Property Tax Silly Season

Property digests are out and cities, including Dunwoody are posting their Notice Of Property Tax Increase. Why can that be? Well the short answer is because they are required to by law and rest assured were they not required you would never get that memo. Apparently the practice of back-door tax increases had become such a prevalent practice annoying so many voters that the State was compelled to step in mandating these fleeting notices.

What you will see and hear for some time is "We didn't raise the Tax Rate, ignoring the fact that your tax bill did indeed go up. More aggressive and egregious propagandists will simply say "We didn't raise taxes" with the assumption that you believe "tax rate" is implied or that your tax lies unnoticed buried in some escrow account or that you're just plain stupid.

In DaVille it gets better. We don't have a lot of greenfield left to develop, limiting inventory, creating scarcity and inherently driving up property values. That Econ 101 stuff you slept thru really works. You kinda knew that when you bought--you expected your home value to rise and at least be a hedge against inflation. Here's a news flash: the folks running this city know this and they're using it to their advantage. Hence the State disclosure law.

A knock-on effect of this inherent limitation on traditional development (setting aside for the moment high density residential -- apartments -- and high density office) is that the service demand you, as a traditional suburbanite, place on City operations is not increasing. But your tax bill sure as hell will. So think back to the days of Dunwoody Yes! who loudly complained about our tax monies being funneled down south and how at shift change cops headed straight down to Buford Highway. Are you deja vu-ing yet? Fast forward to citihood and our tax increases are being thrown to the growing service demands of Perimeter Center where unrestrained growth is the order of the day.

Even still a fundamental question remains: is tax revenue a direct derivative of needs? Of course not. These backdoor increases are viewed as revenue windfalls and every penny will be spent.  It seems inherent in government budgeting to fund existing programs with year over year increases and add new programs whenever the opportunity arises.  No politician is going to openly justify OPM spending each and every year, no more than they will annually review portions of City operations to determine if they are needed going forward. And no one is going to even suggest zero based budgeting as this was merely a Fool's Tool that was used pre-city to beat up on DeKalb.

In an election cycle that saw the prominent politician who drove us towards citihood demand a more accurate accounting of eSPLOST-V spending maybe it is not so unreasonable to demand a similar accounting from the City regarding this tax increase.

Remember

It Is Called Discrimination

Discrimination is using the brain god gave you to discern the best option or action to take. In and of itself discrimination is not inherently bad. But when used, particularly by governments, to control or even just influence what folks can do or where they can live based on colour, culture, ethnicity or even socio-economic status there is an evil taint.

But that is exactly the kind of discrimination underpinning the "these apartments are good, but those, back then were bad."

To really grok this you must remember Dunwoody's first assault on undesirables hoped to use a Parks Bond Referendum to capitalize our own little Pogrom. This forced expulsion was rationalized as a way to improve our schools and therein lies the big clue. So what about these most-favoured apartments? How can they possibly be better than the ones the City so wanted to bulldoze? How are they even different?

Turns out the problem is not with apartments per se, but with the specific kind of folks that live therein. In both cases they're immigrants. But over by PIB they're hispanic, poor, with more than few suspected to be undocumented. Down Ashford Dunwoody, they're asian, mostly Indian (dot not feather), sporting H1B visas and IT jobs with more than decent salaries. And they speak english--kinda.

More importantly the PCID apartment dwellers are educated and fully intend that their children will not just succeed in school--they will excel. These apartment dwellers are all right by us not least because their children, who primarily attend Austin and Dunwoody Elementary are part of the reason that each of these schools ranked above the much ballyhooed Vanderlyn on the most recent CCPRI rankings. Austin even ranked well against special charter and magnet schools.

In short, it is simple discrimination and socio-economic segregation that determines whether an apartment is good or bad. 

E-SPLOST, Let's Hope Not

DeKalb Schools' track record with education SPLOSTs offers little hope for the upcoming SPLOST but if history tells us anything it is that it will pass anyway.  Some claim that Superintendent Green has not been specific enough regarding what the SPLOST will buy. But can he really say "Just like last time we'll use this SPLOST to finish up our commitments on the last SPLOST." Because then it is turtles all the way down.

