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A TAD bit of a problem: Hall cities struggle for redevelopment funds after ruling

POSTED: March 1, 2008 5:00 a.m.

Construction cones line downtown Flowery Branch.

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Gainesville officials aren’t the only ones in Hall County left reeling from a state Supreme Court ruling last Monday that is bringing dozens of development projects around the state to a halt.

Flowery Branch and Oakwood officials said the ruling, which prohibits the use of school taxes for noneducational purposes, presents a major setback for the two cities’ separate tax allocation districts, which were intended to fund sewer expansion and downtown revitalization efforts in the municipalities.

The Georgia Supreme Court determined the Beltline, a metro Atlanta project that aimed to transform a 22-mile loop of abandoned railroads into parks and mixed-use developments, could not use school funds to finance the project through a tax allocation district because the funding method violates the state constitution’s educational purpose clause.

The Flowery Branch TAD was estimated to generate $11.2 million over 25 years, 63.5 percent of that coming from school board revenue. And Oakwood officials planned for the school board to contribute 64.3 percent of $9.9 million to the city’s tax district over a 25-year period.

The Gainesville tax allocation district funds designated to develop the Midtown area are also diminished as a result of last week’s ruling.

Flowery Branch and Oakwood officials were preparing to meet with Hall County government and Hall County school officials in upcoming weeks to negotiate the terms of the tax districts. The districts sought to freeze a portion of county and school property taxes on underdeveloped or blighted property, issue bonds to improve it and use tax revenue generated from the new development to repay the bonds.

In September, both Flowery Branch and Oakwood voters approved the creation of tax allocation districts in their respective cities.

Although the two South Hall cities were operating independently of one another, both Flowery Branch and Oakwood city staff and city council members had been working with Gary Mongeon, vice president of the Atlanta-based consulting firm Bleakly Advisory Group, to implement tax allocation districts in the cities when the ruling was made last week.

A significant portion of Flowery Branch’s TAD bonds were expected to fund the doubling of the Flowery Branch sewer and water treatment plant capacity to 2 million gallons.

"(School board property taxes) were going to make up the lion’s share of the project," said James Riker, Flowery Branch planning director. "The next plan of action is to wait and see what kind of solution the legislature might have to correct this matter."

Lt. Gov. Casey Cagle implemented an informal Senate work group Thursday to address the state Supreme Court’s decision to remove key school board funding from TAD operations that have funded much of the recent development in Georgia, including Atlanta’s TAD-funded Atlantic Station.

Oakwood City Manager Stan Brown said Oakwood’s TAD projects are not being scrapped, but the ruling will require officials to get more creative with project financing.

"We’re not stopping our projects with or without TAD-funding," Brown said. "We’re still moving ahead. We just need to reassess our funding sources."

Brown said he is currently exploring the possibility of continuing the Oakwood TAD with only county funds.

City officials are also re-evaluating finances in Braselton, where voters approved a TAD in November. Mayor Pat Graham said the city will lose more than half of its projected funding due to the court’s decision.

The town anticipated spending $5.5 million to reconstruct the intersection of Ga. 124 and Ga. 53, create a town green space in place of the current Ga. 124 route next to the Braselton Antique Mall, install streetscapes and build an amphitheater.

Now that school taxes are off the table, Graham expects the town to raise roughly $2.5 million from Jackson County taxes, which means the amphitheater and some of the streetscapes in the project will have to wait.

Graham said she considers the town to be in better shape than some that will not be able to carry out planned projects following the ruling.

The town will continue to draft a consent resolution that must be passed by the Jackson County Board of Commissioners. The town has not presented the TAD to the board at this time.

Like Braselton, many municipalities in Georgia will have to scale back projects based on TAD-funding as a result of the ruling.

Mongeon said there are nearly 50 locations in Georgia, including Savannah and Augusta, where tax allocation districts were under consideration or already established prior to last week’s decision.

Mongeon said the widespread use of TADs signifies a need cities have to redevelop their blighted areas or inadequate infrastructure.

"This is a tool that was clearly working and has been in existence for 10 years," Mongeon said.

He said that through the end of 2006, TADs in Georgia communities have resulted in $3.3 billion of investment, half of which took place in the metro Atlanta area. Mongeon added that Georgia is now one of only a handful of states nationwide that prohibit school districts from participating in TADs.

The legitimacy of tax allocation districts has also come to the attention of some proponents of education who disapprove of funds originally meant for education being funneled into public infrastructure or redevelopment projects.

However, Mongeon said tax allocation districts have consistently increased local property tax revenues faster than areas without the districts. So, he said, tax allocation districts generate more revenue for school boards in the long run.

"The argument that children are harmed is not proven ... The facts show that communities and school districts need to invest in their tax base to insure long-term growth," Mongeon said.

Hall County schools Superintendent Will Schofield said the tax districts can be a great economic tool for schools, but should be considered carefully.

He said that TADs allow local governments to work together for the common good of a community, such as providing public infrastructure and tax revenue to support school systems.

"I think it’s quite clear when a school district is forward-thinking, where a TAD could be a good thing for school districts and municipalities. They may have the opportunity to have a generous return on an investment," Schofield said.

"I think to say all TADs are bad for schools would be a misrepresentation," he said.


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