Sunday, June 7, 2009

Sembler Tax Abatement Update and June 8 Meeting Information by Rep. Mike Jacobs

Thank you to everyone who responded to my e-mail message last week regarding the Sembler tax abatement proposal. I intend to reply to each of your messages personally, although that will take some time.

Most responded in opposition to the tax abatement. A handful supported it.

This is not about “standing in the way of progress,” as a couple of people characterized it. It’s about transparency and accountability in the way our county and school taxes are managed. It’s also about a very serious and real concern that throwing open the barn doors to giving property tax abatements to developers whose projects are caught in the doldrums of the real estate market ultimately will place upward pressure on the tax burden of DeKalb County citizens.

This e-mail is divided into categories to make it easier to read. It also includes a call to action at the end of the message.

COMMUNITY MEETING ON JUNE 8

There will be a community meeting regarding the Sembler tax abatement proposal on Monday, June 8, at 7:00 p.m. in the Fellowship Hall of Chamblee United Methodist Church, 4147 Chamblee Dunwoody Road.

We will discuss the mechanics of the tax abatement and ways that you can make sure you have a voice in whether it goes forward. In addition, Sembler will make a 15-minute presentation to give you their perspective on the proposal.

John Woodham, a lawyer who is fighting similar transactions in Fulton County, will not be speaking at the meeting. He had been invited to speak, but then last week the AJC and Fulton County Daily Report reported that he is facing sanctions from a Fulton County Superior Court judge after some questionable conduct. I promptly removed him from the meeting agenda.

DEVELOPMENT AUTHORITY MEETING ON JUNE 18

The next meeting of the DeKalb Development Authority is Thursday, June 18, at 8:00 a.m. Stay tuned for more information. There is no word yet as to whether the Development Authority will make a decision on the Sembler tax abatement proposal at this meeting.

BANKRUPTCY CLARIFICATION

I want to clarify that the Development Authority is never “on the hook” for any failure to repay the revenue bonds that would be issued to finish construction of the Town Brookhaven project. This is because Georgia law specifically provides that revenue bonds are never an obligation of the governmental body that issued the bonds.

With regard to bankruptcy, the point I was making in last week’s message (click for updated version) is that bankruptcy law gives a tenant such as Sembler Bell Brookhaven, LLC the unilateral power to reject its unexpired lease with a landlord such as the Development Authority, thus abandoning the failed project to the Development Authority.

REVENUE PROJECTIONS TOO ROSY?

At the June 8th community meeting, you will see tax revenue projections that appear to indicate the Town Brookhaven project will generate more tax revenues for the county and the school system over the 20-year life of the tax abatement than will be lost as a result of the abatement.

Caveat emptor. Buyer beware.

Like any projections, these tax revenue projections are based upon assumptions that might not pan out. You should make up your own mind about them, but remember that Sembler and the Development Authority are not infallible. Just last week, Dr. Eugene Walker, the Chairman of the Development Authority, e-mailed some of my constituents this gem of a prediction:

“It is estimated that this project will create 1,000 new jobs in the County, which is substantial particularly during these tough economic times, but this factor (I am surprised) does not appear to be receiving very much attention. If you conservatively estimate an average salary of $40,000 per job, that’s $40 million in wages pumped back into the local economy. Every year!”

Before assessing the “conservatism” of Dr. Walker’s estimate, it’s important to bear in mind that Town Brookhaven primarily includes retail stores and restaurants that are intended to divert business away from stores and restaurants located in Buckhead and Perimeter Center. To be fair, there is one small to mid-sized company considering the project as one of a couple of places to relocate its headquarters. However, I still wouldn’t call “1,000 new jobs” at “$40,000 per job” a conservative estimate.

