The commissioners managed to fund most areas of public safety and the courts at 2009 levels. In this economy, that isn’t too shabby.

In order to ensure that a millage rate increase is avoided (the county millage rate is set in June), approximately 550 county employees will have to take early retirement. Early retirement is less expensive for the county than paying out unemployment claims, which is why they aren’t doing layoffs, at least not at this point.

If I may editorialize for a moment: It is troubling that CEO Ellis is willing to propose a property tax hike without batting an eyelash. Fortunately, the county commission did the hard work of trimming the budget to the point that raising property taxes might not be necessary. If all goes as planned, good work!

Commissioner Jeff Rader also will be participating in this meeting. He has prepared a thoughtful analysis of the CEO’s proposed budget. Click here to read Commissioner Rader’s commentary.

The Board of Commissioners decides what goes in the final budget, subject to any line item vetoes by the CEO. As Commissioner Rader has suggested, the BOC could downsize the budget to avoid having to increase the millage rate, which is used to calculate your property taxes.

This budget meeting will be held on Tuesday, February 16, at 7:00 p.m. at the Torah Day School of Atlanta (TDSA), 1985 LaVista Road.

The DeKalb Delegation meeting that was held on January 25 was an eye-opener. It included a visit from three of our county commissioners, members of the commission staff, and representatives of the CEO’s office, although not the CEO himself. The tension between the commission’s and CEO’s representatives was palpable, and it nearly grew into open hostility when the commissioners made their presentation.

There appears to be a turf war brewing between the county commission and CEO. My request to these elected officials is a simple one: knock it off. At a time that tax revenues at all levels of government are slumping, citizens are hurting financially, and the county is considering an ill-advised property tax increase to prop up a budget that became seriously bloated after eight years of Vernon Jones, the last thing we need is posturing from county politicians.

The not-so-subtle hostility between the county commission and CEO’s office appears to be related to a December proposal by the commissioners to completely eliminate the CEO position. Because it deals with the basic structure of the county government, that proposal would require the approval of DeKalb’s state legislators. It came out of left field and was not expected by the legislative delegation. If necessary, I will see to it that any such legislation is defeated.

The commissioners also are requesting that we give them the power to approve their own contracts with outside vendors, rather than working through the CEO. Not even the state legislature has the kind of contracting power they are requesting. It simply isn’t a legislative function, and it’s a power that is a breeding ground for cronyism and corruption. This, too, is a proposal that is dead on arrival.

In 2008, the General Assembly passed and the voters approved reforms that enabled the county commission to conduct and set the agenda for its own meetings. This completely removed the CEO’s involvement in those meetings and strengthened the checks and balances between the CEO and county commission. Any further reforms, however, should have the approval of both the CEO and commission before state legislators give them any consideration.

In the meantime, if the county commission is looking for a way to leverage the existing checks and balances that are already built into our county government, I have a recommendation: Defeat the CEO’s proposal for a property tax increase. Rather than posturing to gain a political upper-hand over the CEO, that’s a tangible action your taxpaying constituents will appreciate.

The following commentary on the DeKalb County budget and the CEO’s proposal for a property tax increase is republished with permission from Commissioner Jeff Rader. It’s a worthwhile read:

The more things change, the more they stay the same.

A year ago, I publicly expressed my disappointment in the budget process for DeKalb County. The process, as described in my formal remarks in February 2009, is subject to political considerations and short-term gains at the expense of tough decisions and long-term sustainability.

It was my hope then that the new county CEO and the new governing structure for the county Board of Commissioners (BOC), each with a full year under its belt, would lead to improvements in the preparation of this year’s budget. Sadly, the process seems to have gotten worse, not better.

While major changes may not happen overnight, my recommendations last year included simple, incremental steps to ultimately create a budget that is inclusive and forward thinking. The first and easiest step is to add transparency by sharing the departmental budget requests, typically submitted in late summer, with the general public and BOC.

The requests would be used as a starting point for public and ongoing discussion among various constituencies, notably the BOC, to establish funding priorities for the coming year. Instead, the administration elected to keep the specific departmental requests under wraps. Thus, the BOC is flying blind if it attempts to cut spending because it has limited information on how such cuts impacts each department.

Further, because the departmental requests were not shared with the BOC, the latter did not develop the urgency to finalize its priorities for the coming budget. For what it’s worth, my top budget priorities are public safety and infrastructure. The first is self-explanatory and the second is needed to address an enormous backlog of deferred maintenance, which threatens the functionality of county services.

As in years past, the public’s and BOC’s first look at the proposed 2010 budget was mid-December, the constitutionally mandated date for the CEO to formally present a budget. The BOC, in turn, is mandated to approve the budget by March 1, leaving a mere two months to debate possible revisions, a timeframe that makes it difficult for substantive deliberations.

The CEO’s proposed budget is based on questionable assumptions and actions.

