The Development Authority of Cobb County is forging ahead with granting tax abatements on the mixed-use Riverwalk project backed by developer John Williams after Cobb’s highest elected official said the project didn’t qualify for incentives.
Cobb Chairman Tim Lee told developers of Riverwalk that the project didn’t qualify for a waiver of permitting fees and licenses.
But Lee encouraged the company to seek tax abatement — a waiver of property taxes — through the Development Authority, which has more discretion in how it chooses to dole out tax breaks.
The development planned for Cobb Parkway and Cumberland Boulevard in the Cumberland Community Improvement District will contain 236 condos, 14 three-story townhomes and a 10-story office tower offering 200,000 square feet of “Class A” space, which targets the highest-paying office tenants.
In a Nov. 18 letter, Lee told the developers their project won’t add the 25 jobs and $500,000 to the county’s tax digest needed to qualify for a waiver of permitting fees.
But he encouraged them not to give up on striking an incentives deal geared toward tax abatement.
“To that end, I want to express the county’s support of your efforts as they relate to working with the Development Authority of Cobb County as well as the Board of Tax Assessors to secure other incentives for this project as they determine are appropriate,” Lee wrote in the letter.
The developers’ application appears to be on a fast track toward final approval. If it gets that approval, it will mean Riverwalk pays no property taxes in year one of the 10-year abatement, then pays on 10 percent of the property value in year two, 20 percent in year three and so on until year 10 when it assumes 100 percent ownership in the property.
The abatement would also allow Williams and his investors to avoid the coming three mill tax increase the Board of Commissioners is expected to approve later this month to be levied on owners of apartment complexes and commercial properties in the Cumberland CID. That new tax will be used to help pay for the Atlanta Braves stadium deal.
Lance Lamberton, president of the Cobb Taxpayer’s Association, said the lack of oversight on the Development Authority’s deals allows well-connected developers to use their power and influence to “get preferential treatment from governmental bodies that are supposed to be fair and impartial, but as we can see here, are anything but.”
It’s a situation that “cries out for reform,” Lamberton said.
“It un-levels the playing field, giving the well-connected player, Williams, an unfair advantage over other competitors in the local real estate market,” Lamberton said.
Riverwalk would also mark the first time county leaders can recall that an apartment project has received tax abatement. A tax subsidy would lower the company’s costs, allowing it to undercut its competitors by offering lower rents.
It’s also the biggest project the Development Authority has dealt with in recent years, said Nelson Geter, executive director of the authority, who acknowledged that Riverwalk is an “exception to the rule.”
Geter admits granting incentives for an apartment developer could open a floodgate, but said other applications would be considered as long as they meet Cobb’s requirements of 25 jobs and half a million to the tax digest.
That’s a standard that Riverwalk does not meet, yet it has caught the eye of the Development Authority as a candidate for tax abatement.
“If you look at the project comprehensively, the total scope of the project would warrant that level of consideration,” said Geter, who is also employed as an economic development manager with the Cobb Chamber of Commerce.
While Cumberland-based Greenstone Properties is listed as the developer of record for Riverwalk, one of John Williams’s companies is involved as a financial backer.
Calls to that company, Preferred Apartment Communities, were directed to the firm’s president, who said the company is simply acting as a lender on the project.
Williams could not be reached for comment.
Coming off the tax rolls
The two parcels that make up the 7 acres of undeveloped land are valued now at about $6.1 million, according to the Cobb County Tax Commissioner’s website. The county received $26,803 in tax revenue from the parcels in 2013, the Cobb School District received $46,433 and the state got $368.
A $100 million development would pump more than 15 times that amount into county coffers, with $436,400 generated for the county, another $756,000 for Cobb schools and $6,000 for the state, according to estimates provided by the county finance office.
Williams founded Post Properties Inc. in 1970 and has directed the development of more than $5 billion in real estate during his career. He led the effort to build the $150 million Cobb Energy Performing Arts Centre and its main theater is named after him, The John A. Williams Theatre.
Preferred Apartment Communities plans to move its headquarters into a 60,000-square-foot space at the new office tower and Greenstone will take up between 5,000 and 10,000 square feet, said Chris Scott, principal of Greenstone.
Authority surpassing county government The development that brings the first Class A office building to Cobb in 12 years might not have met the county’s standards, but it has passed muster with the Development Authority, governed by a board whose members are appointed by county commissioners.
But, unlike the Cobb Board of Commissioners, the Development Authority has the ability to lower its standards in select cases. How often it decides to make an exception, and how it goes about choosing the developers who qualify for special treatment, remains shrouded in secrecy. No posting on the authority’s website explains this process and officials were vague in their description of it.
“Ninety percent of the cases will follow those incentives the county follows,” said Geter, referring to the county’s requirement that a project create 25 jobs and contribute $500,000 to the tax digest.
