Sembler + Tax Abatement = Taxpayers Lose

June 14, 2009

After spending some time crunching the numbers this weekend, this simple equation sums up the conclusion I have reached. And I’m not the only one reaching this conclusion.

The DeKalb Development Authority will meet this Thursday, June 18, at 8:00 a.m. at 150 East Ponce de Leon Avenue, Suite 400, in Downtown Decatur. The meeting time and location isn’t posted anywhere on the Internet. You have to call the county to get it.

The Sembler tax abatement proposal is on the agenda. There is no word yet as to whether a final vote on the tax abatement will occur at this meeting. At a minimum, it will be discussed.

Thank you to everyone who attended last Monday’s community meeting about the tax abatement. It is estimated that more than 250 people attended. I also want to thank State Rep. Fran Millar for serving as the on-the-spot emcee for the meeting, Commissioner Jeff Rader for his thoughtful remarks and for his efforts to draw the DeKalb County Commission’s attention to the shortcomings of the tax abatement, and Jeff Fuqua of the Sembler Company for taking the time to explain his company’s position to a skeptical public.

I believe the public is right to be skeptical. I have reviewed the KPMG analysis of the 20-year tax “benefit” that Sembler and the Development Authority are claiming the county government and the school system will receive if the 20-year tax abatement is granted. Courtesy of Jim Walls’ “Atlanta Unfiltered” blog (more on Atlanta Unfiltered below), you can review the document containing the KPMG analysis here (click for link).

The KPMG numbers indicate to me that the proposed Sembler tax abatement will REDUCE the county government’s and school system’s operating funds, if you subtract from the padded totals (1) the revenue that the county government and school system will receive whether or not the tax abatement is approved, and (2) the revenue that doesn’t defray any county or school operating costs. Please take a look at the somewhat difficult-to-read page 3 of the KPMG document, and I’ll show you what I mean.

First, the analysis counts one revenue source that doesn’t go toward operational (instructional) costs of the school system, but instead goes only toward school construction:

ESPLOST Revenue = $4,098,287

Also, the analysis counts one revenue source that doesn’t go to the county government or school system at all, but instead goes to MARTA:

MARTA Sales Tax = $40,982,873

In addition, the analysis counts two revenue sources that will go to the county government and school system whether or not the tax abatement is approved, because the buildings that would generate these revenues are at or near completion:

Property Tax on Non-Abated Buildings = $45,594,544
Property Tax on Personal Property of Renters = $5,761,440

None of the above sources should be counted as part of the tax “benefit” to county government and school system operations. The following sources, however, should be counted:

HOST Revenue = $36,024,362
Property Tax on Personal Property of Retailers = $5,817,997
Business Licenses = $3,185,756

When you add these three numbers together, the total of the actual tax “benefit” is $45,028,115. From that amount, the following three amounts must be subtracted:

Value of the Tax Abatement = ($51,699,253)
Cost of County Services = ($11,321,760)
Cost to Educate Children Living in the Project = ($10,990,000)

The result is a NET LOSS to the county government and school system of $28,982,898 over the 20-year life of the tax abatement. Even if you assume that the “cost of county services” and the “cost to educate” arise only from the non-abated portion of the project (which is not likely), and add those amounts back into the total, the result is still a net loss.

Worse yet, this doesn’t account for Commissioner Rader’s point at last Monday’s meeting that many of the “new” tax revenues claimed in the analysis are actually existing tax revenues that are being shifted to the Town Brookhaven project from elsewhere in DeKalb County.

Granting this tax abatement is bad policy. It will place upward pressure on your property taxes. That problem will be amplified the more often the Development Authority decides to give away the shop to developers whose projects are victims of the real estate market.

Don’t just take my word for it. Jim Walls, a former AJC investigative reporter who now runs his own blog, Atlanta Unfiltered, did his own math and wrote an article reaching a similar conclusion, albeit with a lower price tag. You can read Jim’s analysis here (click for link).

If you’re available this Thursday at 8:00 a.m., I encourage you to join your neighbors at the Development Authority meeting. It is crucial to show the non-elected, unaccountable Development Authority that the community is watching.