There there is the pretty well documented fact that DeKalb Schools, on the whole, consistently underperform against the other systems in Georgia. And it isn't like Georgia is topping the charts in the nation. Add to this research suggesting more money is not the answer and that expenditures per student negatively correlate with positive outcomes and it gets very difficult to entertain the notion of voting them another pile of money. And we're not alone. Strong voices in the community are poised to have the schools forgo future tax rise opportunities to divert money to development suggesting a clear set of priorities. Funding schools isn't at the top.

But how could it be? DeKalb has the highest millage rate of any school in the state. Some claim it is illegally high and that it is a funding hangover from the days Perimeter College was run by DCSD. [Note to self: once you give a government or its agency a funding stream you can never, ever shut it off.] They've not been good stewards of the cash they've gotten, and it is more than just horrible education outcomes. We've been sending school officials to jail. Hell, we're sending more than just a few graduates, and yes, dropouts to jail.

So maybe it would be best if Superintendent Green had only one item on his SPLOST list: DCSD will reduce the millage rate until it is below the legal limit. If we can't make it good can we at least make it cheaper?

Global Climate Change

At least in the political world where the glacial habitats of the heretofore protected political establishment is melting away under heated rhetoric from new and neglected sources. Their feeble pushback seems based on leveraging accusations like those forming the basis for Godwin's Law common in an attempt to demean their detractors. With the rise of enthusiastic support of figures not part of the political Parties' Elite Cliques we are treated to more brash and frankly vulgar rhetoric from both sides. And we all know what that leads to.

And it isn't just Donald Trump.

In fact, obeying Godwin's Law is a transgression the Teflon Don has yet to commit. One of the few. Nonetheless he does share with some notable others having been compared to Hitler by some disgruntled members of the PolEliteClique from both the Left and Right Wings. But when it comes to extremist rhetoric Trump is actually quite mild.

Case in point is the "Punisher" Rodrigo Duterte (AKA "Duterte Harry") former mayor of Davao City and recently elected President of the Philippines. He boasts of Viagra-fuelled affairs, threatens to kill drug dealers and has joked about raping a missionary against which referring to his predecessor as a sonofabitch seems mild. CNN International has labeled him "Philippine's Trump" while others, more aware of his open support of vigilantes disappearing those folks who lack his approval have likened him to Hitler. The really important folks, the political establishment running the planet, are looking on with trepidation because Duterte Harry may be bad for bidness.

Halfway 'round the world we get Ken Livingstone, the deputy leader of the Labour party who stepped on a land mine making what were interpreted as anti-semitic remarks getting him suspended from the party with a threat of expulsion. Livingstone is quite surprised since he's been dancing in this minefield for some time making incendiary pot-stirring remarks for decades now.  His "but it IS the truth" defense never gained traction and ironically other Labour members are reported to have been suspended. Why ironic? Because Jeremy Corbin, Labour leader, snubbed the newly elected London mayor, Sadiq Khan who is Muslim, by failing to appear at the swearing-in ceremony. While some moderate voices are questioning if it is even possible (for a Gentile) to criticize Israel without being anti-semitic, others have seized the stage to savagely condemn Livingstone as a holocaust denier for his inappropriate reflections on Hitler.

When you look outside our own little political bubble, maybe Trump is not as outrageous as we thought.

Don't It Make Your Brownfield Green?

The site of the old GM plant is known as a brownfield mostly because it is the site of the old GM plant. Now in a land nearby but a time long ago developers would have lined up to redevelop this site with their only contact with local government being around zoning -- consider upcoming development projects at Perimeter Center. And why did they do this? To make money and in particular to make profits. Fast forward and now any development larger than Al's Park is going to require that government Politicians pony up some public money -- think: Atlantic Station, Cobb's Brave's Stadium, Atlanta's Falcon's Stadium or the more disappointing Beltline project.

There are some tools, both raised in discussions around the GM plant available for Politicians to tap OPM on behalf of developers : Development Authorities, Tax Allocation Districts and Tax Abatement. Since there has been so much confusion around these tools let's take a closer look, shall we?

