On November 6, Fayetteville residents will be the only ones seeing a unique opportunity to help local development on the election ballot.
According to Fayetteville’s Brian Wismer, Main Street Director/Downtown Development authority Director, residents will get the opportunity to give their city government the authority under the “redevelopment powers law” to create development finance tools that can help revitalize older commercial areas.
Appearing before the Fayette County Board of Education, Wismer pointed out that over 40 cities and counties in Georgia have used the powers to create a TAD (Tax Allocation District) around an older commercial center or area.
“Thirty years ago the state of Georgia created a way to offer a new financing tool to spur public/private development.”
Atlanta’s Atlantic Station is one of the prime success stories. While before the development the property tax receipts for the land were around $6 million dollars, with the advent of the TAD and redevelopment of the property, the city is seeing closer to $250 million in tax base.
“It’s been a shining star for the state.”
According to Wismer, the TAD is becoming a common financing tool to help redevelopment on struggling properties that otherwise wouldn’t be able develop without this incentive.
“We had this on the ballot a few years ago, about the same time as the renewal of the SPLOST and it was defeated by seven percentage points.”
Part of the problem, pointed out board member Janet Smola, could simply be because many voters were required to go to a secondary voting place, since this referendum is strictly for Fayetteville city voters.
Wismer also said that there hadn’t been as much emphasis on public awareness the last time, which they’re hoping to change this time.
Wismer told the board that when a TAD is created, that area is placed under a property tax freeze with respect to taxes paid to the city, county and school system for the life of the TAD. When the property is redeveloped, and the assessed property value rises, the additional taxes levied on that development will instead be used to pay for infrastructure and other development costs.
“The reality is that we have commercial centers that are reaching 20 and 30 years old and could some help in redevelopment. The TAD would freeze the property tax on a particular property.”
The cost of redeveloping some of these sites makes it unlikely that anything will happen with any project incentives, Wismer pointed out. Using TADs is a way to finance a portion of the upfront costs of development without creating a liability to the taxpayer.
“The difference a TAD makes can be just enough to push a redevelopment project forward.”
Wismer said that when a property comes up to be considered for the TAD, the project is presented to the city, and county governmental entities and to the local Board of Education since the school system is such a large part of the tax digest. If the entities agree to the tax freeze, it would leverage future property tax assessments in the form of a bond, with the bond investors being the ones taking the risk, and then the property si assessed as redevelopment occurs.
“So if there is a $50,000 assesment for the bond, the property is redeveloped at then assessed $150,000, the three entities would get $50,000 and the additional $100,000 would go to service the bond for, say, 10 to 15 years. The advantage of doing that is that at the end of the bond term, the property will pay taxes on the full assessed value going forward, which would then be distributed among the entities.”
Only properties which would not see redevelopment any other way would be picked for the TAD.
“You’re not giving up anything you’re not already receiving.”
The requirements are minimal, said Wismer, with the need to be served by sewer in an area that is seeing physical decline or stagnation.
“If the voters pass the referendum, the city has the authority, the ability, to look for projects that would be good candidates. Once a project is identified, it becomes a very public process, with public hearings and discussions, a redevelopment plan and the city would come before both the county commission and the board of education to get their consent.”
IF the board of education chooses not to agree to a project, though their portion of the property tax would still be included, the liklihood of the project going further would be significantly reduced.
“This type of financing is a supplemental tool and it could be just enough to get over the hump of financing some developers need to go forward. The important thing is that it doesn’t create debt obligation. The risk is on the bond holders, who only have access to the separate funds over and above the property tax, not the residents of homeowners. It is parcel specific for a redevelopment project and it does not increase property taxes.”
Wismer pointed out that, to date, there have been no defaults on any of the TADs created and that over $450 billion has been used to finance projects using this method. Surpluses above and beyond what is needed to service the bond can be held, or used to prepay bonds early.
Fayetteville Mayor Greg Clifton, also on hand for the meeting, said the city is completely behind this project.
“It’s important to note that nobody loses anything. We keep getting what we are receiving now until the debt is retired. Commercial developers are often required to put 25 percent down to begin a project. The TAD can help finance 10 or 15 percent. It doesn’t penalize the developer making projects easier to finance and it may be what helps get the deal done. It’s a win, win, win for all entities.”
The TAD could benefit the city to get redevelopment projects going in areas that could be left derelict as a result of the current economic situation and eventually the entities will see more tax money coming in.
No vote was required by the board on this.