Leave a Comment » | Brookhaven, DeKalb County, Fiscal Accountability, Property Taxes, Sembler | Permalink
Posted by Mike Jacobs

Sembler Tax Abatement Update

June 5, 2009

Thank you to everyone who responded to my e-mail message last week regarding the Sembler tax abatement proposal. I intend to reply to each of your messages personally, although that will take some time.

Most responded in opposition to the tax abatement. A handful supported it.

This is not about “standing in the way of progress,” as a couple of people characterized it. It’s about transparency and accountability in the way our county and school taxes are managed. It’s also about a very serious and real concern that throwing open the barn doors to giving property tax abatements to developers whose projects are caught in the doldrums of the real estate market ultimately will place upward pressure on the tax burden of DeKalb County citizens.

This e-mail is divided into categories to make it easier to read. It also includes a call to action at the end of the message.

COMMUNITY MEETING ON JUNE 8

There will be a community meeting regarding the Sembler tax abatement proposal on Monday, June 8, at 7:00 p.m. in the Fellowship Hall of Chamblee United Methodist Church, 4147 Chamblee Dunwoody Road.

We will discuss the mechanics of the tax abatement and ways that you can make sure you have a voice in whether it goes forward. In addition, Sembler will make a 15-minute presentation to give you their perspective on the proposal.

John Woodham, a lawyer who is fighting similar transactions in Fulton County, will not be speaking at the meeting. He had been invited to speak, but then last week the AJC and Fulton County Daily Report reported that he is facing sanctions from a Fulton County Superior Court judge after some questionable conduct. I promptly removed him from the meeting agenda.

DEVELOPMENT AUTHORITY MEETING ON JUNE 18

The next meeting of the DeKalb Development Authority is Thursday, June 18, at 8:00 a.m. Stay tuned for more information. There is no word yet as to whether the Development Authority will make a decision on the Sembler tax abatement proposal at this meeting.

BANKRUPTCY CLARIFICATION

I want to clarify that the Development Authority is never “on the hook” for any failure to repay the revenue bonds that would be issued to finish construction of the Town Brookhaven project. This is because Georgia law specifically provides that revenue bonds are never an obligation of the governmental body that issued the bonds.

With regard to bankruptcy, the point I was making in last week’s message (click for updated version) is that bankruptcy law gives a tenant such as Sembler Bell Brookhaven, LLC the unilateral power to reject its unexpired lease with a landlord such as the Development Authority, thus abandoning the failed project to the Development Authority.

REVENUE PROJECTIONS TOO ROSY?

At the June 8th community meeting, you will see tax revenue projections that appear to indicate the Town Brookhaven project will generate more tax revenues for the county and the school system over the 20-year life of the tax abatement than will be lost as a result of the abatement.

Caveat emptor. Buyer beware.

Like any projections, these tax revenue projections are based upon assumptions that might not pan out. You should make up your own mind about them, but remember that Sembler and the Development Authority are not infallible. Just last week, Dr. Eugene Walker, the Chairman of the Development Authority, e-mailed some of my constituents this gem of a prediction:

“It is estimated that this project will create 1,000 new jobs in the County, which is substantial particularly during these tough economic times, but this factor (I am surprised) does not appear to be receiving very much attention. If you conservatively estimate an average salary of $40,000 per job, that’s $40 million in wages pumped back into the local economy. Every year!”

Before assessing the “conservatism” of Dr. Walker’s estimate, it’s important to bear in mind that Town Brookhaven primarily includes retail stores and restaurants that are intended to divert business away from stores and restaurants located in Buckhead and Perimeter Center. To be fair, there is one small to mid-sized company considering the project as one of a couple of places to relocate its headquarters. However, I still wouldn’t call “1,000 new jobs” at “$40,000 per job” a conservative estimate.

Furthermore, many of the tax revenues included in the projections are from dedicated sources that are not used for providing county government services or covering instructional costs. For example, many of the projected tax revenues come from the seven-cent sales tax. Out of every seven pennies of sales tax, four pennies go to the state government, one penny goes to MARTA, one penny is for the five-year SPLOST that goes toward school construction (not school operations), and one penny goes toward the Homestead Option Sales Tax (HOST). Only that final penny goes to the county government. None of these funds are used directly by the Board of Education for school operations.