The unelected board has more discretion over the remaining 10 percent that Geter estimated falls outside of the county’s guidelines.
In October 2012, Cobb changed the way it considers tax incentives, Geter said. Previously, it would have considered Riverwalk’s office park and apartment complex as one project.
A committee of high-ranking county staffers considered the $43 million apartment building and $60 million office tower separately last month and found it did not qualify for a waiver of permitting fees.
But Geter maintains that, had the two components been looked at as one mega development, it would have easily met the county’s criteria.
Donna Rowe, a Development Authority board member appointed by Commissioner Bob Ott, said she didn’t consider the county’s criteria when looking at Riverwalk.
“It was necessary in order to encourage that development,” Rowe said.
The development is expected to bring about 400 jobs, almost all of them being generated by the office park and not the apartment complex.
Still, the number of jobs that will end up being created remains an open question. The office park will provide a new venue for companies to operate from and many of those employees will simply be shifting from other office parks in Cobb County and metro Atlanta.
“I think it’s a combination of both,” Geter said. “I think there will perhaps be some existing jobs that will move over to the facility, but I also think with the availability of 100,000 square feet of office space some new jobs will come to the county.”
When asked who would move to the space and create jobs, Geter said, “That’s a question only the developer can answer.”
No recourse for tax assessor
The Board of Tax Assessors is scheduled to set a value on the property being considered for abatement today, but the board doesn’t have the authority to deny any incentives.
Assessors will determine if the lease between the Development Authority and the developer is legal and will set the value of the property and the lease during its meeting at 10 a.m. today at 736 Whitlock Ave., said Scott Gregory, attorney for the Board of Tax Assessors.
“The tax assessor would never look at, ‘Is this something that is good politically or not?’” Gregory said.
The Development Authority has already issued two bonds of $43 million for the apartment building and $60 million for the office park.
The authority will enter into an agreement to lease the property to the developer, making the land tax-exempt because the authority is a government agency.
While the project is being constructed, no taxes will be levied. But once the construction is complete, developers will begin making bond payments to the authority and will be taxed on the value of the lease until it assumes full ownership at the end of the 10-year term.
Developers are seeking tax abatement on both the land itself and the development. An application for each element — office tower and apartments — have been sent to the Board of Tax Assessors.
The Development Authority must go before the Cobb Board of Commissioner for approval when it takes out tax-exempt bonds, Geter said, but the bonds for Riverwalk are taxable and do not require approval.
Tad Leithead sees no conflict
Though real estate magnate Williams and Greenstone Properties are behind the development, their names don’t appear on the first pages of the two 100-page applications for the tax break.
Tad Leithead is the applicant.
Leithead is also the chairman of the Cumberland Community Improvement District, which includes the site of the development, a body chartered by the state made up of commercial property owners who agree to tax themselves at a higher rate to pay for improvements to their community.
Leithead is also chairman of the Atlanta Regional Commission.
Leithead said he’s acting as a consultant for Williams’s apartment company on zoning and incentives.
He does not see his multiple roles as presenting any potential conflicts of interest.
“Every member of the CID board is a developer in the CID,” Leithead said. “The CID board is made up of commercial property owners to tax themselves to enhance the values of their properties in the CID.”
If doing business in the district is a conflict of interest, Leithead maintains, all members of the board would be forced to resign.
Braves move not changing the game
Riverwalk is planned for property that sits about 2 miles away from the site of the new Atlanta Braves stadium. The baseball team will abandon Turner Field in 2017 for a new stadium at Circle 75 Parkway and Windy Ridge Parkway.
Officials say the Riverwalk development was in the works long before the Braves deal was announced and that incentives are still needed to attract glamorous developments.
“The fact that the Braves are coming is certainly a wonderful thing for Cobb County, but that still doesn’t resolve the fact that we don’t have an adequate Class A office space,” said Geter, director of the Development Authority.
The project itself doesn’t have anything to do with the Braves, said Clark Hungerford, chairman of the authority, though it certainly would make the offices and apartments more attractive to tenants once the stadium sees its first pitch.
Hungerford, an executive with Vinings Bank who was appointed to the Development Authority by Commissioner Helen Goreham, said incentives help get the taxpayers the most “bang for the buck.”
“What’s wrong with making it more attractive?” Hungerford responded when asked if incentives are really needed to lure private investors such as John Williams into a neighborhood anchored by a Major League baseball stadium.
Lamberton, of the Cobb Taxpayer’s Association, says he’s concerned about real estate deals that have come to light since the Braves made their intentions to move public.
“It is the equivalent of ‘insider trading’ which is highly illegal when trading securities, but perhaps not so much when it comes to real estate,” Lamberton said.