New Year, New TAD Deal
Happy New Year! I hope everyone is enjoying the last day of semester break and getting ready for school to start in the morning!
Update 1/7/19 at 6:10 p.m: I am pleased that the Atlanta City Council joined the Atlanta Board of Education today in unanimously approving the intergovernmental agreement regarding Atlanta Public Schools’ (APS) contribution to tax allocation districts (TADs). This agreement creates the most comprehensive reform of TADs in the decades-long history of APS’ participation. Our intervention in the bond validation proceedings in the Westside TAD will now be withdrawn.
Update 1/7/19: Atlanta School Board Approves IGA with the City of Atlanta on Tax Allocation Districts
The Atlanta Board of Education today approved an intergovernmental agreement (IGA) with the City of Atlanta and a resolution related to the Westside Tax Allocation District (TAD) that would create the most comprehensive reform of TADs in the decades-long history Atlanta Public Schools (APS) has been involved in them. Upon ratification and acceptance of the resolution and IGA by the City and APS, APS’ intervention in the bond validation proceedings in the Gulch would be withdrawn from the courts.
The IGA also would reduce APS’ exposure in the Gulch from $1.56 billion to $1.38 billion, distributes the impact of the APS increment more evenly over the lives of the TADs, limits exposure of the APS tax digest to be no more than 10% of collectable digest in any given year (based on current assumptions) and relieves immediate pressure on the APS budget. The agreement also provides a net gain of between $130 million and $180 million to APS over the life of the TADs.
I want to thank members of the Atlanta Board of Education for their unanimous vote in passing today’s IGA and resolution with the City of Atlanta, providing APS with a more predictable, manageable and sustainable way of contributing to and supporting economic development in the City, while balancing the interests of our 52,000 students, 6,000 employees and 158,000 taxpayers.
In addition, this agreement caps our financial contributions in future TADs and sparks economic development in four TADs on the Southside, where so many of our students and employees live.
I want to thank everyone who has worked tirelessly on this issue for over a year, both at APS and at the City of Atlanta, for helping us get to this point. I especially want to thank our legal team and our Chief Financial Officer, Lisa Bracken. Today’s important step could not have happened without the leadership of Mayor Keisha Lance Bottoms and the City’s legal team on this issue for their commitment to working with us and reaching an agreement.
January 6, 2019 — I wanted to share an important update with you regarding tax allocation districts (TADs) and their fiscal impact on APS. Over the past month, in collaboration with the City, we have worked to find alignment around APS’ longstanding concerns related to all tax allocation district agreements in which APS participates. Here is where we are with our discussions with the City of Atlanta (City): we do have an agreement between the two administrations. However, the agreement is not done until both the Board of Education (BOE) and City Council approve. The final version of the administration’s recommendation to the BOE can be found on Board Docs at http://www.boarddocs.com/ga/aps/Board.nsf/goto?open&id=B8532Z74B5ED. While the timing of the public posting is shorter than we would all prefer, and for that I apologize. The timeline was driven by court-imposed deadlines that were outside of APS’ and my control.
For context, APS has long been a supporter of economic development for our communities since before my time as Superintendent. We are the largest contributor to five of the ten TADs in the City (Eastside, Atlantic Station, BeltLine, Perry Bolton, and Westside). Since 1999, APS has invested $434 million in those projects. We estimate that we will continue to contribute an additional $1.2 billion more over the life of those five TADs.
While you may hear varying perspectives on the value of the agreement (including some folks who are using outdated and inaccurate information or just making up stuff…SMH!), please understand that our District has its own internal goals – smoothing the impact of TADs, relieving pressure points and windfalls/shortfalls, positioning ourselves better to weather an economic downturn – which are supported by financial analysis reflected in the terms of the agreement. The District worked to achieve predictable, foreseeable, and time-bound use of its increment in TADs, which was a driver behind negotiations allowing APS to more strategically participate in existing and any new TADs. This is a key step toward APS continuing to support the City’s redevelopment initiatives while balancing the interest of economic development with the District’s educational mission and responsibilities to our 52,000 students, 6,000 employees and 158,000 taxpayers.
