The Downtown Development Authority of Avondale Estates (DDA) entered into a “Bond for Title” inducement with the developer. In this arrangement, a portion of the project is owned by the DDA for a period of time, which lowers the property taxes due on the project. This inducement is widely used by development authorities in Georgia to encourage large projects to be built in a given area.
In the final weeks before closing the deal, the developer received notice from DeKalb County that sufficient sewer capacity may not be available for the project. The solution to this was an unanticipated new structure on the premises to add storage capacity while the county improves its sewer system.
This late-breaking news put the project in peril, but it is hard to say whether the developer would have found another way or not. One of the other ways to resolve this would have been to approach the County’s development authority with the exact same request. If that had happened, the taxes that were abated would have been the same – the difference being that Avondale would have been seen as not willing to help a responsible development in its most difficult juncture.
Obviously, that depends on whether any other company would have developed the land, or it had stayed in its traditional use, which paid $6,201 to the City per year in taxes. If a failed deal had cooled the demand for building on that site by 3 years, then the taxes expected to be collected during that time would have been $18,603 ($6,201 x 3).
The taxes collected in the first year of the abatement (2019) will be $58,547, a nine-fold increase over the previous year’s (no-development) payment. And each year, the portion of taxes paid increases by 6.5%, until in the 10th year, the abatement is over, the bond is paid and title to the property is fully with the developer, and DDA is out of the project.
No, the entire bond is secured by the project, and does not impact the City’s debt picture in any way.
This portion of the downtown is not in the Tax Allocation District, so no increased taxes would have gone to the TAD.
The Bond for Title inducement lowers the taxes due to all three entities, because the method of abating taxes is that the DDA owns a portion of the project. DDAs do not pay property taxes, so the inducement affects the taxes collected by all three entities.
It is certainly one of several methods to be considered in incentivizing outstanding design and smart development in our downtown. Most (if not all) future developments the DDA will be working with will be in the TAD area, so the benefits to our community of any inducement have to be weighed in terms of how much value the developer is bringing to the community, measured against the benefits to the City of any method at the disposal of the DDA (or the City).
The Avondale TAD covers a specifically defined geographic area or district (see map.) Taxes within TAD are paid as usual, but once a development is built, any future tax revenue above the base value is limited to infrastructure expenditures related to the district. Examples include utilities, stormwater and sanitary sewers, sidewalks, streetscapes and pedestrian improvements, parking facilities, green space and parks, wetlands mitigation, transportation and transit facilities.
Dekalb County School District (DCSD) does not currently participate in the Avondale TAD. http://avondaleestates.org/DocumentCenter/View/1321
However, both DCSD and DeKalb County taxes are typically included in Tax Abatement incentives. It is possible for a Tax Abatement incentive to be added as an additional layer to the TAD only after the appropriate due diligence and consideration of economic costs and benefits to the city.
Yes, the County can also choose to do an abatement. It, too, would affect City, County and School District taxes.