MY POSITION ON THE TAX ABATEMENT

As a state legislator, I have a role in writing the laws that govern the Development Authority.

Transactions like the Sembler tax abatement should be subject to a requirement that the elected bodies which might lose tax revenues (here, the Board of Commissioners and the Board of Education) must approve the tax abatement for it to take effect.

This is particularly true where the tax abatement would be granted after the developer already has broken ground on the project and is seeking to compensate for assumptions about the real estate market that proved to be incorrect.

State law gives the non-elected Development Authority the sole power to make this decision. I intend to change that.

Some, but not all, PILOT-type bond deals already have been made subject to a local government approval requirement. That was done in House Bill 63 (click for information), which passed the General Assembly this year. The same approval requirement also applies to those now-infamous Tax Allocation Districts (TADs).

The Development Authority is comprised of individuals who bear no direct responsibility to you, the voters and taxpayers of DeKalb County. Your elected officials should be making these decisions, not an unaccountable board that meets at 7:30 or 8:00 in the morning.

As I mentioned last week, Sembler’s tax abatement will have to be approved in a bond validation proceeding in DeKalb County Superior Court. DeKalb citizens are entitled to make a legal objection in that proceeding. Thus far, I have come up with at least one objection worth making.

There has been some chatter that Sembler and the Development Authority might claim that they are entitled to “bootstrap” their new tax abatement proposal to the Superior Court’s approval of a different abatement that was obtained last year between Christmas and New Year’s Day. I don’t see how that is legally permitted, because the Superior Court’s prior judgment in favor of Sembler and the Development Authority is a final, binding judgment as to “all questions of law and of fact.” They cannot now change the facts and claim to be covered by the same Superior Court judgment. I will seek an injunction from the Superior Court if they try to do this.

This is not my first time at the bond validation rodeo (click for information about the Arts Center bond validation). I am willing to forgo making any formal objection if Sembler and the Development Authority will do the right thing and allow the elected officials on the Board of Commissioners and the Board of Education to make the final decision on their tax abatement.

EUGENE WALKER’S CONFLICT OF INTEREST

I also want to clarify that I do not blame Sembler for looking after its business interests.

I do, however, believe that Gene “$18K” Walker should be made to understand the intractable conflict of interest between his dual service as Chairman of the DeKalb Development Authority and as a member of the DeKalb County Board of Education.

The public should call or e-mail every other member of the Board of Education and ask them to insist that Dr. Walker allow them to vote on whether the Sembler tax abatement will happen.

Word is spreading that CEO Burrell Ellis may insist that the Board of Commissioners be given the right to vote on the Sembler tax abatement proposal. He could make this happen because he appoints the members of the Development Authority.

Shouldn’t the Board of Education have that same right? After all, the school system could stand to lose more property tax revenues than the county if these tax abatements are allowed to go forward.

Both the Board of Education and the Board of Commissioners should have the right to vote on the Sembler proposal. If Dr. Walker disagrees with that, then he should have to answer to his colleagues on the Board of Education for his refusal to let them vote. He has sufficient power and influence over the affairs of the Development Authority to hold up the tax abatement until the Board of Education weighs in.

You can make that happen. Please contact the members of the Board of Education and ask them to ask Dr. Walker to let them vote.

You can find their contact information here (click each member’s name for a link to their contact information):

Tom Bowen, Chair
Zepora Roberts, Vice Chair
Jim Redovian, District 1
Don McChesney, District 2
Sarah Copelin-Wood, District 3
Paul Womack, District 4
Jay Cunningham, District 5
Pamela Speaks, District 8

If the above links don’t work, you can find contact information for the Board of Education at www.dekalb.k12.ga.us/board/members/.

Leave a Comment » | Brookhaven, Community Events, DeKalb County, Fiscal Accountability, Legal Issues, Property Taxes, Sembler | Permalink
Posted by Mike Jacobs

Sembler’s Big Brookhaven Bailout

May 27, 2009

The proposed Sembler tax abatement for its “Town Brookhaven” project needs to be stopped.

