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If you ever want to liven up a dull social affair, toss out for discussion the concept of offering tax breaks as a means of spurring development. It’s a topic on which everyone seems to have an opinion.
For those who believe in reducing taxes as a means of promoting growth, the practice of doing so is the only way to compete in the cut-throat world of economic development, where other governments are offering the same sorts of incentives and fighting for the same developments.
For those opposed to the idea, the practice is punitive to existing property owners who are carrying a full load of taxes and are not benefitting from any sort of government largesse. And, it sometimes means more growth and change than some in a community are ready to see happen.
Tax reductions or deferments of one sort or another have been a part of some of the biggest economic development news ever in Georgia. They also have been used for some development busts that have resulted in scandal and criticism.
The difference can be found in how tax reduction programs are handled by local officials and the degree of stewardship of public money shown by those authorized to reduce taxes in order to bring new jobs, residential areas, industries and businesses into a community.
Gainesville is starting the process to end special tax considerations for development in its midtown district through the tax allocation district program, which has been an option for communities in Georgia since 1985.
TADs allow a governing entity to identify a specific geographic area within its boundaries for which it can provide certain tax reductions in return for work done by developers that is of value to the general public, such as expansion of sewer lines or addition of parking spaces. Those projects approved by a TAD oversight committee pay their normal taxes, then have a portion refunded for a set amount of time.
Whether you believe tax reductions to bring about development are a good idea or not, it’s hard not to recognize the success of the TAD program in changing the face of downtown Gainesville.
Over a period of 16 years, some $250 million has been invested in the downtown and midtown areas through projects for which TAD tax incentives were approved. Projects such as Gainesville Renaissance, Solis, Bourbon Brothers and The National will chart the path for the future of the city, and all have had some degree of TAD support.
The value of those properties will increase year after year, rising far above the tax levy on the properties they are replacing. In addition, they will spark other sorts of taxes — retail taxes, taxes collected from tourists, hotel/motel taxes, etc. The tax incentives offered for development will quickly be dwarfed by the increased values of the properties for which the incentives are issued.
Would developments of similar quality have come to Gainesville without tax incentives? Possibly, though other communities offering such incentives would certainly have been stiff competition for projects like those.
Would the downtown area have seen so much change in such a short period of time without TAD? Probably not.
The changing face of downtown has not happened by accident. The Gainesville 2030 Comprehensive Plan, prepared in 2012, sets out a plan for the future of the city. It discusses using the downtown TAD area for multi-family and mixed used projects that take advantage of public-private partnerships. It also sets “urban redevelopment” as a goal. Those strategies are being met.
That said, it is time to let the downtown TAD sunset. Under the law, the city could keep the TAD in place for 25 years, but the fact it is being ended soon is attributable to its success. A new downtown area will continue to grow and develop off the seeds that have been planted, and as the incentives which have been improved run their course, tax funds will be paid at normal rates to the city school system and city government.
The city also has a TAD district established for the Lakeshore Mall area which will remain active. The hope is that TAD-supported projects will breathe new life to that part of town, as it has downtown.
Administered properly, tax incentives are a valuable tool for a city hoping to renovate, revitalize and boost the local economy. The downtown TAD has done its job, and the city will continue to benefit from it for the next few years as the program is allowed to “sunset.”