Furthermore, many of the tax revenues included in the projections are from dedicated sources that are not used for providing county government services or covering instructional costs. For example, many of the projected tax revenues come from the seven-cent sales tax. Out of every seven pennies of sales tax, four pennies go to the state government, one penny goes to MARTA, one penny is for the five-year SPLOST that goes toward school construction (not school operations), and one penny goes toward the Homestead Option Sales Tax (HOST). Only that final penny goes to the county government. None of these funds are used directly by the Board of Education for school operations.

MY POSITION ON THE TAX ABATEMENT

As a state legislator, I have a role in writing the laws that govern the Development Authority.

Transactions like the Sembler tax abatement should be subject to a requirement that the elected bodies which might lose tax revenues (here, the Board of Commissioners and the Board of Education) must approve the tax abatement for it to take effect.

This is particularly true where the tax abatement would be granted after the developer already has broken ground on the project and is seeking to compensate for assumptions about the real estate market that proved to be incorrect.

State law gives the non-elected Development Authority the sole power to make this decision. I intend to change that.

Some, but not all, PILOT-type bond deals already have been made subject to a local government approval requirement. That was done in House Bill 63 (click for information), which passed the General Assembly this year. The same approval requirement also applies to those now-infamous Tax Allocation Districts (TADs).

The Development Authority is comprised of individuals who bear no direct responsibility to you, the voters and taxpayers of DeKalb County. Your elected officials should be making these decisions, not an unaccountable board that meets at 7:30 or 8:00 in the morning.

As I mentioned last week, Sembler’s tax abatement will have to be approved in a bond validation proceeding in DeKalb County Superior Court. DeKalb citizens are entitled to make a legal objection in that proceeding. Thus far, I have come up with at least one objection worth making.

There has been some chatter that Sembler and the Development Authority might claim that they are entitled to “bootstrap” their new tax abatement proposal to the Superior Court’s approval of a different abatement that was obtained last year between Christmas and New Year’s Day. I don’t see how that is legally permitted, because the Superior Court’s prior judgment in favor of Sembler and the Development Authority is a final, binding judgment as to “all questions of law and of fact.” They cannot now change the facts and claim to be covered by the same Superior Court judgment. I will seek an injunction from the Superior Court if they try to do this.

This is not my first time at the bond validation rodeo (click for information about the Arts Center bond validation). I am willing to forgo making any formal objection if Sembler and the Development Authority will do the right thing and allow the elected officials on the Board of Commissioners and the Board of Education to make the final decision on their tax abatement.

EUGENE WALKER’S CONFLICT OF INTEREST

I also want to clarify that I do not blame Sembler for looking after its business interests.

I do, however, believe that Gene “$18K” Walker should be made to understand the intractable conflict of interest between his dual service as Chairman of the DeKalb Development Authority and as a member of the DeKalb County Board of Education.

The public should call or e-mail every other member of the Board of Education and ask them to insist that Dr. Walker allow them to vote on whether the Sembler tax abatement will happen.

Word is spreading that CEO Burrell Ellis may insist that the Board of Commissioners be given the right to vote on the Sembler tax abatement proposal. He could make this happen because he appoints the members of the Development Authority.

Shouldn’t the Board of Education have that same right? After all, the school system could stand to lose more property tax revenues than the county if these tax abatements are allowed to go forward.

Both the Board of Education and the Board of Commissioners should have the right to vote on the Sembler proposal. If Dr. Walker disagrees with that, then he should have to answer to his colleagues on the Board of Education for his refusal to let them vote. He has sufficient power and influence over the affairs of the Development Authority to hold up the tax abatement until the Board of Education weighs in.

You can make that happen. Please contact the members of the Board of Education and ask them to ask Dr. Walker to let them vote.

You can find their contact information here (click each member’s name for a link to their contact information):

Tom Bowen, Chair
Zepora Roberts, Vice Chair
Jim Redovian, District 1
Don McChesney, District 2
Sarah Copelin-Wood, District 3
Paul Womack, District 4
Jay Cunningham, District 5
Pamela Speaks, District 8

If the above links don’t work, you can find contact information for the Board of Education at www.dekalb.k12.ga.us/board/members/.

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