One thing you can do to stand in its way is to attend an upcoming community meeting to be held on Monday, June 8, at 7:00 p.m. in the Fellowship Hall of Chamblee United Methodist Church, 4147 Chamblee Dunwoody Road.

At this meeting, we will discuss possible legal strategies for challenging this latest scheme foisted on the public by Sembler and the non-elected, unaccountable DeKalb County Development Authority. We also will explain the mechanics of the tax abatement proposal.

At the May meeting of the Development Authority, Sembler made its pitch for the tax abatement and dismissed the opposition to the proposal as coming from a small handful of discontented citizens. If the e-mails I am receiving from constituents are any indication, I’ll bet what Sembler is dismissing as a small handful of discontents will look a lot more like a packed room of unhappy taxpayers at the June 8th meeting.

Furthermore, attendance at this meeting should not be limited to those who live in the immediate vicinity of the Town Brookhaven project. Citizens across DeKalb County should be concerned about the proposal. Please forward this e-mail message and ask your neighbors to attend. Here’s why:

The deal Sembler is seeking is known as a PILOT bond deal. PILOT is short for “payments in lieu of taxes.” In this deal, Sembler will convey to the Development Authority ownership of large portions of its mixed-use Town Brookhaven project. The Development Authority will float bonds to finish construction of the project. The Development Authority also will lease the project back to Sembler. Under this lease, Sembler will make rent payments to the Authority sufficient to repay the principal and interest on the bonds.

Development Authority bond deals must be confirmed in DeKalb County Superior Court. Sembler and the Development Authority already have obtained Superior Court approval for a smaller PILOT bond deal. That deal was rushed through the Superior Court at a time the public was unlikely to notice, between Christmas Day and New Year’s Day, in 2008. Sembler now wants a bigger tax abatement and is seeking to abandon its earlier, less lucrative deal. As I discussed in this week’s Dunwoody Crier (click for link), the “holiday gift” that the Development Authority gave Sembler last December could furnish a legal basis for challenging Sembler’s new, more costly proposal.

This PILOT bond deal results in a property tax abatement because the Development Authority, a government entity, will own the property and therefore the property cannot be taxed. The value of this tax abatement is estimated to be $51 million over 20 years.

The direct costs of educating the children who will live in Town Brookhaven and providing county services to the project will be borne by families and small businesses across DeKalb, the same families and small businesses who are struggling to make ends meet in this tough economy.

By contrast, Sembler may no longer be subject to the risks of doing business in a tough economy. As a result of Sembler’s proposed PILOT deal with the Development Authority, those risks could be transferred to the public.

The Town Brookhaven project isn’t owned by Sembler the parent company. It’s actually owned by a “bankruptcy-remote” entity known as Sembler Bell Brookhaven, LLC. The sole purpose of Sembler Bell Brookhaven, LLC is to develop and operate Town Brookhaven. It doesn’t own any other property.

If the commercial real estate market remains as bad as it is right now (click for AJC article) and Town Brookhaven flops, Sembler Bell Brookhaven, LLC could file for bankruptcy. Bankruptcy would afford Sembler Bell Brookhaven, LLC the opportunity to reject its unexpired lease with the Development Authority. That would leave the Development Authority the owner of a failed project and abandon the Authority to sort things out with the bondholders. The deal probably does involve insurance to cover the bondholders’ losses, and could require security to allow the bondholders to make a recovery. However, these safeguards don’t change the fundamental concern that Sembler is socializing the risks of its project.

Last but not least, there’s the unique ethical dilemma of Dr. Eugene Walker, who serves in dual roles as the Chairman of the Development Authority and a member of the DeKalb County Board of Education. He was first elected to the Board of Education in 2008 with the help of $18,000 in campaign contributions from Sembler executives, employees, and their spouses. You can view Dr. Walker’s campaign contribution disclosure reports here and here (click for links to two separate reports).

