Mayor Andre Dickens is relying heavily on tax allocation districts (TADs) to fund his sweeping $5.5 billion plan to invest in long-neglected Atlanta neighborhoods. But public finance experts and city officials alike say the city will need public funding sources beyond tax increment revenue to make the Neighborhood Reinvestment Initiative (NRI) a reality.
Atlanta City Councilmember Michael Julian Bond last week introduced legislation from the Dickens administration that would extend the lifetimes of six of the city’s eight active TADs through 2056. If approved by the city council, Fulton County, and Atlanta Public Schools, the extensions would allow the city to keep capturing future property-tax growth in the Westside, Eastside, Campbellton Road, Donald Lee Hollowell Parkway/MLK Jr. Drive, Metropolitan Parkway, and Stadium TADs for decades.
Dickens’ chief of staff, Courtney English, says that even without extending the Beltline and Perry-Bolton TADs, the remaining six TADs could generate between $5 billion and $7 billion for the Neighborhood Reinvestment Initiative over the next 30 years, assuming 5% annual growth in property values.
But TAD funds collected can only be spent within that TAD — and the NRI includes neighborhoods outside the TAD boundaries. Consequently, the city is looking for other public funding sources beyond the tax increment revenue from these six TADs.
There is likely no single public funding source that can supplement the tax increment revenue from the TADs, said Sharon Gay, who helped to design Atlanta’s initial TADs in the early 1990s and has informally advised the Dickens administration.
TADs can jumpstart the engine for the Neighborhood Redevelopment Initiative, but other funding sources must eventually keep it running, said Gay, who’s senior counsel at Dentons. Instead, the city will have to layer funding over time, such as state infrastructure dollars, (increasingly rare) federal grants, philanthropic support, private capital, and city-issued bonds. Foundations and corporate donors typically want to see government commitment and proof of execution before investing heavily, she added.
NRI Trust Fund
One key piece of the new TAD-extension legislation is creating an NRI Trust Fund to fund development and infrastructure projects for neighborhoods outside of the TADs. It would also pay for social services across the NRI’s footprint, since TAD dollars are reserved for capital projects. Notably, the NRI Trust Fund would be controlled by the Atlanta City Council. By contrast, it is the city’s economic development arm, Invest Atlanta, that manages the TAD funds.
The question is how to fund it.
The city council’s NRI task force in March urged the Dickens administration to find additional public funding sources. It suggested two property tax sources beyond the TADs: special service districts and an economic development millage.
Special services district
Dickens’ deputy chief of staff, Katie Molla, said in an email that the administration plans to ask the city council to create a commercial special services district that imposes an additional tax on commercial properties within it.
Additional property tax revenue from a special services district could finance affordable housing projects, as well as programs for food access, early childhood education, small business support, and workforce development, Molla said.
Molla didn’t say how much the Dickens administration anticipated raising from a special services district tax or where it would be located.
Public finance expert Sherman Golden, who’s senior counsel at Thompson Hine, said special services districts can be useful for generating revenue that’s not restricted to development projects, like a TAD. However, he added, they raise a fairness problem: Large landowners within a special services district may benefit most from the improvements that the taxes fund, but smaller property owners must still pay the tax.
Economic development millage
The NRI task force also proposed imposing an additional tax on Atlanta property owners called an economic development millage to fund activities such as attracting new business to an NRI neighborhood or improving infrastructure. That would require an increase to the city’s current 11.37 millage rate. Each mill represents $1 of property tax per $1,000 of assessed property value, and state law enables the city to authorize a levy and collect up to 3 mills to provide financial assistance to a development authority — in this case Invest Atlanta.
Golden said adding an economic development millage tax is “probably a good idea,” but he cautioned that it’s less targeted than other public funding sources, because it taxes all Atlanta property owners, rather than those who directly benefit from new development.
Gay, the TAD expert, said she sees adding an economic development millage to Atlantans’ property tax bill as one layer in a larger funding stack. It would likely be more politically feasible to structure such a tax so it doesn’t affect the overall millage rate, she added. That would mean offsetting any additional millage to fund the NRI against the increased revenue to the city’s general fund when the Beltline TAD expires in 2030, and then the Perry-Bolton TAD in 2041.
Upzoning fee on developers
Golden’s preferred alternative to raising property taxes is to charge developers an upzoning fee to build denser, more valuable projects.
He said an upzoning charge would be more targeted than either raising property taxes via a special services district or an economic development millage, because it would tax the parties directly benefiting from development activity.
“An upzoning charge is better than a TAD, because of geographic limitations on TADs — and it’s better than the economic development millage, because that would tax everybody, including those people that don’t benefit,” he said. “An upzoning charge just taxes the people that are directly benefiting.”
However, Golden pointed out, when the city upzones a developer’s property, it not only increases the value of their property – but also that of adjacent land. Increases in land prices make affordable housing harder to build, he said, so the city should spend a portion of any upzoning fees it collects for affordable housing.
“You just exempt affordable housing from the [upzoning] charge,” he added, by reducing or waiving the fee for development projects that include a meaningful share of affordable units.