What are TADs?
TADs are areas that are specifically designated by local governments for TIF projects where real estate property taxes gathered above a particular threshold for a set period of time must be used to fund specified improvements. When considering possible TADs, local governments will consider geographic areas that have potential for development or redevelopment, but which suffer from blight or other distressed conditions. As improvements and redevelopment occur in such areas, the taxable value of property in the TAD increases, resulting in additional tax revenues that are held by the local governments in special funds to pay the debt service on tax allocation bonds (“TABs”) issued to fund the improvements. The life of a TAD is typically 20-25 years, or sufficient time to repay the TABs.
How does it work in Georgia?
Tax incentive financing is generally referred to in Georgia as “TAD financing.” Local governments in Georgia were authorized to use TAD financing by virtue of Georgia’s Redevelopment Powers Law, codified at O.C.G.A. § 36-44-1 et seq., as amended from time to time (the “Redevelopment Law”), and adopted by the General Assembly in 1985, to issue TABs for the purpose of financing infrastructure and other redevelopment costs within a specifically defined area. In order to create and carry out the purposes of TADs in Georgia:
(i) The Redevelopment Law must first be made applicable to a certain county or city through the passage of a local law by the Georgia General Assembly and its approval by virtue of a special election in the county or city to be affected by TAD financing.
(ii) The city or county will then prepare a redevelopment plan for the proposed TAD and submit the plan for consent to the political subdivision or board of education required to consent.
(iii) The city or county will then submit the plan to the local legislative body of the political subdivision whose area of operation will include the TAD.
(iv) The local legislative body will then adopt a resolution:
a. Approving the redevelopment plan,
b. Describing the TAD with sufficient particularity to identify the territory included,
c. Creating the district on December 31st of the year in which the resolution was adopted (or December 31st of a subsequent year, if so decided by the local legislative body),
d. Assigning a name to the TAD,
e. Specifying the estimated tax allocation increment base,
f. Specifying ad valorem property taxes to be used for computing tax allocation increments,
g. Specifying property to be pledged for payment or security for payment of TABs, and
h. Setting forth findings that the TAD is an area that would not be redeveloped without the approval of the redevelopment plan or contains assets that have not been properly preserved and the use of TAD financing will enhance the value of a substantial portion of the other real property in the TAD.
(v) A certified copy of the authorizing resolution must be submitted to the local legislative body of the political subdivision whose area of operation will include the TAD prior to including the ad valorem property taxes or general funds in the calculation of the tax allocation increment.
Once a TAD has been properly designated and approved, TABs may be issued by the city or county in order to pay redevelopment costs for approved projects within the TAD. TABs are secured by the incremental increase in tax revenues resulting from the redevelopment activities within the TAD and may be qualified to pay interest exempt from state and federal income taxes. Over the term of a TAB, the tax increment will be set aside to pay debt service on the bonds. Once the TAB is retired, the increment is placed into the general funds to be spent at the taxing jurisdiction’s discretion. TABs are not considered general obligations of the issuer.
For purposes of financing, either (i) TABs may be sold by the local government on the front end of a project so that funds are readily available for initial costs such as infrastructure or land acquisition costs, and the bonds are then fully or partially paid with tax increment revenues as they are collected, or (ii) improvements and projects may be financed on a “pay-as-you-go” basis, whereby initial development costs are paid from cash or other sources available and then reimbursed as tax increment revenues are generated.
What are the benefits of TAD financing?
TAD financing provides the funding necessary for projects designed to stimulate redevelopment that may otherwise not have been feasible.
TAD financing provides local governments with the ability to make otherwise challenging redevelopment sites attractive to developers.
TAD financing allows local governments to leverage tax increments in order to receive new public infrastructure and private investment without spending current tax revenues.
TAD financing allows access to redevelopment powers, such as eminent domain.
TAD financing has the potential to create new jobs, eliminate blight, reduce crime, increase property values and tax revenues, decrease poverty, create economic opportunities, and redevelop underperforming neighborhoods and underused commercial parcels.
What are some examples of TIF projects?