In a recent Dunwoody Crier article (click for link), Dr. Walker credited his “platform of economic development” for carrying him to victory in his Board of Education campaign. In the same vein, I suppose he might explain the $18,000 in campaign contributions as Florida-based Sembler’s way of showing special concern for the children of DeKalb County.

You should feel free to e-mail drepwalker@yahoo.com and let Dr. Walker know whether you think he should be involved as Chairman of the Development Authority in making a decision on Sembler’s request for a PILOT tax abatement. Unlike the other members of the Development Authority (click for more information), who get to vote to sock the taxpayers with Sembler’s $51 million tax bill without having been elected to anything, Dr. Walker is now an elected member of the Board of Education who should hear directly from DeKalb citizens.

Other developers are waiting in line behind Sembler to secure their own tax abatements from the Development Authority. If Sembler succeeds, the floodgates will be open. It’s a snowball effect that ultimately will cause county officials to claim they need to raise our property taxes to make up for lost tax revenues.

Somebody will have to pay for the services consumed by the new projects. You and I are those somebodies.

I hope to see you on June 8th.

1 Comment | Brookhaven, Community Events, DeKalb County, Fiscal Accountability, Legal Issues, Property Taxes, Sembler | Permalink
Posted by Mike Jacobs

Brief Submitted in Arts Center Appeal

May 12, 2009

You may remember that the DeKalb County Development Authority and the DeKalb County Government chose to disregard your right to vote on a bond transaction to cover $4.3 million in cost overruns for an expensive new “performing arts and community center” elsewhere in the county. I authored the 2007 law that gives you the right to vote on the specific type of bond transaction that the county and the Development Authority were seeking to effectuate.

I challenged the proposed bond transaction in DeKalb County Superior Court for failure to conduct a referendum. The Superior Court upheld the referendum requirement and declined to approve the bond transaction. Click here for an article I wrote after the Superior Court issued its ruling.

The county and the Development Authority appealed that ruling to the Georgia Supreme Court. If you’re interested, please click here to read the legal brief I submitted to the Supreme Court last week arguing in support of the Superior Court’s ruling. This brief is saved as a PDF file, and Adobe Acrobat Reader is required to view it.

The brief took a full week to prepare, but was necessary in order to preserve your right to vote on how public debt is incurred and how your tax dollars are spent.

Leave a Comment » | DeKalb County, Fiscal Accountability, Legal Issues | Permalink
Posted by Mike Jacobs

A Victory for Taxpayers

December 1, 2008

I am pleased to report some success in the ongoing fight to require DeKalb County to ask for your vote before spending your tax dollars to repay the principal and interest on new bonds for expensive new county facilities.

Judge Daniel M. Coursey, Jr. of the Superior Court of DeKalb County has ruled that legislation I passed in 2007, House Bill 181 (click for more information), complies with the Georgia Constitution and does indeed require a referendum for the $4.3 million in additional bonded debt that the DeKalb County Government and the DeKalb County Development Authority were planning to issue to cover the over-budget construction costs for a new performing arts center on Rainbow Drive in South DeKalb.

You can read more about Judge Coursey’s decision in these articles in the AJC and DeKalb Champion and on GoDeKalb.com (click link to read each article).

The cost of the performing arts center has jumped from $11 million to $18 million in the past year. That’s $18 million of your tax dollars, plus interest, just to build the facility. The county isn’t sure how it is going to fund the ongoing operations of this facility once it opens its doors.

To finance the amount this project has exceeded its original construction budget, the county was seeking to use a clever bond financing scheme. They proposed to have the DeKalb Development Authority (a quasi-governmental entity not accountable to voters or taxpayers) float $4.3 million in new bonds. After construction, the Development Authority would own the arts center, lease it to the county, and the county would use our tax dollars to repay the principal and interest on the bonds as rent payments to the Development Authority.

House Bill 181 subjects this type of bond financing scheme to a referendum requirement. Rather than using one of the election dates that have come and gone in 2008 to propose a ballot question and ask for your permission to issue these bonds, the county government and the Development Authority decided to disregard your right to vote on the bonds and challenge HB 181 in the courts. As an attorney, I have been donating my legal services to make sure this law is upheld.