Perhaps the most misguided assumption is that the county tax digest (aka property taxes) will remain the same as it was in 2009. A reasonable person knows the national economy’s downslide was precipitated primarily by the implosion of the real estate market. The general consensus is the real estate market shows signs of, at best, a weak recovery in 2010. The county’s Board of Tax Assessors, in two separate memos this January, estimates the tax digest will decline by nearly seven percent in 2010.

Even if the administration’s revenue forecast is accurate, it still has a roughly $60 million deficit relative to its spending requests. The CEO proposes to close that gap roughly in half by raising the millage rate 1.86 points, and the other half by reducing the labor force through an early retirement offer.

Given the current economic climate, it is not prudent to burden the taxpayers with a tax increase. So a tax increase is not a viable option to address a budget shortfall.

The logical alternative is to reduce expenses by trimming positions from the county work force because labor costs (wages and benefits) comprise roughly 80 percent of the county’s budget. While no one wants people to lose their jobs due to layoffs, the county’s fiscal situation creates the necessity to right size the workforce now. Such a move is an economic necessity when there is not enough money in the financial coffers.

But offering early retirement is not the most efficient method to reduce the labor force, because the employees, rather than the employer, dictate the staff reduction. As a result, the county could end up losing its most talented, experienced and critical employees, creating a deleterious effect on county services.

That in turn could force the county to hire back those employees, or someone else to fill those positions, thus diminishing the financial savings from the initial staff reduction. The worse scenario would be to lose a disproportionate number of employees from public safety departments, which I, again, consider to be the top priority.

Ideally, the administration would identify those positions that could be eliminated with the least impact on county services. That can be done after a careful performance audit of each department to evaluate the correlation between quality of services and its staffing levels.

While the CEO’s budget proposes a reduction in force of 400 employees, it does not propose a comparable reduction in scope of services provided to the county. If the county is able to provide the same scope of services with fewer employees, that will be an indication it has been operating inefficiently in past years. If the county is not able to do so, then the public will suffer from the decrease in quality of services.

Early last year, in anticipation of the tough budget currently facing the county, the BOC considered contracting with Georgia State University to conduct a staffing study to identify excess and redundant positions that could be cut. The administration protested, saying that it would conduct its own study. But the administration did not follow through.

So last November, the BOC approved the staffing study initially proposed early that year. Regrettably, the results will be available towards the middle of February, extremely late in the annual budget process. The sad truth is that more budget cuts will likely be necessary to compensate for the revenue shortfall noted above, and the county may end up cutting the budget all year long.

Either way, it seems counterintuitive that in this economic climate, the administration has passed up this opportunity for fundamental restructuring of its operations. Aside from the consolidation of two development departments and the outsourcing of another development department, there is no significant shrinkage of scope of services outlined in the proposed budget.

In the private sector, companies and entrepreneurs have, out of necessity, discovered new ways of doing business that should reap benefits as the economy recovers. Families and individuals have fundamentally altered their way of life, out of necessity, such as giving up cable television, and eating dinner at home more often. But the administration has declared its intent to conduct business as usual.

The more things change, the more they stay the same.

In my budget commentary last year, I called attention to the county’s inadequate funding for capital maintenance. Historically, the county government has been enamored with the creation of new facilities rather than the maintenance of existing ones.

Last year’s budget set aside 10 percent of HOST (Homestead Option Sales Tax) for capital maintenance. This year, five percent, which projects to $4.4 million, according to the administration. To put that number in context, this time last year, the county was 60 years behind schedule on needed street repaving and had total deferred maintenance liability of more than $260 million. Business as usual.

The administration also proposes business as usual for those employees still in place after the reduction in force. In fact, the CEO’s budget proposes a one percent, across-the-board merit increase. While there are many county employees who are exceptional performers, the economic reality dictates that DeKalb does not have the luxury of offering pay increases, no matter how deserving.

Nor does the CEO’s budget propose any changes in the benefits programs — health, retirement — for county employees. The county, which is self-insured, pays 70 percent of all medical expenses for its employees. With medical costs rapidly escalating nationwide and an aging workforce, the county can not sustain that 70-30 ratio without raising taxes or requiring its employees to contribute more.

The county continues to operate a defined-benefit retirement plan, while the private sector predominantly offers defined-contribution plans. To maintain the promised benefit, the county’s actuaries advise that contributions to the pension fund should be increased to 15 percent of payroll in 2010 ($50 million) all the way up to 25 percent of payroll in 2020 ($105 million), which is a significant cost increase even before factoring the early retirement program.

The county currently pays about 67 percent of contributions to the employees’ retirement plan. That financial obligation is unsustainable. If the county wishes to save its defined benefits program, the beneficiaries must pay a larger share.

Nor does the CEO’s budget propose any changes to the number of paid holidays for county employees. Eliminating a paid holiday saves money and probably has the least impact on county services because government is considered closed that day.