TIF has been used in DeKalb County, Georgia and the cities of Atlanta, Macon, College Park, East Point, Marietta, Acworth and Smyrna, among others. The following are two of many examples of successful TIF projects:
- Atlanta, GA: The City of Atlanta in 2001 issued $67,505,000 in TABs for the purpose of financing a portion of the infrastructure work for the Atlantic Station project. The total infrastructure development cost budget was $187,000,000. Bond proceeds were used for clearing and grading, utilities, streets and sidewalks, environmental remediation, parking, costs of issuance, and related items. The TAD contained approximately 119 areas. It is estimated that for this project, the incremental tax revenue increase for 2006 over the 2001 base year was $8,347,772.
- Smyrna, Georgia: The Smyrna TAD was established in 2003 to finance infrastructure for the redevelopment of 2 obsolete shopping centers along Atlanta Road ($27,000,000 project).
Community Improvement Districts
What are Community Improvement Districts?
Article IX, Section VII of the Constitution of the State of Georgia provides that the General Assembly may, by passage of local law, provide for the creation of one or more community improvement districts (“CIDs”) for any county or city or combination thereof. A CID is a unit of government with the power and authority to provide certain governmental facilities and services, such as street and road construction, parks, water systems, and other services and facilities. Property owners within CIDs agree to a self-imposed tax to be used for improving the district. CIDs can either be a public body or a not-for-profit corporation established to collect money from property taxes, business licenses, sales taxes or user fees within the CID, which funds are then used to provide services within the district. To finance its facilities, the administrative body of a CID may incur debt without voter referendum. The debt of a CID is backed by the full faith, credit and taxing power of the CID but is not an obligation of the State of Georgia or any local government of the State other than the CID.
How does it work?
While the Constitution allows for CIDs, local legislation is also required to provide for CIDs within a specified county or municipality, or both. Thus, under the Georgia Constitution, the creation of a CID requires:
(i) Adoption of a resolution consenting to the creation of the CID by the:
(a) governing authority of the county if the CID is located wholly within the unincorporated area of a county,
(b) governing authority of the municipality if the CID is located wholly within the incorporated area of a municipality, or
(c) governing authorities of the city and municipality if the CID is located partially within the unincorporated area of a county and partially within the incorporated area of a municipality;
(ii) Written consent to the creation of the CID by the:
(a) majority of the owners of real property within the CID who will be subject to taxes, fees and assessments levied by the administrative body of the CID; and
(b) owners of real property within the CID who constitute at least 75% (by value) of all real property located within the CID that will be subject to taxes, fees and assessments levied by the administrative body of the CID, with value being determined by the most recent approved county ad valorem tax digest.
Once the foregoing have been achieved, the County Tax Commissioner will certify that the required approvals and percentages have been satisfied. The County Board of Commissioners and/or the City Council must then pass a resolution consenting to the creation of the CID.
CIDs are governmental entities administered by a board of directors, the composition of which is set forth in local legislation. The board consists of elected and appointed members, with numbers varying per CID. For example, Cobb County and Gwinnett County CIDs are governed by a board consisting of 6 members elected by property owners and 1 member appointed by the County. Terms of office for such members are also set by legislation.
The board of a CID generally raises funds by setting ad valorem millage rates on real property. However, property used for agricultural, residential or forestry purposes may not be assessed. The millage rate is constitutionally capped at 2.5% of the assessed value of the real property (i.e. 25 mills), but local laws may further limit the millage rate. For example, Cobb County has placed the millage rate ceiling at 5 mills. The rate is placed upon regular tax bills that are sent to owners by the Tax Commissioner. Once the taxes are collected, the Tax Commissioner sends such tax revenues to the CID Board for expenditure in accordance with the CID’s purposes. CID revenues may only be used to provide governmental services and facilities with the CID.
What are the benefits of CIDs?
A special taxing district is created through a CID to pay for infrastructure needs and the provision of necessary services and facilities, such as the following: street construction and maintenance, parks and recreation facilities, storm water and sewage collection, terminal and dock facilities, parking facilities, and public transportation.
Where do CIDs exist in the State of Georgia?
Numerous CIDs exist in the State of Georgia, with a majority of such CIDs being located in and around the Atlanta area. For example, the following CIDs exist: Cumberland (Cobb County), Buckhead (Atlanta), Downtown (Atlanta), Midtown (Atlanta), Town Center (Cobb County), Gwinnett Place (Gwinnett County), Lilburn (Gwinnett County), and Town of Braselton (Braselton).