Development Authorities

Nothing is simple in Georgia, at least nothing involving politicians and power, and Development Authorities are no exception. The Atlanta Law Firm of Seyfarth Shaw have a very informative report De-Constructing Development Authorities : Learn Their Rules From How They Function focussing specifically on the types and behaviors of these quasi-governmental organizations here in Georgia. A key thing to keep in mind whilst perusing that document is that the Georgia Department of Community Affairs show the Downtown Development Authority of the City of Doraville as a single jurisdictional statutory Development Authority. Directors of these corporations are appointed by local politicians and you can rightly assume that Directors are not selected by an arms-length procedure but are a priori known to the politician. While these are unpaid positions Directors wield power and it is very common for power to be converted to money. It's magic, but it always seems to happen. It is thru the Development Authority that major Developers tap into public money for their profit.

Tax Allocation Districts

First and foremost TADs are interesting because no other place on the planet calls this technique a TAD, instead others use the more descriptive "Tax Increment Financing" or TIF. TIF is more descriptive because TAD or TIF, financing, AKA debt, is involved. Digging deeper let's move away from some of the confusing talk and look to an authoritative source: TAD Allocation Districts: How They Work from the Andrew Young School of Policy Studies. 

A depiction of how TAD/TIF's work with regards to underlying asset (property) values is this diagram from the above document.

The key takeaway is that for the period of the TAD/TIF taxing agencies (e.g., City, County and Schools) forgo all the potential tax in the yellow triangle in hopes of getting a pot of gold after a few decades.

There are lots of assumptions embodied in the diagram. Straight line asset appreciation. Really? Again, the "F" in TIF is "Financing" and these projects tend to be front-loaded in expense and asset value. It is more likely to follow an inverse exponential curve with the public foregoing significantly more than this simplistic depiction.

Has there ever been a development in it's golden years doesn't need to be torn down and redeveloped? What is life expectancy of the proposed development, how does that compare to the TAD period, what happens in the latter years of TAD and years thereafter? IRS depreciation schedule allows depreciation of commercial property over 39 years and residential property over 27.5 years. Depending on the length of the TAD the pot of gold may be skinnier than shown above.

Tax Abatements

Technically a Development Authority has no abatement powers which is why "abatement" almost always appears in quotes, but thru a very complex set of business arrangements they can reach a situation whereby the Developer gets a tax break, is awarded a grant and effectively leases the development over a period of years after which the title is transferred to the Developer. You'll find all the skinny in Understanding Property Tax "Abatement" courtesy of the Carl Vinson Institue and Seyfarth Shaw. 

This scheme relies on removing the property from the tax rolls by transferring title to the quasi-governmental Development Authority concurrent with a lease/purchase agreement with the developer and the issuance of a bond. 

The net net on this tool is that it is not as lucrative as a TAD and the property lease itself may be taxable, so "abatement" is negatively impacted. No one looking to profit from this endeavour favour this approach.

Current Kerfuffle

There is a developer who wants to get richer making money off the old GM Plant site and there are lots of Politicians who want to help make that happen. The Politicians' tool of choice is a TAD as it maximizes the amount of money Politicians get to funnel thru their Development Agencies to the Developers. Remember, money equals power and control of money is indistinguishable from having money. That is not to say that the artist's renderings of the redeveloped property are not beautiful. They are. They just do not surface any of the assumptions or risks. 

If you look at what is at risk in the context of a TAD you'll simply need look at your property tax bill. You'll note that your payments to the City, the County and the School System increase in that order with Schools dwarfing the others. If you look at this from that perspective you see a similar graph. 

If you take the position, as the Superintendent of DeKalb County Schools seems to, that the cost of service will increase over the period of the TAD possibly exacerbated by the addition of residents and students due to the TAD then you might not see this as a good idea. TAD proponents, many of whom benefit from the Power of OPM the TAD offers, point out that if the TAD fails a Tax Abatement will be used in which case the School's tax on that property will drop to zero for the abatement period. And, the pot of gold at the end of the journey will be smaller with abatement than with TAD. 

Perhaps. Perhaps not. 

While the Schools tax bill is quite high for the payer relative to City/County the question is what is the impact on the City given that this current revenue stream is a larger percentage of their overall revenue? 

A little perspective. 