The BOC has two choices to rectify the CEO’s proposed budget. One, it can save money by unilaterally reducing the scope of county services. Two, it can save money by improving the cost efficiency of its current scope of services. Both are difficult tasks because of the limited time frame and information provided to the BOC in this budget process.

In the short term, the latter seems to be the best option, specifically reviewing the compensation structure for county employees, as highlighted in this commentary. This means the budget would be balanced on the back of good county employees. That would be regrettable, but preferable to balancing it on the back of taxpayers.

The CEO describes the proposed budget as “bare bones,” one that provides little more than the essential, required county services. In 2001, the first year of the former CEO’s administration, DeKalb County had a $420 million budget. If that budget was sufficient to fulfill the county’s mandate at that time, then it should have continued to be the benchmark in the subsequent years while allowing for inflationary and population increases. Based on those two statistical factors, today’s budget would be $563 million rather than the $583 requested by the CEO. The numbers suggest there are ample opportunities to make significant cuts in government spending.

The CEO and his team are honorable and well intentioned, but regrettably they have not been able to keep ahead of the extraordinary economic and organizational challenges we are now facing. But it’s not too late to start. Crafting this year’s budget is not a one-time challenge. The county tax base is expected to remain flat for a significant period into the future. The administration needs to reject the premise of relying on short-term fixes in order to resume business as usual.

The result is a big win for DeKalb taxpayers. You can read more about it in the Atlanta Business Chronicle and on Jim Walls’ Atlanta Unfiltered blog (click for links).

I brought a legal challenge to the issuance of these bonds because it would have violated a law I passed in 2007 that gave you the right to vote on a particular type of bond transaction known as a “backdoor general obligation” or “backdoor G.O.” transaction. It’s called “backdoor G.O.” because it involves the use of an independent government entity known as an “authority” to sell bonds to construct a public building (here, the Arts Center) and then lease the project back to the county, thus avoiding the county having to do a traditional “general obligation” bond issue which requires a voter referendum. You wouldn’t have the right to vote on it, but nevertheless your tax dollars would be used to pay the principal and interest on the bonds.

Rather than comply with the law and let you vote on the bonds, the DeKalb Development Authority decided to challenge the constitutionality of the law by attempting to conduct a “backdoor G.O.” bond issue for the Arts Center without a referendum. This forced me to stand up for your right to vote by challenging the bond issue in court.

Chief Justice Carol Hunstein wrote for a unanimous Supreme Court finding that the referendum requirement complies with the Georgia Constitution and should have been followed. Here are links to PDF copies of the full Supreme Court opinion and my brief that was filed in the case. The Supreme Court affirmed a well-written trial court ruling by DeKalb Superior Court Judge Dan Coursey.

One interesting point suggested by Chief Justice Hunstein in the first footnote on pages 3 and 4 of the Supreme Court opinion is that the referendum requirement could apply not only to the “backdoor G.O.” bond transactions of the Development Authority, but also to the run-of-the-mill private bond transactions of the Development Authority. Think “Town Brookhaven” and the various proposals for the shuttered Doraville GM plant. Even the Sembler tax abatement that was rushed through at the end of 2008 might have required a referendum and could have been challenged.

That was never my intent for the referendum requirement, but the law the General Assembly passed in 2007 was worded very broadly because we never anticipated that the Development Authority, which is intended to help fund private projects, would be abused by the county to build a plain old public building like a performing arts center. In fact, there is an unrelated Georgia Supreme Court case (Haney v. Development Authority of Bremen, for you lawyers out there) that says development authorities can’t be used to build plain-vanilla public facilities.

During this year’s legislative session, I noticed the problem that the referendum requirement could apply to the Development Authority’s private bond deals and tried to fix it with new legislation, House Bill 203 (click for more information). However, the Development Authority and a small handful of DeKalb legislators worked to block HB 203 in the hopes that the Supreme Court would later strike down the entire statute. The bill languished in committee, but still remains available for consideration during the 2010 legislative session. As it turns out, its detractors threw a Hail Mary pass that the other team intercepted and ran back for a touchdown (and I promise that’s my last sports analogy in this article).

In light of recent overreaching with respect to Development Authority tax abatements (click for news article), I’m not as convinced that the broad sweep of the 2007 law is as problematic as I once thought it was. We probably should amend the 2007 law to make it narrower, while keeping the referendum requirement for “backdoor G.O.” bond deals. However, I also believe this is an excellent opportunity to require that elected officials accountable to the voters make the final decision on the Development Authority’s tax abatement deals. On this point, I’d like to hear your thoughts.

I donated more than two weeks of legal work writing briefs in the Supreme Court and the trial court in the Arts Center bond case. The county, the Development Authority, and its lawyers from a large Atlanta law firm spent a lot of time, and sadly, your tax dollars, on the case. Next time, here’s hoping the county will just follow the law and save both of us the effort.

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.

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/.

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.

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.

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.