I anticipate that the Development Authority and its high-priced lawyers from a major Atlanta law firm will appeal Judge Coursey’s decision to the Georgia Supreme Court. I will be making an open records request to find out exactly how much the Development Authority is paying its lawyers to challenge HB 181 and from what source these pricey legal fees are being paid.

It would be both ironic and appalling if the county is spending your tax dollars to deny your right to vote on how your tax dollars are spent.

2 Comments | DeKalb County, Fiscal Accountability | Permalink
Posted by Mike Jacobs

It’s Your Credit Card, You Should Decide

September 22, 2008

You’ve probably never seen it. You’ll probably never use it. However, the cost of building the county’s new performing arts center on Rainbow Drive in southern DeKalb jumped from $11 million to $17 million this past year. That’s $17 million of your tax dollars just to build the facility. The county isn’t sure how it is going to fund the ongoing operations of this performing arts center once it opens its doors.

Decisions like this help explain why your county property tax bill increases every year. Decisions like this also help explain why county spending has jumped 40 percent in the past eight years, far outpacing DeKalb’s 10 percent population growth during that same period.

To finance the amount this project has exceeded its original budget, the county is proposing to use a clever bond financing scheme. They propose to have the DeKalb County Development Authority (a quasi-governmental entity not accountable to voters or taxpayers) float an additional $4.3 million in bonds. After construction, the Development Authority will own the performing arts center, lease it to the county, and the county will use our tax dollars to pay the principal and interest on the bonds as rent payments to the Development Authority.

In 2007, I authored and the General Assembly passed House Bill 181, which subjects this type of bond financing scheme to a referendum requirement. DeKalb taxpayers will be paying the principal and interest on the arts center bonds for years to come. The premise behind HB 181 is simple: Before using your credit card, the county should ask your permission in a referendum.

The DeKalb County Government and the Development Authority have decided to disregard your right to vote on these bonds and challenge HB 181 in the courts. As an attorney, I am donating my legal services to make sure this law is upheld.

The case is currently in DeKalb County Superior Court and probably will be appealed to the Georgia Supreme Court. Between writing briefs and making in-court arguments, the donated time will equal at least two or three weeks. It is well worth every minute to preserve your right to vote on how the county uses your tax dollars.

Leave a Comment » | DeKalb County, Fiscal Accountability | Permalink
Posted by Mike Jacobs

It’s All About Priorities

March 24, 2008

DeKalb County’s police force is woefully understaffed and underpaid.  Currently, DeKalb has 1.4 officers per 1,000 residents.  The national average is 2.7 officers per 1,000 residents.

As a result of DeKalb’s inadequately staffed police department, wait times for an officer to arrive at the scene of an incident that is not a dire emergency often can exceed 30 minutes.

Commissioners Burrell Ellis, Elaine Boyer, Jeff Rader, and Kathie Gannon recently sponsored a sensible proposal to boost pay for sworn officers by 8% and add 127 new officers to the DeKalb County Police Department.  Their proposal would be funded by trimming non-public safety functions of the county government by 1.25%.

Commissioners Larry Johnson, Lee May, and Connie Stokes voted against that proposal, saying they favored a property tax increase by way of a millage rate hike in order to fund the police positions and pay raises.

The Ellis-Boyer-Rader-Gannon proposal prevailed on a 4-3 vote.  However, CEO Vernon Jones vetoed it, claiming that he was carrying out “the will of the people” in supporting the Johnson-May-Stokes proposal for a property tax increase.

The will of the people???  On what planet?

As Commissioner Boyer points out:  “Since Jones became CEO, the county’s budget has grown more than 54 percent while the county’s population has grown about 29 percent.”  Moreover, a recent audit of county contracting practices uncovered a troubling pattern of structuring no-bid contracts in amounts just below the competitive bidding threshold to the same vendors for the same services over and over and over again.  As a result, our county government has paid millions of dollars to vendors in violation of competitive bidding safeguards.

An attempt to override the CEO’s veto could occur as early as this Tuesday’s county commission meeting.  In order to override the CEO’s veto, five votes are required.  To reach five votes, one additional vote is needed from among Commissioners Johnson, May, and Stokes.

