The county attorney believes an agency that used bond proceeds to build a film studio is not legally required to repay the Paulding government for making the past three years’ worth of payments on the financing.
Now, a county commissioner believes the $4 million gained from the studio’s sale to a private film production company should go toward construction of an industrial park to attract other employers to the county.
Atlanta-based Swirl Films on July 19 bought the Hiram studio and its 11-acre site from the Paulding County Industrial Building Authority after Swirl began renting the facility for its TV and movie productions in mid-2018.
County Attorney Jayson Phillips give his opinion Tuesday, Aug. 13, to the Paulding County Commission about the building authority’s obligation to repay the county government for making payments on the bonds the authority issued to build the studio in 2012.
Phillips said his “legal conclusion” is that “there is no express or mandatory legal requirement that the IBA repay Paulding County for those bond payments.”
“The intergovernmental contract that was validated by the court stated that those bond payments are the ‘absolute and unconditional obligation of Paulding County,” Phillips said.
He said the collateral used for the bonds was Paulding County’s court-validated authority to impose a property tax rate of up to 1 mill to raise funds to repay the bonds.
The building authority-owned studio was not used as collateral, he said.
The idea for a film studio sprang from the initial boom in Georgia film productions following the approval of tax credits for companies filming in the state last decade.
Supporters on the building authority and county commission in 2011 said they believed a Paulding studio would benefit from the initial rush to produce films in Georgia after revisions to a 2008 law made the state one of the most tax-friendly areas for film producers in the country.
However, despite being the location for TV productions and movies such as the Jackie Robinson biopic “42,” the building authority found it was not generating enough revenue from the studio and other properties to make the bond payments.
The county government then began making the bond payments in 2016. It now owes more than $6 million on the original $7.9 million bond the building authority issued with the county’s backing in 2011.
The bond included $5.5 million to build Atlanta Film Studios Paulding County and the remainder for construction of a water tower and hangar at Paulding Northwest Atlanta Airport in west Paulding County.
Phillips said he reviewed the 1962 state constitutional amendment which established the building authority; and Superior Court orders validating both the bond issue and an intergovernmental contract for the project.
He also reviewed the terms of the 2011 bond issue with attorneys who were the county’s bond counsel for the project. A bond counsel typically is an attorney the bond issuer hires to make sure such financing plans are being done legally.
“Inside the bond documents, the IBA has the express authority to use sale proceeds, revenue proceeds from the film studio for any lawful purpose, including further economic development projects within Paulding County,” he said.
“One of those lawful purposes is it does have the authority to use those proceeds to repay the county for the bond payments, but it is not a mandatory requirement,” Phillips said.
Among those who wanted the funds repaid to the county were County Commissioner Ron Davis and community activist Sue Wilkins.
Wilkins said she “wasn’t at all surprised by Jayson’s legal opinion.”
However, she said it was “unfortunate” Phillips did not address a part of the 1962 amendment establishing the building authority which appeared to require enough money be raised from a property sale to pay off any bond financing for it.
County Commissioner Brian Stover said he wanted the Industrial Building Authority to use the money to “have a grade-ready site available” to give potential new companies building sites to consider in Paulding County.
“We really don’t have much to offer anyone that is looking to expand or relocate,” Stover said.
Stover also chairs the Paulding County Economic Development Organization which was established in part to help recruit new industry to the county.