelopment Powers Law where local governments have the authority to sell bonds to finance infrastructure and other redevelopment costs within a specifically defined area (a TAD). A TAD is established for the purpose of catalyzing investment by financing certain redevelopment activities in underdeveloped or blighted areas using public dollars. Redevelopment costs are financed through the pledge of future incremental increases in property taxes generated by the resulting new development. Typically upon creation, TADs have vacant commercial and residential properties, blighted conditions and numerous vacant buildings or are in need of significant environmental remediation, Durham said.
Explaining the tax increment, Durham said it is the difference between the amount of property tax revenue generated when the TAD is established (the “base” year) and the amount of property tax revenue generated after the TAD designation. When a TAD is created, the Georgia Department of Revenue sets the base value for the district. Any growth in property tax revenues resulting from increases in property values above the base value are collected in a special fund and used for redevelopment costs in the TAD. Only property taxes generated by the incremental increase in the values of these properties are available for use by the TAD.
And while the TAD bonds often run 25-30 years, Durham strongly recommended paying off the bond early. Given that a successful TAD project will increase in value, and hence in property valuation, the difference in that increase can be used to pay off the bond early and/or to make infrastructure or other improvements within the TAD district.
The sooner the bond is paid off the sooner the improved property goes back on the tax rolls (at the fully taxable price), Durham said.
As was done to create Atlantic Station in Atlanta or more recently in Fayetteville, the city designates a specific geographic area that has the potential for redevelopment. While the bulk of the TAD areas in Fayetteville include older retail sites, it also includes undeveloped sites in The Villages at Lafayette development.
Durham said TADs offer a flexible alternative to financing economic development without the need to use general funds, local option sales taxes or special purpose local options sales tax revenues or to raise taxes. While there can be significant benefits to using TADs, cities should also be aware of the risks associated with this tool, including the possibility that the TAD area may not generate the level of revenues that the city originally estimated.
As for risk, Durham said there is no risk to taxpayers through a TAD bond. The full faith and credit of the city is not behind the TAD bond, he said.
City attorney Ted Meeker added that there is no intergovernmental agreement associated with a TAD.
If the city were to pursue a TAD after the analysis, it would require forming a redevelopment agency and hiring a consultant to begin the lengthy public process. Durham noted that a redevelopment agency does not have the authority to levy or increase property taxes. It is important to note that the increased tax revenue from the sale, development or rehabilitation of property reflects a rise in property value and not an increase in tax rate, he said.
Specific to a TAD is the revenue going to the school board and county. Both would have to agree to the TAD proposal since both would continue to receive taxes from the property at the frozen base rate until the bonds are retired.
Also during the discussion, Mayor Vanessa Fleisch suggested staff look at the variables involving a Community Improvement District (CID). An example of a nearby CID is the South Fulton CID which includes mainly industrial members in the Oakley Industrial Boulevard area. Specific only to CIDs is the capability of levying taxes within the CID boundaries for things such as infrastructure improvement.