Please call or e-mail these commissioners today.  Their contact information is as follows:

Commissioner Larry Johnson, District 3

larryjohnson@co.dekalb.ga.us, 404-371-2425

Commissioner Lee May, District 5

lmay@co.dekalb.ga.us, 404-371-4745

Commissioner Connie Stokes, District 7

conniestokes@co.dekalb.ga.us, 404-371-3053

County spending has grown in excess of the rate of population growth plus inflation.  Meanwhile, important areas such as public safety have not kept pace.  The Ellis-Boyer-Rader-Gannon plan would rein in the county budget while setting the right priorities for our community.

Leave a Comment » | DeKalb County, Fiscal Accountability, Public Safety | Permalink
Posted by Mike Jacobs

A TAD More Than We Bargained For

March 8, 2008

Tax allocation districts, or TADs for short, have become a popular infrastructure financing mechanism for Georgia’s county and city governments.

A TAD relies on the annual property tax increases which result from year-to-year increases in assessed property values.  These annual property tax increases from properties located inside a TAD are captured and applied to infrastructure improvements such as roads, sidewalks, sewer lines, and parks within the boundaries of the TAD.

Originally, TADs were used as an incentive to attract developers to redevelop blighted or economically distressed areas.  Such property does not have much value in the first place.  Thus, the county or city gives up some of the early increases in tax revenues to help improve blighted or economically distressed areas and attract development into these areas.  The benefit is that the county or city receives significantly improved tax revenues later, after the blighted or economically distressed areas have been improved and property values have increased.  Atlantic Station and the BeltLine are examples.

Some local governments have gone hog wild with TADs, using them in areas that are not blighted or economically distressed, and using them to subsidize new development where new development would occur anyway.  Personally, I believe that the North Druid Hills and Briarcliff TAD, an area where the median home sale price is greater than $410,000, falls into this category.

Another problem with a tax allocation district is that, if the board of education consents, the annual increases in school property taxes that result from year-to-year increases in assessed property values can be applied to infrastructure improvements inside the TAD.

School taxes are paid for educational purposes, and are not paid to subsidize new infrastructure and development projects, however meritorious these projects might be.  If not used for educational purposes, there is a compelling argument that school taxes should not be collected in the first place.  County and city governments already receive their share of our tax dollars to fund infrastructure improvements, after all.

In a unanimous decision handed down last month, the Georgia Supreme Court agreed.  The Court found that the use of education taxes for TAD infrastructure projects violates the Educational Purpose Clause of the Georgia Constitution, which provides as follows:  “School tax funds shall be expended only for the support and maintenance of public schools, public vocational-technical schools, public education, and activities necessary and incidental thereto, including school lunch purposes.”

I believe the Supreme Court got it right.  However, efforts are afoot in this year’s General Assembly to overturn this decision of the Supreme Court by amending the Georgia Constitution.  I do not support these efforts, and have co-sponsored House Bill 1215 to remove all references to education taxes from the law that created TADs.

Taxpayers deserve truth in taxation.  We deserve to know our school taxes will be used for educational purposes.  Otherwise, we deserve our money back.

A version of this post was published in the February 27 edition of the Dunwoody Crier.

1 Comment | Fiscal Accountability | Permalink
Posted by Mike Jacobs

DeKalb’s Costly Shenanigans Should Be A Crime

January 27, 2008

Audit reports aren’t what I would call “pleasure reading,” but they are necessary reading for elected officials like me who care about the way your tax dollars are spent.  You can learn a lot from an audit report.  For example, consider this passage from a June 25, 2007 KPMG audit report on the spending practices of the DeKalb County Government:

“We reviewed the purchasing and contracting procedures relative to Information System (IS) consulting services.  We noted that there were numerous purchases that were required to be competitively bid in accordance with the County’s purchasing policy, that were not bid.  The County’s policy states that purchases in excess of $50,000 should be competitively bid except if there is a Georgia State Contract or Federal Contract covering such purchase.  The County’s Purchasing and IS Department did not solicit competitive bids on several purchases in excess of $50,000 when there were no applicable Georgia State or Federal Contracts.  In addition, the County’s purchasing policy requires the Board of Commissioners’ approval when a total contract exceeds $100,000.  Relative to the IS Department’s use of consulting services, on numerous occasions no such Board of Commissioners approved contracts could be located.”

