This post is the first in a two-part series examining the use of a tax allocation district (TAD) in the Doraville Assembly redevelopment. This might not seem to be related to education, but I believe the school system and its families could potentially benefit financially from participation in the TAD.

Additionally, an investment that contributes to the health and growth of a community can directly or indirectly affect the students and their families in a holistic manner. Students living in blighted communities perform worse in school, experience more health problems, and struggle with the effects of poverty in economic and social ways. Investing in this particular Buford Highway community could be one of the best ways the school system could support student success in a real way. As research repeatedly shows, helping communities out of poverty is one of the best ways to improve a student’s academic, social, and economic prospects.

How does a TAD work?

A TAD is financing tool used when an area has great potential for redevelopment but requires significantly more infrastructure investment and/or environmental cleanup than a developer would or could finance. In other words, TADs help turn development potential into reality. Specifically, Georgia’s Redevelopment Powers Law gives local governments (cities and counties) the ability to sell bonds to finance infrastructure and other redevelopment costs within a specially defined area (i.e. the TAD) based on projected future property tax revenues. As development takes place in a TAD, the local government sets aside these incremental property tax revenues into a special fund to pay off the bonds. This process allows a local government to use the money from selling bonds for infrastructure and environmental cleanup instead of money from current taxpayers.

Atlantic Station is an example of a very successful TAD in metro Atlanta. This development is located on the former Atlantic Steel mill, which lacked infrastructure and needed significant environmental cleanup. The problem was that developers were hesitant to make a substantial investment before they knew how the infrastructure and environmental issues would be resolved.

The City of Atlanta, on the other hand, was hesitant to spend limited taxpayer dollars for infrastructure and environmental cleanup unless it was sure that the property would be successfully redeveloped. It is like the chicken and the egg problem for development; should private or public investment come first?

The TAD created for Atlantic Station helped solve this problem because the city could issue bonds for infrastructure and cleanup based on projected future property tax increases. If there weren’t enough revenues to pay off the bonds, the buyers of the bonds (banks, insurance companies, bond mutual funds, bond exchange traded funds, and other investors) would have lost the most money, not the taxpayer. This is because the bonds are repayable only from the TAD, and the City of Atlanta is not obligated to use its general tax revenue to repay the TAD bonds.

The counter example to Atlantic Station is an area where development is certain to occur with or without a TAD. One can imagine a scenario where a developer convinces a local government to create a TAD only to over improve and beautify a development project where no real public investment was needed. Here one would be taking the future tax revenues from redevelopment and dedicating them to a specific site instead of the local government as a whole. In other words, there are examples where a TAD would provide a subsidy to a developer that is unnecessary to promote redevelopment, thereby increasing the developer’s bottom line at the public’s expense.

So the key then to understanding whether a TAD is a good idea is coming up with the best estimate possible as to the quality, speed and taxable value of redevelopment both with and without a TAD.   If there is little difference, a TAD is probably a bad idea. However, if there is a substantial difference, the TAD is pretty close to the proverbial free lunch because local governments realize all of the benefits flowing from the redevelopment of a blighted property.

Does Assembly need a TAD?

Let’s look now to the redevelopment of Assembly. Unlike many areas that are redeveloping along the MARTA Gold line from Brookhaven to Doraville, the former GM Assembly site does not have much existing infrastructure like roads, sidewalks, water lines, sewer lines, and storm sewers to handle rainwater. Additionally, while the property is located next to the Doraville MARTA station, there is no easy access to the MARTA station for cars or pedestrians. This is because the MARTA station is separated by the Norfolk Southern freight train line, significantly reducing the value of the site for redevelopment. In addition to these infrastructure needs, I understand that there are some environmental cleanup issues and stream restoration that may be needed.

While some development is certainly possible without the TAD (like the car dealership already being built on the northern end of the property today), any development without a TAD will likely be of lower quality, occur more slowly and ultimately create less taxable value because of the uncertainty surrounding the when, if and how of any infrastructure investment and environmental cleanup

Where does the TAD stand today?

In July 2015, the city of Doraville approved the creation of the Assembly TAD in the areas encompassing the former General Motors site and the area between it and Buford Highway in Doraville.

The DeKalb County Board of Commissioners then voted unanimously to approve the creation of the TAD in mid-December 2015.

Now all that is left is an approval by the DeKalb County Board of Education to create the TAD. This is going to be the biggest hurdle yet.

So what’s in it for the Schools?

In a statement made in December after the Board of Commissioners approved the creation of the Assembly TAD, Dr. R. Stephen Green, superintendent for DeKalb County Schools, said that he has some “serious reservations” about bringing this issue before the board of education.

I steadfastly believe that Dr. Green has our children’s best interests at heart and has, thus far, demonstrated this in his decisions. Approval of the TAD from the school’s perspective involves some significant judgment calls based on projected redevelopment scenarios of Assembly. In my mind the main the questions for the school district boil down to (1) what is the likely value and speed of development with and without a TAD, and (2) how will the school system accommodate any additional students in an already crowded district. In my next post I will write about these questions and some ways in which the school system may be able to ensure it benefits from the creation of the TAD.