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

New Property Assessment Freeze in Effect

May 12, 2009

The news media had a lot to say about the 2009 session of Georgia General Assembly. Not much of it was particularly flattering.

If you’re a homeowner, there’s good reason to tune out this echo chamber of Negative Nellies. That’s because property assessments have been frozen for the 2009 and 2010 tax years.

Improving upon the five-year DeKalb property assessment freeze that I helped pass and the citizens of DeKalb County supported in a 2006 referendum, this new freeze covers your entire property tax bill, county taxes and school taxes alike. The 2006 DeKalb freeze only covers the county government’s portion of your property tax bill.

The legislation that accomplished this new across-the-board assessment freeze was House Bill 233. It passed on a party-line vote and was signed into law by Governor Perdue last week. I was proud to support it. My good friend Representative Edward Lindsey, who represents Buckhead, deserves kudos for authoring the bill.

Some of you may be asking: What about that notice of an assessment increase I received from the county within the past month?

Even in this difficult economy with headlines indicating that home prices are either falling or stagnant, but certainly not on the rise, DeKalb County recently sent notices of increased property assessments to a large number of homeowners in our community.

Thanks to HB 233, the assessment hike some of you recently received from the county is null and void. It will not be used in calculating your 2009 property tax bill.

It is recommended, however, that you still appeal your reassessment notice if you were planning to do so. The appeal deadline is Monday, May 18.

The procedures for filing an appeal can be found here.

The General Assembly also passed Senate Bill 55, a measure requiring that foreclosed properties be taken into account when counties set the tax values of nearby homes. You may recall that DeKalb had a problem with exactly this issue. The problem was solved this time with some quick intervention by CEO Burrell Ellis. Under the new state law, it won’t happen again.

Leave a Comment » | DeKalb County, Property Taxes | Permalink
Posted by Mike Jacobs

Property Assessment Appeal Deadline

May 11, 2008

It’s that time of the year again.  Spring has sprung.  Every car bears a coat of yellow pollen.  And the DeKalb County Board of Tax Assessors has sent out property assessment change notices.

Not everyone received a property assessment change this year.  However, for those of us who have been reassessed, the increases are quite shocking.  Several constituents have e-mailed me about their reassessment notices.  Here’s an example:  “I just received a notice from DeKalb County with a $70,000 property assessment increase!!!  I filed the form to freeze the value last year and was told that it had been received.  Was the law repealed?  What happened?  Please help ASAP!”

Evan and I received a $44,300 assessment increase this year, which is 15% of the assessed value of our home on Granger Drive.

The headlines tell a different story.  “Atlanta home prices fall 4.8 percent” in 2007, reports the Atlanta Journal-Constitution.  “Atlanta home values drop sharply since last summer,” says Creative Loafing.

These artificial, unjustifiable assessment increases are the county government’s and school system’s way of increasing your property taxes without actually holding a public vote of the county commission or school board to increase your property taxes.  They are back-door tax increases.  Worse yet, it doesn’t matter how the real estate market is doing, which is outrageous.

The first step toward fighting back was passing the county property tax assessment freeze back in 2006, which freezes your property assessment for the purposes of calculating the county government’s portion of your property tax bill.  I am proud to have actively supported this measure.  Without my help in passing the property tax assessment freeze, it would not have happened.  The property tax assessment freeze only affects the approximately 25% of property taxes that are levied for use by the county government, which explains why the county continues to increase property assessments year after year.

Another important thing you can do to fight back is to exercise your right to appeal your reassessment.  That is the purpose of this message, to remind you about this right.  You can find information on how to appeal your property assessment increase on the DeKalb County Property Appraisal Department’s website (click for link).  Your letter of appeal must be postmarked no later than this Monday, May 12.

Leave a Comment » | DeKalb County, Property Taxes | Permalink
Posted by Mike Jacobs

North Druid Hills-Briarcliff Survey Results & TAD Hastiness

December 9, 2007

In the midst of the ongoing debate about the future of the community around North Druid Hills and Briarcliff Roads, I decided to ask the neighborhoods in my State House district that would be most directly impacted by the proposed high-density, mixed-use development what they think about it.

318 households from Merry Hills and the North Druid Hills Residents Association responded to a survey conducted in hard copy format and with a follow-up telephone call to households that did not respond to the paper survey.

The question that was asked was as follows:

Do you support the proposed high-density, mixed-use development at the intersection of North Druid Hills and Briarcliff Roads?

Yes, unconditionally;

Yes, but only if the transportation infrastructure, traffic flow, sidewalks, streetscapes, and greenspace are improved; or

No.

The following results reveal that a significant, but not overwhelming, majority of households are opposed to the efforts to redevelop the area:

No :  169 respondents:  53.1%

Yes, with conditions:  135 respondents:  42.5%

Yes, unconditionally:  14 respondents:  4.4%

Thus, 53.1% said “no” and 46.9% said “yes” to the proposed new development.  While these results are not from a true scientific poll, the high number of respondents makes them fairly reliable.  Respondents were not pushed to give a particular response, either positive or negative.

I am surprised at the speed with which the proposed tax allocation district (TAD) for the North Druid Hills-Briarcliff intersection is being rushed through the approval process.  Within the very short time span of two weeks, an informational meeting, a public hearing (held on the first night of Chanukah, for a proposal that will impact the Orthodox Jewish community in Merry Hills and along LaVista Road), and a county commission vote will have been held to adopt the TAD.  The vote is scheduled for the DeKalb County Commission meeting this Tuesday, December 11, at 9:00 a.m., in the Maloof Auditorium, 1300 Commerce Drive, in Downtown Decatur.

A TAD relies on the property tax increases that result from year-to-year increases in assessed property values.  The annual property tax increases inside the TAD are captured and applied to infrastructure improvements within the TAD boundaries, which in this case is almost entirely comprised of commercial property such as Loehmann’s Plaza, Executive Park, Target, and the potential Sembler property

However, in order to entice the DeKalb County School System (DCSS) to participate in the TAD and give up the property tax revenues from inside the TAD that DCSS otherwise would receive, proponents of the TAD are hoping for a “halo effect” outside the TAD.  The “halo effect” means that tax increases which would result from assessment increases on properties (including residential properties in neighborhoods such as Merry Hills and the North Druid Hills Residents Association) outside the TAD boundaries would be greater than the tax increases from assessment increases on properties inside the TAD boundaries. Thus, in theory, DCSS would give up a little in property taxes, but still net an increase in property taxes, which existing residential property owners would be forced to pay, to fund education.

A “halo effect” in an area like Toco Hills where the median home sale price already is a robust $411,901 could make residential property taxes unbearable.  Any way you slice it, the so-called “halo effect” constitutes a residential property tax hike.

DCSS has not yet made a decision whether to participate in the North Druid Hills-Briarcliff TAD, thereby giving up its portion of the property tax increases within the TAD to fund infrastructure improvements within the TAD.  In a recent Atlanta Journal-Constitution article, the board of education appeared to be caught flat-footed by how quickly the county commission is moving to approve the TAD.

Is there an alternative?  Yes, a community improvement district (CID).  A CID is a self-taxing district in which the business owners elect to have additional property taxes assessed against their commercial property in order to help fund infrastructure upgrades within the CID.  A CID would be more akin to the pay-to-play impact fees that the county at one time said it would impose on new development.

Leave a Comment » | DeKalb County, Property Taxes, Toco Hills | Permalink
Posted by Mike Jacobs