That’s a mouthful, but here is what it means in plain English:  There is a state law that requires the DeKalb County Government to perform a competitive bidding process whenever the value of goods or services it is seeking to obtain exceeds $50,000, and to obtain approval by majority vote of the county commission whenever the value of goods or services it is seeking to obtain exceeds $100,000.  For certain technology consulting contracts, the county administration has been doing neither.

That’s bad news, but it gets worse.  DeKalb County officials, including the county’s highest ranking non-elected administrator, Richard Stogner, have been approving purchases in amounts like $49,000 — just below the competitive bidding threshold — to the same vendors for the same services over and over and over again.  These purchases are intentionally designed to skirt the competitive bidding and commission approval requirements.

In fact, county officials have paid a select group of vendors more than $22 million in flagrant violation of competitive bidding safeguards.  These safeguards are in place to ensure that taxpayers receive the best services at the lowest possible cost.  They are designed to thwart the practice of giving high-priced sweetheart deals to favored vendors.

I was astonished to learn that violating the competitive bidding and commission approval safeguards is not a crime.  That’s why I have drafted, introduced, and am planning to work toward passage of House Bill 922 during this year’s legislative session.  HB 922 will make this official misconduct a misdemeanor, punishable by a fine, jail time, or both.

The Audit Committee of the DeKalb County Commission, chaired by Commissioner Elaine Boyer, is investigating the failure by county administrators to comply with state competitive bidding laws.  As is the case with many things in our “strong CEO” county government, there is only so much our elected commissioners can do to rebuke county administrators who have run amok.  Thanks to HB 922, however, any future efforts to skirt competitive bidding safeguards can be prosecuted as a crime and appropriately handled as a fraud on the taxpayers.

A version of this post was published in the January 23 edition of the Dunwoody Crier.

Leave a Comment » | DeKalb County, Fiscal Accountability | Permalink
Posted by Mike Jacobs

New Year’s Diet for Bloated Budgets

January 14, 2008

Each year, the General Assembly is charged with setting a budget for our state government.  In fact, if we do nothing else during the annual legislative session, passing a budget is the one thing we absolutely must do.  It is mandated by the Georgia Constitution.

Georgia’s Fiscal Year 2008 budget exceeded $20 billion, and the FY 2009 budget we will consider during the legislative session that begins this Monday will be even larger.  These are your hard-earned tax dollars.

When budgeting for our households, we think about every penny we spend.  And that’s what the state government does with your tax dollars, right?

Wrong, at least until this year.

In the past, state budget-making has been governed by bureaucratic inertia.  Each department of the state government, through the Governor, submits an annual budget request to the General Assembly.  Previously, each department’s new annual request has been a carbon copy of the prior year’s budget, with some changes here and there that usually amount to nipping and tucking at the margins.  Consequently, the bulk of each department’s budget has been carried over from year to year to year.

This year, however, we will institute zero-based budgeting.  In a zero-based budgeting process, each department of the state government must come before the Appropriations Committee of the House of Representatives, start their budget at zero, and justify every penny of taxpayer money the department is seeking to spend.  Inertia no longer will be the driving force behind the state budget.

Due to the magnitude of the state budget and the brevity of the 40-day legislative session, we can only require zero-based budgets for a couple of departments each year.  This year, it’s the Department of Revenue (DOR) and Department of Human Resources (DHR) that will be required to justify every penny in their budgets.  The departments will rotate from year to year so that every department in the state government must start at zero every few years.

Eliminate bloated budgets.  Demand results.  Justify every penny that is spent.  As stewards of your tax dollars, we owe you nothing less.

A version of this post was published in the January 9 edition of the Dunwoody Crier.

Leave a Comment » | Fiscal Accountability, State Budget | Permalink
Posted by Mike Jacobs

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