Attorneys for the Cobb School District filed a formal objection in Cobb Superior Court just before the close of business Monday alleging the tax breaks take away the district’s right to levy taxes. They also argued that the benefit to the public wasn’t closely considered.
The district’s concerns will be heard by Senior Judge Michael Stoddard today at 9:30 a.m.
The school system is challenging the bond validation, which is the last step before property tax abatement can be offered to a project backed by real-estate mogul John Williams.
The development, coined Riverwalk, is a mega-development to include 236 for-lease condos, 14 three-story townhome apartments and a 10-story office tower planned for the Cumberland area.
It didn’t meet the county’s requirements of creating 25 jobs and contributing $500,000 to the tax digest, but the Development Authority, which is chaired by Vinings Bank executive Clark Hungerford, husband of Cheryl Hungerford, a deputy superintendent for the school district, is moving ahead anyway with a 10-year property tax abatement.
Cobb school board Chairman Randy Scamihorn plans to attend today’s validation hearing with other school officials.
“We want to make sure that our system is fair and I’m satisfied with the judge looking at this and I’m hopeful that the right decision is made, whatever that may be,” Scamihorn said.
Schools say deal takes away right to tax
A motion filed in Cobb Superior Court at 4:44 p.m. on Monday by the school district argues that the court should not validate the Development Authority’s bonds because it takes away the school district’s right of taxation.
That right is “with the school board; therefore, the Development Authority cannot give it away,” the schools attorneys argue. They also argue that none of the parties offering the tax deal “seek to protect the school district or school board’s rights” and validating the bonds would “cut off the school board and school district’s right to collect the taxes due it.”
The motion also claims that Georgia laws governing public bonds does not allow school taxes to be waived. It only names taxes levied by state, county and municipal governments along with political subdivisions and taxing districts.
The two parcels that make up the 7 acres of undeveloped land are currently valued at about $6.1 million for tax purposes, according to the Cobb County Tax Commissioner’s website. That raw land generated $46,433 for the Cobb School District in 2013 and $26,803 for the county.
If developed into a $100 million project, the site would pump more than 15 times that amount annually into county coffers, with $436,400 generated for the county and another $756,000 for Cobb schools, according to estimates provided by the county finance office.
The school district should be named as an official party to the bond validation, the motion argues, and if it is not allowed to become part of the validation, the school district would have no right to appeal.
Schools: ‘Public good’ forgotten
The school system argues the bonds “benefit a private developer and place the public’s funds at risk” and are a “gratuitous gift of public funds.”
Development authorities are created under state law for the public good, the school district argues, but that good wasn’t considered for the Riverwalk project.
The Development Authority does not appear to have policies on how it “reviews and approves multi-million dollar bonds through which it grants lucrative tax abatements to private developers at taxpayer expense,” the motion says, and has no way to “ensure that the proposed project will actually provide benefit to the public despite the fact that is the main purpose of the Development Authorities Law.”
Riverwalk will “allegedly create only five jobs,” the school district argues, but the Development Authority did not review what those jobs will be, their salaries or the appropriateness of those jobs.
“The Development Authority will be unable to evidence that it engaged in any meaningful review of the public benefit at the time of passing the bond resolution because, in fact, it did not engage in such a review,” the court filing states. “Though the Development Authority may, after the fact, articulate some theoretical public benefit, the Development Authority will not be able to show that such public benefit was considered at the approval of the resolution.”
Though the project did not meet the county’s guidelines for incentives, which includes creating at least 25 jobs and contributing $500,000 to the tax digest, the Development Authority pursued the tax incentives on its own.
That’s problematic, the school district argues, because the authority was created by the county and shouldn’t be able to exceed the county’s scope of powers.
“Ultimately, this property seems ripe for development without public financing,” the motion states.
Amount of incentives ‘far too costly’
Larry Savage, who sits on the board of the Marietta-based Georgia Tea Party, estimates the school board will lose more than $5 million from the incentives deal while the county will be out almost $3 million over the 10-year term of the tax abatement deal.
Nelson Geter, executive director of the Development Authority, and Tad Leithead, chairman of the Cumberland Community Improvement District who is also a paid consultant for the Riverwalk project, have both argued that incentives of that magnitude are needed to attract substantial development to the site.
Savage says that argument doesn’t hold up in the economic juggernaut known as the Cumberland area, which is touted as accounting for one-third of Cobb’s economy and 5 percent of the state’s economy.
“If you’ve got to incentivize that (development) in this location then, my goodness, how can anyone build anything anywhere else?” Savage said.
Savage also plans to attend today’s bond validation hearing, though he hasn’t filed an official objection, and says $8 million in tax breaks on a $103 million development is too good of a deal.
“It seemed like a very generous incentive to begin with, and then I thought to myself this is one of the most desirable locations in the state and why would you give someone an incentive to develop in such a great area?” Savage said. “It seems like they’d be willing to pay extra to have a shot with it.”
Questions about accountability
He also questions the process behind offering tax breaks in Cobb County.
The Development Authority’s board is comprised of appointed members who aren’t directly accountable to taxpayers or voters.
“It looks like an adjunct to the Cobb Chamber of Commerce rather than part of the government of the people,” Savage said of the powerful nonprofit made up of unelected, well-connected business leaders.
Members of Cobb’s local delegation also called the process into question on Monday morning during a breakfast with the Cobb Board of Commissioners.
State Sen. Lindsey Tippins (R-west Cobb) asked for a legal opinion on the Development Authority’s ability to negotiate with school tax revenues since the school board has no say over who sits on the authority’s board.
Rep. David Wilkerson (D-Austell) called for more accountability in the process saying he favors leaving tax dollars directly in the hands of elected officials, not appointed boards.