New dis­clo­sures show firms that profit from tax breaks

4 coun­ties ceded mil­lions in taxes in 2016, au­dits show.

The Atlanta Journal-Constitution - - FRONT PAGE - By Mark Niesse mark.niesse@ajc.com

They are among metro At­lanta’s defin­ing land­marks and mar­quee com­pa­nies, from the up­scale Avalon de­vel­op­ment in Al­pharetta to Bank of Amer­ica Plaza in Mid­town, from Town Brookhaven to Coca-Cola.

They’re also among the big­gest ben­e­fi­cia­ries of tax breaks doled out by lo­cal gov­ern­ments in 2016. To­gether, in the name of eco­nomic de­vel­op­ment, gov­ern­ments in At­lanta’s four core coun­ties — Ful­ton, DeKalb, Gwin­nett and Cobb — ceded tens of mil­lions in taxes last year, an amount that now can be tal­lied for the first time be­cause of more rig­or­ous na­tional au­dit­ing re­quire­ments.

Among the busi­nesses re­ceiv­ing pub­lic fi­nan­cial aid are Wal­mart, Costco, Home De­pot, State Farm, SunTrust and more than a dozen other For­tune 500 com­pa­nies.

Small busi­nesses rarely qual­ify for sim­i­lar treat­ment, but At­lanta’s sky­line is dom­i­nated by con­struc­tion projects un­der­writ­ten by tax dol­lars, in­clud­ing of­fice tow­ers, mixed-use de­vel­op­ments and fac­to­ries, the fig­ures show.

In all, com­pa­nies in the four coun­ties re­ceived $30.7 mil­lion in prop­erty tax discounts in 2016, and still owed $72.6 mil­lion, ac­cord­ing to an ex­am­i­na­tion of records ob­tained by the AJC un­der the Georgia Open Records Act. Not in­cluded in that amount are hun­dreds of mil­lions of dol­lars dis­trib­uted across the state in film tax cred­its, jobs cred­its and sports sta­dium con­struc­tion deals.

The tax in­cen­tives are in­tended to help fund cor­po­rate ex­pan­sions and en­tice com­pa­nies that cre­ate jobs and grow the lo­cal econ­omy.

But crit­ics com­plain that the tax breaks take vi­tal rev­enue away from schools, po­lice, li­braries and other ser­vices — to give to com­pa­nies that might have lo­cated in the re­gion any­way. They also say there’s lit­tle ac­count­abil­ity if the projects don’t lead to the num­ber of jobs promised.

“The im­pact is sig­nif­i­cant,” said DeKalb Su­per­in­ten­dent Steve Green, who ex­pressed frus­tra­tion that the fund­ing could have been used to hire coun­selors, spe­cial ed­u­ca­tion teach­ers, or math and sci­ence teach­ers, es­pe­cially in low-per­form­ing schools. “We need some re­lief be­cause we can’t have 30 in­cen­tives at a time con­verg­ing on this school sys­tem — not at the ex­pense of crip­pling or com­pro­mis­ing the ed­u­ca­tion need of a school dis­trict like ours.”

Busi­nesses and gov­ern­ment of­fi­cials who sup­port tax in­cen­tives, how­ever, say they’re a crit­i­cal tool needed to spur de­vel­op­ment and keep an area com­pet­i­tive. They also ar­gue that com­pa­nies give back to the pub­lic in many ways — not just by cre­at­ing jobs and even­tu­ally pay­ing their full prop­erty taxes, but by stim­u­lat­ing the econ­omy, in­vest­ing in the com­mu­nity and con­tribut­ing to char­i­ta­ble causes.

Avalon, a mixed-use “city within a city” built on a prop­erty in fore­clo­sure, re­ceived nearly $2.6 mil­lion in tax breaks last year, the largest abate­ment in metro At­lanta. Avalon’s in­cen­tive was a 50 per­cent dis­count on the $5.1 mil­lion it would have paid oth­er­wise.

The rise of Avalon

When de­vel­op­ers bought the 86-acre site for $27 mil­lion in 2011, there was lit­tle there ex­cept a par­tially built park­ing deck, said Mark Toro of North Amer­i­can Prop­er­ties. Pre­vi­ous plans to build a mixed-use com­mu­nity col­lapsed fol­low­ing the re­ces­sion.

To­day, Avalon is a bustling — and ex­pen­sive — com­mu­nity, filled with restau­rants, a movie the­ater, yoga classes on the lawn and a tech com­pany of­fice build­ing. Busi­nesses on the $600 mil­lion site — in­clud­ing Mi­crosoft, An­tico Pizza, Whole Foods and An­thro­polo­gie — share the fi­nan­cial ben­e­fit of the tax in­cen­tives that helped make it hap­pen.

