Wednesday, June 18, 2008

The politics of urban real estate financing

I also want to call attention to Maria Saporta's column concerning the TAD constitutional amendent. If you aren't familiar with Tax Allocation Districts, let me recap. The Atlanta Housing Authority issues bonds backed by future property tax revenue, and give portions of the bond proceeds to developers to build in "blighted" or "revitalizing" portions of town. The idea is that these developments will increase the tax base, and it is this future increase that backs the AHA bonds. Developments get portions of the bond proceeds based on how much their development will increase tax revenue.

The need for a constitutional amendment came about because the GA Supreme Court ruled that it was unconstitutional (by the GA Constitution) to use school taxes for non-school purposes - in this case paying back bonds which funded private development. Because school taxes make up more than half of property taxes, this ruling effectively cut the amount of money available to incentivize development by half. So to restore full funding, a constitutional amendment is needed.

Saporta supports the case for TADs by pointing out the mass of development just north and east of Centennial Park:

To reinforce her point, Franklin surveyed the view and began ticking off all the
developments that had received TAD financing: The World of Coca-Cola, the Museum Tower, the Ernst & Young high rise, Centennial Towers among others.
She also identified several other projects that received some kind of public
financing to become reality, such as Centennial Place and Centennial Olympic
Park.

Franklin then asked a group of observers whether they remembered how
the area looked before the 1996 Summer Olympics. The view then included Techwood Homes, a bunch of surface parking lots and vacant non-descript buildings.


This argument probably works well for Saporta's readers, and for the folks the Mayor was talking to at the time. But it probably is exactly the wrong argument for the rest of the city. Helping already rich developers and corporations build fancy high rises and museums isn't the most compelling argument for mortgaging future school taxes.

A much better argument is to talk about the numerous affordable housing units and mixed-income projects that have been built with TAD financing. Replacing blight with communitites is a much better argument. Not to mention the transit and parks it will fund with the BeltLine. Supporting the TAD amendment is a way for everyone pissed that the regional transit tax option didn't pass can support alternative funding for transit projects.

I also see these future school taxes as funds that would not exist without the TAD, so it is slightly inaccurate to argue that TADs take away school funds. Without TADs incentivizing development, the value of the property to be developed will stay the same, and schools would end up with the same taxes as they would with the TAD.

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