Residents may have questions about the last item on their November ballot, the redevelopment powers local referendum, before casting their vote. To help answer residents’ questions, the below question-and-answer style guide is being shared.
Why is this item appearing on the ballot?
The Henry County Board of Commissioners passed a resolution on April 7, 2020 requesting the local legislative delegation to introduce local legislation allowing for the redevelopment powers referendum in Henry County, and if approved, for Henry County to be permitted to exercise redevelopment powers within the law.
The local legislative delegation sponsored house bill 1249 allowing for the referendum and redevelopment powers. Governor Kemp signed the bill on June 30.
What are the redevelopment powers?
Georgia’s redevelopment powers law gives local governments (cities and counties) the authority to sell bonds to finance infrastructure and other redevelopment costs within a specially defined area, a tax allocation district or TAD. The bonds are secured by a “tax allocation increment” which is the increase in the property tax revenues resulting from redevelopment activities occurring. As public improvements and private investment take place in a TAD, the taxable value of property increases. The city /county collects those revenues, putting the increase due to the new investment into a special fund to pay off bonds or loans that financed the public improvements in the district.
Where can cities and counties form TAD districts?
The redevelopment powers law limits communities to including a maximum of 10% of the community’s Tax Digest in all TADs it creates. When forming a TAD a city or county designates a specific geographic area that has the potential for redevelopment but suffers from blight, or underinvestment, or a lack of infrastructure.
Do I pay a higher tax rate if my property is in a TAD district?
No, the millage rate in a TAD is the same as outside the district. There is no additional assessment charge in TAD like there would be in a CID or special taxing district.
What happens to the property taxes already being collected in the TAD district when it’s formed?
The taxes collected by the city, county and school system as of the date the TAD is formed continue to go to those taxing districts over the life of the TAD.
What does the TAD referendum authorize?
The redevelopment powers law requires that local communities authorize by referendum the use of tax allocation districts in their communities. Approval of the referendum gives local governments the right to form one or more TADs, but it does not form any districts or grant the incentive to a project or projects.
How is a TAD area created?
If the TAD referendum passes, the local governments are authorized to form one or more TAD districts consistent with the requirements of Georgia’s Redevelopment Powers Law. That is accomplished by designating a TAD boundary and preparing a TAD Redevelopment Plan to act as the business plan for the operation of the district. The plan is discussed at two public hearing and then must be approved by a resolution of the local government. Once the resolution is passed, the taxable value in the TAD is “certified” as the base value of the district.
How long does a TAD stay in effect and can it ever be dissolved once it is created?
The length of the TAD is determined by the redevelopment plan and approved in the resolution passed by the local government. In most but not all cases, TADs are initially approved for 30 years so they can be effectively used to secure bond financing. It is typical for intergovernmental agreements between cities, counties and school boards to include provisions for ending the agreement and returning tax increments in the event that expected redevelopment does not take place, bonds are not issued by a designated deadline or bonds are issued but paid off faster than expected. These types of provisions provide flexibility to dissolve TADs prior to the stated termination date if warranted.
How do private developers benefit from TADs?
Creating a TAD allows for future tax revenues generated by a redevelopment project to be used to help pay for some of the costs of building the project. Usually, TAD bonds are used to either pay for public improvements to enhance a project or to help reduce the higher costs and risks of investing within a blighted area. TADs are often used to help pay for demolition of existing buildings, expensive water or sewer upgrades, parking structures, new roads, streetscape improvements or other extra costs that otherwise make private redevelopment financially unfeasible.
How does a developer get access to TAD funds and how are taxpayers protected if the developer doesn’t perform?
Once the TAD is created and the consent agreements are in place, the local government can then evaluate applications from private developers who wish to undertake redevelopment projects and access TAD funds to help defray project costs. If a local government agrees to contribute TAD funds to a project, the terms are negotiated in an agreement with the developer. The “development agreement” specifies the obligations and performance requirements of the developer in order to qualify to receive the funds, particularly if bonds are involved. Underwriters of TAD bonds require extensive development agreements to protect bondholders and ensure that projects are completed as proposed. As an added protection, TAD funds are usually released to developers in phased payments over time as construction is completed and the taxable value of the property is increased.
What would happen to taxpayers if there was a default on a TAD bond?
TADs are revenue bonds and not general obligations of the local government. Therefore taxpayers are not at risk in the unlikely event of a default. Investors who finance TAD bonds understand this and typically charge a higher interest rate than on municipal bonds which are guaranteed by taxpayers.
The material above, with the exception of the first question pertaining to Henry County, has been reprinted from a document uploaded online by the city of Brunswick. The original source is not specified.
This information is being provided to help educate voters about tax allocation districts and is not meant to advocate for or against the referendum.