The tax in­cen­tives, which last for a decade and de­cline in value each year, were a “dif­fer­ence maker” for Avalon, Toro said. With­out gov­ern­ment sup­port, de­vel­op­ers wouldn’t have been able to of­fer ameni­ties like a concierge, entertainment by the Punch­line Com­edy Club, con­certs and other events, he said.

“It’s kind of the poster child” for in­cen­tives, Toro said while giv­ing a tour of Avalon. “But for the abate­ment, would this be the suc­cess it is? The an­swer is no. There’s no ques­tion the abate­ment was a part of our de­ci­sion.”

About 3,625 peo­ple work at Avalon’s of­fice tower, stores, restau­rants, man­age­ment of­fices.

Avalon is one of 56 projects in Ful­ton County, in­clud­ing At­lanta, that re­ceived tax in­cen­tives worth $24.1 mil­lion last year. That to­tal is the most of any county ex­am­ined, but it’s an in­vest­ment that led to 30,165 new or re­tained jobs, ac­cord­ing to the De­vel­op­ment Au­thor­ity of Ful­ton County.

Greg LeRoy, ex­ec­u­tive di­rec­tor for Wash­ing­ton-based Good Jobs First, has his doubts.

“We’ve ba­si­cally al­lowed the com­pa­nies to make gov­ern­ments into their cash cows,” LeRoy said. “This theme of big com­pa­nies get­ting dom­i­nant abate­ments is hardly unique to At­lanta. It re­flects the fact that the word is out, and it’s been out for quite a while. If you are a big com­pany with site lo­ca­tion con­sul­tants, and tax and ac­count­ing ac­coun­tants, you can ex­tract abate­ments by virtue of your size and lob­by­ing clout.”

Greater trans­parency

While gov­ern­ment agen­cies in Georgia have been dis­pens­ing tax in­cen­tives for decades, they never pre­vi­ously showed up on gov­ern­ment fi­nan­cial re­ports. That’s chang­ing this year as a re­sult of a rule by the Gov­ern­men­tal Ac­count­ing Stan­dards Board, known as State­ment 77, which re­quires the value of tax abate­ments to be dis­closed in an­nual au­dits. The non­profit board sets fi­nan­cial re­port­ing stan­dards for U.S. state and lo­cal gov­ern­ments.

In the past, it was dif­fi­cult to find the value of tax in­cen­tives through tax records, and the com­bined im­pact of lo­cal tax breaks on gov­ern­ment fi­nances wasn’t mea­sured. Now it will be.

The dis­clo­sures will help gov­ern­ments eval­u­ate whether they’re mak­ing wise de­ci­sions when they award in­cen­tives, said Al Nash, ex­ec­u­tive di­rec­tor for the Ful­ton De­vel­op­ment Au­thor­ity. The in­for­ma­tion also can be used by busi­nesses to ex­tract the same deals as their com­peti­tors, and by res­i­dents watch­ing gov­ern­ment spend­ing de­ci­sions.

“We’ve seen good pay­back off of th­ese deals,” Nash said. “Com­pa­nies do have choices, and it is a com­pet­i­tive world out there, and we want to make sure we’re fruit­ful with th­ese in­cen­tives. ... It’s not what you gave, but what you get. We’re see­ing a lot of ben­e­fits out of this.”

In­cen­tives are awarded by county or city de­vel­op­ment author­i­ties, which are quasi-gov­ern­men­tal agen­cies ap­pointed by lo­cal elected of­fi­cials. Th­ese agen­cies have the power to re­duce a busi­ness’ prop­erty tax bill for years into the fu­ture.

The im­pact is felt by schools, which bear the brunt of in­cen­tives be­cause they col­lect the largest por­tion of prop­erty taxes, as well as county and city gov­ern­ments.

Su­per­in­ten­dent Green said there should be a cap on the value of ac­tive in­cen­tives, which di­verted about $3 mil­lion from DeKalb’s school sys­tem last year. He vig­or­ously fought tax in­cen­tives for re­de­vel­op­ing the site of the old Gen­eral Mo­tors fac­tory in Do­rav­ille, but he couldn’t stop city of­fi­cials from rout­ing pub­lic money to the pro­ject.

Joe Hud­son, chair­man of the At­lanta NAACP Eco­nomic De­vel­op­ment Com­mit­tee, said com­pa­nies aren’t do­ing enough to earn the in­cen­tives.

“It both­ers me,” he said. “The com­mu­nity should get some kind of re­turn for bear­ing the bur­den of the taxes be­ing given away. Th­ese funds don’t come back lo­cally. They just go away” to share­hold­ers.

Top ben­e­fi­cia­ries

Many fa­mil­iar com­pa­nies are on the list of those re­ceiv­ing pub­lic ben­e­fits for their ex­pan­sions.

