DeKalb County, GA, July 8, 2016 – Opinion/Editorial by DeKalb District 2 Commissioner Jeff Rader – In 2015, the Chamblee Development Authority began a new practice in DeKalb that could drive up homeowner’s School and County millage rates, while sheltering private development from the property taxation. Brookhaven is doing much the same. By relieving commercial property owners from taxation and engineering kickbacks to themselves or their sponsoring local government, these unelected Development Authority boards are undermining the financial foundation of basic service delivery, and insulating local government from responsibility for their development decisions.
Development Authorities have many powers, the greatest of which is to exempt private property from taxation. This power has real financial impact and is easily misused, so it should be exercised sparingly, and only in line with formal policy guidelines approved by the public. That’s the best practice.
Instead in DeKalb, Development Authorities can subjectively give tax breaks to “special” projects whose retail brand or apartment amenity package supposedly set them apart from their competition, at least in the eyes of the Development Authority. That’s bad enough, but now in addition to the private windfall, Municipal Development Authorities are authorizing even bigger tax abatements and collecting part of the windfall themselves, through “Administrative Payments”. This makes tax abatement profitable for all the parties involved – except for taxpayers who foot the bill.
The unique incentive for cities to shaft taxpayers is derived from the lopsided structure of your tax bill. Chamblee’s millage only comprise about 14% of the property taxes levied there; in Brookhaven, it’s only 7%. Though smaller in absolute terms, this bite out of the City’s tax base has nevertheless served to suppress their appetite for awarding tax abatements.
Until now. Remember that City Development Authorities exempt their clients from all taxes on property, not just their city’s taxes. In 2015, Chamblee began to exploit this asymmetry by incorporating Administrative Payments, payments into their abatements that provide the city with payments equal or greater than what they would have collected in normal taxes. The expense of this payment to Chamblee is shifted to the County and School System. The City thinks you won’t mind paying more in taxes for those services so they can get their windfall.
Brookhaven is doing them one better. In the case of the deal for a new Hawks Gym, Brookhaven is doubling the tax loss to the County and School System, with that money going straight to Brookhaven. Instead of the incentive to the Hawks costing Brookhaven $33,000 per year, Brookhaven would receive $302,000 annually that would have otherwise gone to the other taxpayer-funded governments, on top of a like amount going to the Hawks. To be fair, the Brookhaven Development Authority has offered to open a dialog with the County on the disposition of the Administrative Payments, but they would remain in control.
To a city, this type of leverage makes the scheme look pretty attractive. They can “make things happen”. And you don’t have to limit it to new development. Owners of existing taxable property could be invited to shift their former tax payments to the city for a cut of the action. If the County Development Authority (with county-wide jurisdiction) competes for transactions in order to protect county revenue, a race to the bottom could ensue.
It’s not just a paper loss, either. With residential property comprising the majority of the tax base, and North DeKalb’s generally higher valuations, the tax bill impact will be immediate and hit close to home. We will also have to find another way to pay for schools, since they don’t have a development authority to weaponize. Ultimately, millage rates may skyrocket as each government continues to extract revenue from a shriveled tax base. One can only hope we homeowners can get in on the game…
This is bad for the public, but there is a remedy. If all development authorities in DeKalb agree to forego kickback payments (and ultimately agree to uniform incentive guidelines and jurisdictional limitations), these obscure but powerful agencies will be tamed, and more accountable to you.
But to make this happen, the City and County elected officials who appoint these Authorities must direct them to do so. And that may be the biggest lift of all.
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