Chamblee, GA, March 30, 2016 – by Trey Benton, Commentary – The word “progress” has a couple of meanings: “forward or onward movement toward a destination” is one, and “the process of improving or developing something over a period of time” is another. In the case of real estate deals shrouded in secrecy by local Governments or the Development Authorities they create, the term “progress” can be used as an excuse, or a qualifier, and it comes at a cost.
In attracting two key developments to the City of Chamblee, while arguably good additions to the local landscape, progress came at a cost of tens of millions of dollars in tax abatements. These two highly publicized developments – The Olmsted and Peachtree Crossing, a.k.a., Whole Foods. – have been in the news for some time, grabbing headlines that sparked excitement of their coming. Admittedly, I penned several articles myself, attended meetings, filed Open Records Requests to learn more and even attended the groundbreaking ceremonies.
But, while most agree progress is a good thing, I believe leaving citizens in the dark by concealing details of that “progress” seems dishonest… but, maybe that’s just me.
It’s legal and not unusual.
Georgia Sunshine Laws allow real estate negotiations between governing bodies and Development Authorities to occur privately, during Executive Session. And, in most cases, the records aren’t subject to disclosure via Open Records Requests either.
Georgia Law also allows property owned by a governmental entity, such as the Chamblee Downtown Development Authority (DDA), to be exempt from paying property taxes. And, governments take advantage of this fact to incentivize developments within their jurisdiction, using their Development Authorities to negotiate and execute deals with developers in the name of “progress” all of the time. It’s legal and not unusual.
So, let’s make a deal.
An abatement works in such a way that a developer transfers title of its property to a Development Authority (DA), making it the new legal “owner.” The DA then, leases the property back to the developer and, since the government now “owns” the property (and is exempt from property taxes) a Payment in Lieu of Taxes Agreement (PILOT) is negotiated. The developer agrees to pay the Authority an amount that could be $0, or any amount for that matter. And again, these deals are done with little oversight and in most cases zero public input.
Which brings us to The Olmsted and Peachtree Crossing (Whole Foods) developments. Effectively, the Chamblee DDA transferred title of both of these properties to themselves, for the singular purpose of exempting the prospective developers from paying property taxes, and to exact annual “administrative fees” payable directly to themselves, instead of the City of Chamblee.
The DDA hired bond lawyer, Dan McRae from Seyfarth Shaw to put these deals together. Nearly $100 million worth of bonds have been issued for these two developments. The DDA’s bonds were validated by DeKalb County Superior Court, making the transaction bullet proof. It can never be challenged, or undone in the future. Once the tax savings deal is over, the developer buys back the property from the DDA for $10.
The two recent Chamblee DDA deals equate to nearly $22 million in tax abatements.
The Olmsted development is projected to be 340,000 sq. ft. development with 278 apartments, 5 town homes and 35,000 sq. ft. of commercial space. The value is purported to be $40,000,000. The Olmsted developer, Stephen Macauley is a partner of Egbert Perry of Integral, Perry is the man leading the charge on the “troubled” Doraville GM redevelopment.
The Chamblee DDA abatement deal with Mr. Macauley exempts The Olmsted development from property taxes for 20 years. Without the abatements, Macauley would have paid approximately $11,363,200 during that time.
For 20 years, neither the State, County, nor School System gets a dime, and neither will the City of Chamblee. Instead, The Olmsted will pay an annual “Administrative Fee” directly to the Chamblee DDA equal to the greater of (a) 10% of the annual savings or (b) the amount that the City would have gotten from its tax levy.
Will the people and families living in The Olmsted development not have kids in our school system, cause wear and tear on our roads, use the DeKalb Courts, or Sheriff, or any County or City services during the next 20 years? Unlikely. Its much more plausible that for the next 20 years, current (and future) Chamblee residents will be subsidizing services to residents of The Olmsted.
With current residents subsidizing the cost of services for new developments, the DDA pays itself.
The Chamblee DDA gave away approximately $568,160 per year for 20 years to The Olmsted’s Macauley. In return, the DDA will divert over $2 million to themselves over the life of the deal.
In the case of the Peachtree Crossing (Whole Foods) Development, the deal is equally hard to swallow. The Peachtree Crossing project is a 107,000 sq. ft. development including a 45,000 sq. ft. Whole Foods grocery store with 500+ parking spaces. The value is purported to be $40,000,000. The project developer is Jeff Garrison of S.J. Collins Enterprises.
Garrison’s taxes were forgiven for 15 years, and he doesn’t have to pay the “Administrative Fee” to the Chamblee DDA until the abated tax savings amount to $7.5 million — to repay him for the construction costs associated with relocating and adding utilities, a traffic signal, grading, an underground detention system, and brownfield remediation on the portion of the site, which was formerly Oxford Chemicals.
So, over the next 15 years, the Chamblee DDA gave away approximately $10 million to Peachtree Crossing’s S.J. Collins. And, once S.J. Collins reaches $7.5 million in tax savings, they too will start paying an annual “Administrative Fee” to the Chamblee DDA of approximately $670,560, an amount equal to what they would pay in City taxes.
The DDA makes the case that neither property was living up to its full potential in the community before redevelopment. They also contend the abatements deal with money the City wasn’t collecting anyway, so what’s the harm? And, both projects, particularly the Peachtree Crossing development, will bring in sales tax, permitting and licensing fees, and jobs… “progress.”
The part I find most troubling is, this is perfectly legal. Especially troublesome, is that the process of concocting these types of deals is done privately, behind closed doors, away from public scrutiny — with little community knowledge or input from the very community that is ultimately on the hook in case of default by the developer, and the same community subsidizing the service delivery costs to these private developments.
One jurisdiction can abate the property taxes of another – without its knowledge or approval.
Recently, Brookhaven experienced this, not only were citizens not aware, the City itself wasn’t either. The City of Brookhaven says they had no idea the DeKalb Development Authority offered and approved over $10 million in tax incentives for the development of a Perimeter Summit high-rise and the expansion of a Brookhaven credit card processing business.
To be clear, what the Chamblee DDA has done with The Olmsted and the Peachtree Crossing Developments is not illegal, and I am not alleging any malfeasance. Like it, or not, it’s the way the system works. And, until laws are changed or Development Authorities cease to exist, this version of “progress” or “Corporate Welfare” will continue. Call it what you will.
Where is my tax abatement?
Remember, our property taxes fund infrastructure, schools, and critical services such a fire, police, etc. And, unless I missed it, the last time I checked, no one is offering to abate my taxes for the pleasure of having me live here. Where is my tax abatement? I’m guessing it’s not coming, because, if the citizens aren’t paying who is supposed to foot the bill for service delivery to a new apartment complex or premium grocer? But hey, I suppose I should just get used to it. After all, it’s “progress.”
For the record, there are three developments in Chamblee now that have received significant abatements, The Olmsted, Peachtree Crossing and Chamblee Plaza (which was issued by DeKalb, and there are more coming in the near future.
Below, please find what we have been able to get from the DDA via Open Records. It is worth scanning over all of the documents.