The following overview was prepared by McKenna Long & Aldridge LLP.
Tax allocation districts in Georgia
What is a tax allocation district?
A tax allocation district, or TAD, is a tool used to pay for infrastructure and other improvements in underdeveloped or blighted areas so that the property becomes productive and enhances the surrounding neighborhoods. As property within the TAD is redeveloped and improved, the City receives new property tax revenues as a result of the increased property values. This new revenue is used to make improvements in the TAD without raising taxes or dipping into the City’s current tax revenues. The City’s investment in the TAD is repaid through improved properties that become permanent sources of increased property tax revenues.
How does a TAD work?
The City designates an area in need of redevelopment, adopts a redevelopment plan outlining how the area will be developed, and creates the TAD. The County Commission and School Board consent to including their share of the new tax revenues, or tax increment, in the TAD. The current value of the tax digest in the area is set as a base, and the City, County, and School Board continue to receive tax revenues on that value for the life of the TAD. As vacant and dilapidated properties are developed, the property values within the TAD increase. New tax revenues from this increased value are placed into a special fund to pay for redevelopment costs or to finance bonds issued to fund capital improvements.
How does a TAD differ from an enterprise zone?
When an enterprise zone is created, property taxes are fully abated for the first five years and then gradually increased for the next five years. Conversely, when a TAD is created, property owners continue to pay property taxes at the full millage rate levied by the City and County. With a TAD, the local governments continue to receive the same amount of property taxes collected when the TAD was created. Any incremental increase in property tax revenues resulting from growth in property values within the TAD is deposited into the special fund for payment of redevelopment costs.
Will creating a TAD cause a tax increase?
No. The property tax millage rate stays the same as before the TAD was created. In fact, the additional tax revenues received as a result of the increased value of newly developed or redeveloped property can relieve the tax burden on other properties. For example, if a vacant lot is developed into a retail center with loft housing, which has significantly higher value than the previous use, the new tax revenues will lessen the burden on other property owners. In addition, the new development in the TAD may stimulate other development in the surrounding area, adding more new property taxes to the City’s coffers. New retail development also generates increased sales tax revenues, which further benefit existing taxpayers.
Is there a limit on the number or size of TADs a City may create?
State law provides that a local government may not create another TAD when the total taxable value of the existing TADs plus the proposed TAD exceeds ten percent of the taxable value of the total digest.
Is the local government obligated to pay off the bonds if the tax increment is insufficient?
No. The Redevelopment Powers Law does not allow a pledge of the general taxing power of a city or county to repay the debt.
Do cities and counties in other states provide this type of financing?
In the 1960s and 1970s, federal and state governments began cutting back economic development programs that could be used to revitalize communities. Tax increment financing, or TIF, as it is known elsewhere, has become a popular tool to attract new business, invest in infrastructure improvements, and rebuild blighted areas. TIFs are used in 44 states to stimulate development and redevelopment. Illinois has over 400 TIFs – 120 in Chicago alone. The TIF program has been credited with providing the catalyst for the dramatic renaissance of downtown Chicago.
Portland, Oregon has created ten TIFs, including the Gateway Regional Center, a project that includes transportation improvements, new housing, mixed-use development, and public facilities in a 653-acre area covering three neighborhoods. Kansas City, Missouri also has used TIFs successfully both to facilitate site-specific developments and to stimulate development in large blighted areas. The Midtown Market Place project involved demolishing over 140 blighted properties within a 22-acre site and rebuilding a mixed-use development with office, retail, and residential elements.
How have TADs been used in Georgia?
Cities and counties in Georgia are beginning to use TADs to stimulate economic redevelopment. As of mid 2006, a total of 17 TADs had been created in the metro Atlanta region from Acworth to Clayton County. Highlights include the following:
Atlanta -- Atlantic Steel: The City has issued two series of TAD bonds (2001 and 2006) to fund infrastructure for the Atlantic Station mixed use development on a former brownfield site west of Midtown. The Developer has master planned the site for approximately 6 million sq. ft. of office space, over 5000 residences, and 2 million square feet of retail and entertainment space and create up to 30,000 jobs. So far, vertical developers have built and opened approximately 2.9 million square feet of mixed use development including a 528,000 square foot office tower which houses the southern regional headquarters of Wachovia Bank, a 100 room boutique hotel, an 811,000 square foot urban retail center, a 366,000 square foot IKEA and 1,060 apartments, townhomes, condominium, and single family homes. The infrastructure needs funded from the Series 2001 and 2006 TAD Bonds include environmental remediation and site development, design, construction and installation of utilities, parking facilities and street, sidewalks and other public works.