The APS administration will be presenting both a resolution and intergovernmental agreement to the BOE for recommended action this Monday, January 7 at 9:30 a.m. If approved, the new resolution would supersede the resolution approved by the BOE on December 7, 2018. The new resolution removes any conflicting portions from the last resolution related to the Westside Tax Allocation District bond validation proceedings. Upon ratification and acceptance of the resolution and IGA by the City and APS, APS’ intervention in the bond validation proceedings would be withdrawn from the courts.
The following are key points in the IGA settlement agreement:
- APS will ratify APS’ participation in the Westside TAD through 2038.
- City will reimburse APS for capital expenditures that APS made in the Westside TAD and make additional payment in lieu of taxes (PILOTS) to APS as follows: $10 million in 2019, $1.25 million in years 2020-2023, and 50% of APS’ increment (after debt service and certain capped fees) from 2024 until the TAD closes in 2038.
- City will pay off bonds on the Eastside TAD in 2019 and then make annual PILOTS of APS’ portion of increment through the remaining life of the Eastside TAD. The Eastside TAD will remain open.
- In 2020, APS will start participating in the City’s four Corridor TADS for 30 years. APS’ contribution to those TADs is capped. The four TADS are Campbellton Road TAD, Hollowell/M.L. King TAD, Metropolitan Parkway TAD and the Stadium TAD.
- City will not issue any new bonds or authorize any new projects in the Atlantic Station TAD, so that the Atlantic Station TAD debt can be fully paid as soon as possible.
- The IGAs for the Beltline and Perry Bolton remain in place, and City agrees to fulfill its obligations under those IGAs.
- If a TAD does not close on the agreed date, then City will use all legally available sources to pay APS 100% of its education tax increment starting the year after the TAD was supposed to have closed.
- These new negotiations yield a net positive impact of around $130 -$180 million but more importantly distributes the impact of the APS increment more evenly over the lives of the TADs, limits the exposure of the APS Tax digest to be no more than 10% of collectible digest in any given year based on current assumptions, and relieves immediate pressure on the APS budget by $10 million.
So, that’s the skinny!
BUT, if you want to get schooled on TADs – and more! – keep reading below:
Tax Allocation Districts and why they should matter to you!
What’s a TAD?
A TAD is a geographic region that is economically depressed, underdeveloped or blighted and would not be developed but for the designation of a TAD. That designation allows developers to build on the property through debt or bonds that are then paid off by the property taxes generated from that new development. Put simply, instead of being distributed to our school district, the City of Atlanta and Fulton County, the future tax revenues generated within the new TAD development are used to pay off the debt or bonds for that development.
The long and short of it is that a TAD is intended to spark development in areas of the City that would otherwise remain undeveloped.
From Where Does the $$ Come?
You guessed it! Tax revenues! When a TAD is established, APS, the City and Fulton County can each decide if that entity will participate by contributing any new taxes generated from the new development back into the TAD to pay off the debt and redevelopment costs. When all debt and costs are paid, APS, the City and Fulton County begin receiving those tax revenues again.
In What TADs is APS Currently Participating?
Atlanta Public School started participating in TADs in 1999 under the leadership of prior Boards and Administrations. We currently participate in five TADs:
|APS TADs||Inception||Close Date||APS Contribution |
Since 1999, APS has contributed approximately $434 million in educational taxes for re-development in Atlanta, making APS the largest investor in these TADs at 52%. If the TADs we participate in continue to operate without any additional redevelopment projects or bond issuance and each TAD ends when it supposed to, then APS will contribute another $1.2 billion toward those TADs. If you add the $434 million we’ve already contributed to the anticipated $1.2 billion, that’s a total of $1.6 billion of educational taxes we have contributed toward re-development in this city.
Granted, if, and when these TADs end, APS is supposed to get the benefit of higher tax values from those TADs. That hasn’t happened yet. We are hopeful that the proposed new agreement puts the District on a better course to achieve predictable, foreseeable, and time-bound use of our increment in TADs, which was a driver behind negotiations allowing APS to more strategically participate in existing and any new TADs.