Beltline a TAD off track but not derailed

Franklin, lawmakers and advocates look at alternate funding schemes

There's no better way to start the week than to discover you've lost $860 million. Especially when it was supposed to go toward building your legacy.

But that's the news Mayor Shirley Franklin received last week a day after arriving back in Atlanta from a trip to India.

For four months, organizers of the Beltline had been tapping the table as they waited for the state Supreme Court to rule on a lawsuit claiming it would be unconstitutional to help fund the ring of parks, trails and transit with revenue from school property taxes. Then, on Feb. 11, the justices announced their unanimous ruling in favor of the plaintiff: Taxes originally intended for schools may no longer be diverted to noneducational purposes.

Such arrangements, called tax allocation districts, or TADs, are used nationwide as inducements for developers to invest in areas that are ripe for revitalization. The idea is that local officials issue bonds to pay for infrastructure fixes. The bonds are paid off by increased tax revenue from property the redevelopment made more valuable.

Politicians and developers love the setup because TADs actually don't increase tax rates; all the revenue comes from rising property values. School boards get on board – often after a bit of prodding – because they view TADs as investments that will lead to more school revenue down the road. TADs have become a financial tool du jour for major projects across the state, including Atlantic Station and a proposed redevelopment of Perry Homes called West Highlands.

While projects already completed or underway will only be affected if they have to issue new bonds, the ruling could slam the brakes on dozens of ventures across the state that had been banking on TADs for much of their public funding.

The problem is that the bulk of property taxes usually goes to schools. In the Beltline's case, that means about 50 percent of the TAD funding – or about a third of the overall budget of $2.8 billion – was just designated untouchable.

Beltline advocates were coldcocked by the decision. At a hastily arranged press conference the day of the ruling, Franklin called the decision "unanticipated" and "unexpected."

"It's a shot in the head," says Emory Morsberger, a Gwinnett developer who'd hoped some Beltline TAD money would help lay the infrastructure to convert City Hall East into his long-awaited Ponce Park project. "Communities across the state need this. I'm not just talking about the Beltline or southwest Atlanta, I'm talking about Norcross. I'm talking about Gwinnett. Most school boards support this. Without TAD money, many of these areas can't see development."

It's unclear how the ruling might cut into such specific features of the Beltline as land acquisition, park development, transit and $240 million worth of affordable housing that is supposed to be created in Beltline neighborhoods over the TAD's 25-year lifespan.

But the mayor's message was clear: We will find a way to make the Beltline a reality. Later in the week, business leaders promised to see the project through.

And state lawmakers quickly scrambled to find ways to plug the giant financing hole. Supporters of TADs in both chambers wasted no time cobbling together a constitutional amendment that would make it legal again to use school money for TADs. The amendment would have to pass the Legislature by a two-thirds margin and be approved by voters in November. Because the ruling could put the brakes on projects from Rome to Savannah, the amendment is drawing bipartisan support.

"The most important message is not to panic," says Kasim Reed, D-Atlanta, who, along with Dan Weber, R-Dunwoody, is leading the push in the Senate. "There would be reason to worry if the General Assembly was not in session. We have our eye on the ball."

The ruling also could give a boost to a separate constitutional amendment on transportation funding that's been kicking around the General Assembly. Business leaders and transit advocates have been pushing for a "Transportation Local Option Sales Tax" that would allow individual counties to seek voter approval to levy a penny sales tax for projects of their choosing. Introduced by Sen. Jeff Mullis, R-Chickamauga, and backed by Lt. Gov. Casey Cagle, R-Gainesville, the amendment passed the Senate Transportation Committee last week.

If neither constitutional amendment passes, Beltline advocates would be left with something of a desperation move: They could sell development rights to investors to fund the transit portion.

"At the end of the day, the Beltline could be funded by private dollars," says Reed, a Franklin ally who intends to run for mayor next year. "In theory, it could be funded by the investing banking community. But be clear: The sky is certainly not falling."

If a funding shortfall forced Beltline planners to winnow out portions of the project, the most expensive chunk would make a tempting target. Since early on, some community leaders have questioned whether the transit portion, which could cost $500 million to $1 billion, is a necessary component.

Al Bartell, a community leader who's helping coordinate public input in the project's northwest quadrant, supports the transit component. But, Bartell says, "The philanthropic community has dedicated and shown so far that they've been willing to take on the lion's share of the parks and trails aspects. But their contribution wouldn't impact the transit component at all. They communicated that from the beginning because it's so expensive, and we understood that. It's just too costly. Just the feasibility studies alone are in the millions of dollars. We knew the bond issue was necessary to do what we needed for transit."

The architect credited with dreaming up the Beltline argues that transit can't simply be sliced out. "It's hard to separate the transit out, because when you design the corridor, it's all in one," says Ryan Gravel, who proposed the Beltline in a graduate thesis at Georgia Tech. "The parks, trail locations and transit are all taken into account."

City leaders are a long way, however, from carving up a dream that includes parks, trails, housing and transit. Mayor Franklin assured a bank of television cameras on the day of the ruling that this was just the kind of setback that "all big dreams" are bound to face. On Feb. 23, she's slated to hold a groundbreaking ceremony on the West End trail in southwest Atlanta, the Beltline's first segment.

"It's disappointing, of course," Gravel says of the ruling. "But the Beltline's always been centered around creativity and interesting partnerships. I think the project is solid and people want it. So now we have to be creative and come up with another way."