Atlanta -- Eastside: In 2005, the City issued $47 million in TAD Bonds for this redevelopment area which incorporate most of downtown Atlanta east of Peachtree Street and the surrounding depressed neighborhoods. This TAD includes diverse developers and projects such as the Capitol Gateway Development, Sweet Auburn Village and TWELVE Centennial Park, who will develop over two thousand apartments and condominiums, office buildings, retail space, hotels, and cultural venues. TAD Bonds were used to pay for environmental remediation, wastewater and stormwater management, streetscapes and sidewalks, utility upgrades, parking structures and other infrastructure costs.
Atlanta -- Westside: This TAD encompasses the rest of downtown Atlanta west of Peachtree Street and includes a variety of projects and developers such as the World of Coca Cola Development, the Historic Westside Village Development, Allen Plaza, and the Winecoff Hotel. The $80 million in TAD Bonds issued in December 2005, are being used to support the redevelopment of vacant lots and dilapidated buildings by reimbursing the various retail, office, residential and tourism developers for environmental remediation, preservation of significant architecture and building façades, streetscapes and sidewalks, utility upgrades, parking structures and other infrastructure costs.
Atlanta -- Perry/Bolton: This TAD was created to fund infrastructure costs of redeveloping a blighted public housing project into a mixed income community of 700 apartments, 1200 single family homes, a town center, and a public golf course on top of a former city landfill. Bonds are expected to be issued early in 2007
Acworth -- Lakeside: The City has just issued $7 million in TAD bonds to clean up a landfill/brownfield site to permit construction of a $40 million shopping center.
Atlanta -- Princeton Lakes: The City issued $21 million in TAD bonds in March 2006 for a 450-acre mixed use and residential development in southwest Atlanta adjacent to the City of East Point’s Camp Creek MarketPlace. Princeton Lakes will include 378,000 square feet of retail, 102,000 square feet of office and over 1,500 residences including apartments, townhomes and single family detached homes in a variety of styles and price ranges. TAD Bonds were used to pay for infrastructure needs like waster and sewer improvements, streetscapes and a new multi-lane parkway.
Atlanta - Beltline: In December 2005 the City of Atlanta created its sixth TAD, known as the Beltline TAD, which is a 22-mile loop of historic railroad tracks that circles the downtown area. The City intends to issue an initial series of bonds for the Beltline TAD to spur economic development and enhance mobility in 45 in-town neighborhoods with parks, transit and trails and affordable housing. The City is presently in proceedings to validate $35 Million in Bond Anticipation Notes to begin projects in the TAD.
East Point -- Camp Creek: The City of East Point issued $22 million in TAD bonds in 2002 to finance infrastructure needed for the Camp Creek MarketPlace, a 700,000 sq. ft. retail center that opened in July 2003, and a 5 million square foot business park under development by Duke Realty. The MarketPlace, which was the first significant retail development in South Fulton County in over 30 years, has become a community gathering place and is setting national sales records for many of its businesses.
Marietta: In 2005 the City issued $8.4 million in TAD obligations for the City’s Center City South Renaissance TAD, designed to provide streets, sidewalks, infrastructure and land assembly costs for several residential developments in the downtown area, replacing substandard and aging housing projects.
Works in progress: In Cobb County, Marietta and Smyrna have created TADs to provide funding for various new redevelopment projects. Clayton County created a TAD to provide infrastructure financing for a mixed-use development in the Ellenwood area. In late 2004, two TADs were approved in DeKalb County and additional one in East Point, for which bonds have not yet been issued. In late 2006 the City of Holly Springs in Cherokee County intends to issue bonds for its New Town Center TAD. The cities of Gainesville, Kennesaw, Rome, Union City and Woodstock are also actively working to create TADs before the end of 2006.
For more information, call 770-794-5716.
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