Posted on October 28, 2008 | Email This!
Amendment #2: “Shall the Constitution of Georgia be amended so as to authorize community redevelopment and authorize counties, municipalities and local school boards of education to use tax funds for redevelopment purposes and programs?”
While you might think that Amendment #2 is “new law,” the fact is that it grants authority that counties, municipalities and local school boards have been operating under for over 20 years!
The Basics: Tax Allocation Districts
A Tax Allocation District (TAD) is a special designation given to a single property or an area that is in need of revitalization. The special designation allows a portion of the tax revenue from the property or area to be focused on and dedicated to redevelopment. With the special designation, the local government is able to sell bonds to generate “up-front” cash to jumpstart the revitalization. As the property values in the TAD increase, the extra tax revenue is used to pay the bond debt.
In other words, a property or a community’s own revitalization pays for itself.
Tax Allocation Districts have helped fund revitalization nationwide for over 50 years. For the past 20 years Georgia cities, counties and school boards have worked together to make TADs a success. Over 50 cities have approved the use of TADs and over 20 communities currently have TADs in some stage of development.
TADs and School Taxes
Earlier in the year, however, the state Supreme Court brought TAD redevelopment to a virtual standstill when it ruled that school systems could not longer participate in TAD financing. The Court ruled that the Constitution restricted the use of school tax dollars to educational purposes only, and that payment of TAD debt did not fit the definition of “educational purposes.”
Amendment #2 is designed to restore a school system’s option to support revitalization of the communities that it serves. Amendment #2 is designed to restore the authority that school boards have operated under for over 20 years.
Schools Do Not Lose Money
One of the common arguments against Amendment #2 is that TADs cause school systems to “lose” money because a portion of the tax revenue is used to pay bond debt. Not only is the argument false, but school systems stand to lose millions of dollars if Amendment #2 is NOT approved!
Schools do not lose tax dollars because the TAD debt is paid with the tax increment– theÂ increase over the original, “baseline” revenue that comes as a result of the property’s redevelopment and, thereby, increased taxable value. Schools continue to receive the same amount as they did in the year that the TAD was created, and no less. Remember that this is revenue that would not be received but for the property’s redevelopment.
In other words, without revitalization within a TAD, not only would the school system receive no benefit but the property would continue to decline, as would the school system’s tax take.
The tax increment revenue, therefore, is not tax dollars lost but tax dollars deferred.
Historically, however, school systems haven’t had to wait for a return on their investment. Because the school board’s participation is optional and because the school tax is usually a majority percentage of the total tax bill, school systems are in a great position to negotiate the extent of their support. Prior to the Supreme Court ruling, several school systems had realized incredible immediate and long-term benefits from particpation in a TAD:
* Cherokee County schools had all development fees waived as part of their agreement to participate in the Holly Springs New Town Center TAD.
* In return for Atlanta Public Schools’ support of the WestsideÂ TAD, the system received $5 million to build Centennial Elementary, an award-winning facility on the site of the old Techwood Homes, plus an additional $2 million for other capital costs.
* For the Beltline TAD, APS had negotiated for $10 million for recreational facilities and ballfields within the TAD; subsidized or free transit rides for APS students; a trust fund for educators and staff; and $150 million for educational programming, paid at $7.5 million per year from years six to 25 of the life of the TAD.
(It is ironic that it was the successful court challenge of the use of education tax revenue for the Beltline TAD that derailed almost all TADs statewide and precipitated the need for Amendment #2. If you want to talk about a school system losing money, here it is! The APS stands to lose tens of millions if Amendment #2 is not approved on November 4.)
School systems understand thatÂ communitiesÂ in decline mean increased demands on school facilities and a steady decline in tax revenue. They alsoÂ understand how a TAD can result in an immediate windfall and fast-tracked revitalization of any school facilities within a TAD, as well as long-term benefits in increased tax revenue.
A YES Vote Creates Opportunity
The approval of Amendment #2 doesn’t create a single Tax Allocation District. It does give local government– including school systems– the opportunity to use this innovative and popular financing tool to revitalize properties that would otherwise continue to be a drain on public resources. I encourage you to vote YES for Amendment #2.
[Bob Griggs is a community activist in Gwinnett County. The opinions expressed are his own and not necessarily those of CamdenGANews.com.]