A number of over $900,000 has been bandied about as the School's annual take from this property. Sounds like a lot of money. It IS a lot of money. But in the context of the 2016 proposed DCSD budget this amount represents less than one fourth of one percent of the revenue from local sources and less than one eighth of one percent of total revenue. Or look at it this way: it is the budgeted amount for the Superintendent. Or consider that if the budgeted amount for the School Board were reduced by a little over fifteen percent it would cover the lost revenue. Not much when compared to the tax base of the entire county, but what about GM plant city tax when compared to total for the li'l burgh of Doraville? Loss of that revenue might make a bigger dent and it may be that Developers and their Minions are playing a game of chicken with the Superintendent. Or will we see a noseless spited face?

What Can It All Mean?

The property in question is indeed a brownfield. But is is also fronting a major interstate with easy access to another, is surrounded by arterials, is adjacent to a MARTA rail station and located on the north side of the economic powerhouse of the southeast. It is hardly what one would call "blighted." It will be developed and the only question is when and who gets to put their fingers in what pie and pull out how many plums. And it can be done without decades-long tax-sucking schemes.

And were not all of today's blighted brownfields once a shining example of what could and should be? The pride of the community? It is probably true there will be higher asset values after completion of the TAD or abatement but to assume that values continue to rise without bound is absurd. At least in the absence of another infusion of public cash--after all isn't that really what this is all about?

Considering that DCSD is at their millage rate limit perhaps Superintendent Green feels that TAD related service costs will rise beyond what property value growth across the county can cover. Given we're talking decades, at least two generations of school children, it is probably beyond human capability to accurately project that far into the future and in that context it is reasonable that those who will bear the costs of bad predictions to exercise more caution than those who do not. The Lewis/Pope/Reed fiasco should have taught us to beware of school leaders who are readily attracted to expensive shiny objects. 

It is clear that the proposed development of the GM site will add to DCSD service cost but what is not clear is by how much and at what periods during the development. No known detailed model of projected service cost has been vetted. The revenue side is clear. With a TAD DCSD get the revenue they're getting now--in the absence of a detailed model of "property appreciation in adjacent areas" that is what is known. With tax abatement current revenue goes away.

Think of it this way: a child born at the beginning of this development may well have earned an advanced college degree and be launching their career before DCSD can tap into TAD's pot of gold. Carrying an increased service cost over 25-30 cohorts of students with many unknowns about if or how any of these costs are to be covered may explain Superintendent Green's position.

Circle The Wagons

Have you every been in a situation where everyone looks at you like you've got three heads and no neck? That's exactly what will happen if you suggest the City get behind the notion that new condo developments in the Perimeter area include an owner-occupied requirement in their Declaration of Condominium. As in "only your estate can rent the unit" and then only for a couple of years whilst probate winds down.

There was a lot of noise about depressing property prices by excluding investor purchases thereby shrinking the buyer pool. Problem with that rhetoric is the exact opposite actually plays out. Investors are buying for location, will minimize maintenance costs, take their depreciation, make no improvements and rent to anyone passing a credit check. The selling investor has no incentive to get top dollar that they'll just pay in capital gains (remember, they took depreciation) so they will sell fast. Units will decay. Turnover, of renters and owners, will accelerate. The tax base will erode.

No matter.

The real noise came from the capitulation crowd, those folks running this burg, who must compromise even when it really isn't necessary. They talk a big show about protecting our community, about ensuring no impact to our schools, and then...then they turn around and deal-down to curry favor with really rich developers who want, but don't really need the handout. This is the kind of two-faced political double-dealing making lay-Republicans vote for Donald. It is also the same kind of shenanigans that these same folks used as justification to break away from DeKalb.

We're back where we started.

Signs Of Symbolism

The esteemed City Council is set to talk around LED signage in the City Limits. Given things like the sign below and other stick 'em in the dirt Dunwoody Village signs it isn't clear if anything Council does in regards to signs has a shelf life or teeth.

At least it is a "get out of town" sign

Given the track record with signage in the Village any other wind-sock ordinances will blow in whatever direction folks who want their signs want them to blow.

Cleaning The Parkway

Looks like another third rate delivery from our former City Manager What's-his-name. Irrigation is probably a good idea for Parkway landscaping. For the asphalt? Not so much.

Or maybe drip irrigation would have been a better idea that improperly installed something else. 

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