In­cluded are lo­cal en­ter­prises like Home De­pot, Equifax and Turner, along­side na­tional ones — Com­cast, FedEx, Costco and State Farm.

Bank of Amer­ica Plaza on Peachtree Street, where the tallest build­ing in Georgia is lo­cated, re­ceived a $1.8 mil­lion tax dis­count last year. The in­cen­tives helped the 55-story tower re­cruit busi­ness ten­ants as it strug­gled with low oc­cu­pancy rates while re­cov­er­ing from fore­clo­sure in 2012.

An­other lo­cal icon, Coca-Cola, ben­e­fited from $894,435 in in­cen­tives last year, pri­mar­ily to sup­port the com­pany’s in­vest­ment in Freestyle foun­tain ma­chines, which al­low cus­tomers to mix and match a va­ri­ety of fla­vors and so­das.

“Th­ese abate­ments helped The Coca-Cola Com­pany make sig­nif­i­cant in­vest­ments to ex­pand our fa­cil­ity and ca­pa­bil­i­ties to bet­ter serve our cus­tomers and con­sumers around the coun­try,” said spokesman Ben Shei­dler in a state­ment. “We’re pleased that the in­vest­ments we made, with the sup­port of Ful­ton County, en­abled our fa­cil­ity to add more than 100 jobs at that site” where the ma­chines are man­u­fac­tured.

Cox En­ter­prises, the AJC’s par­ent com­pany, also re­ceived $1.4 mil­lion in tax breaks last year for re­cently built of­fice tow­ers in Sandy Springs and Brookhaven.

“As an eco­nomic driver and phil­an­thropic leader, Cox is com­mit­ted to the area’s long-term growth. Cox re­cently made sub­stan­tial con­tri­bu­tions to metro At­lanta’s com­mer­cial real es­tate in­dus­try by con­struct­ing more than 1 mil­lion square feet of of­fice space. And, the com­pany-re­lated foun­da­tion has do­nated nearly $75 mil­lion to non­prof­its in Georgia since 2012,” said spokes­woman El­iz­a­beth Olm­stead in a state­ment.

Lux­ury apart­ment com­plexes, es­pe­cially in the Mid­town and Buck­head, were awarded tax in­cen­tives worth more than $7.2 mil­lion. That’s a tax break of­ten crit­i­cized be­cause it leads to few jobs.

But such in­cen­tives for apart­ments are valu­able when they in­crease prop­erty val­ues on un­pro­duc­tive land and bring in res­i­dents who spend money in the area, con­tribut­ing sales taxes along the way, said Jim Borders, CEO of real es­tate and de­vel­op­ment com­pany No­vare Group.

Three of the com­pany’s com­plexes — Sky­house Buck­head, Sky­house Mid­town and Sky­house South — re­ceived $1.9 mil­lion in prop­erty tax breaks.

“One mis­con­cep­tion seems to be that th­ese projects re­sult in a loss of tax rev­enue,” Borders said. “An un­der­de­vel­oped or even blighted lo­ca­tion that gen­er­ates lit­tle or no prop­erty taxes is trans­formed through the in­vest­ment of $75 mil­lion to $100 mil­lion of cap­i­tal into a pro­ject that will im­me­di­ately be­gin gen­er­at­ing sub­stan­tial new tax rev­enue upon com­mence­ment of oper­a­tions, and will be fully tax­able within 10 years.”

The big pic­ture

The 2016 tax in­cen­tive dis­clo­sures don’t tell the full story — for ex­am­ple, they don’t in­clude state in­cen­tives awarded to busi­nesses.

They also don’t cover tax breaks that have been ap­proved but aren’t on the books yet.

In the past three years alone, gov­ern­ment de­vel­op­ment author­i­ties have com­mit­ted about $500 mil­lion in fu­ture prop­erty taxes for projects in DeKalb, Ful­ton, Gwin­nett and Cobb coun­ties and the city of At­lanta, the AJC re­ported in March. That fig­ure was de­rived by cal­cu­lat­ing the fore­cast value of prop­er­ties and fu­ture pro­jec­tions over the term of the in­cen­tives, which last 10 years or more.

Still, the dis­clo­sures pro­vide more in­for­ma­tion to the pub­lic than ever be­fore.

“Gov­ern­ments can gauge where they want to be on this spec­trum of abate­ments,” said Laura Wheeler, a tax ex­pen­di­ture ex­pert for Georgia State Univer­sity’s Fis­cal Re­search Cen­ter. “By know­ing where they are and where their peer coun­ties are, they can de­cide whether they want to be more ag­gres­sive in th­ese abate­ments or less ag­gres­sive.”

‘One mis­con­cep­tion seems to be that th­ese projects re­sult in a loss of tax rev­enue.’ Jim Borders CEO of No­vare Group

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