Tax Allocation District financing packages have become one of Rome’s primary incentives to promote economic expansion. However, there seems to be a tad bit of misunderstanding about how TAD packages actually work. Rome City Manager Sammy Rich said that while TADs have become very popular with developers, there is a statutory limit that no more than 10 percent of a tax digest can be tied up in TADs.
TADs were developed as a provision within the Georgia Redevelopment Powers law. The package is based on the assumption that whatever activity takes place within a specific physical district will generate increased property taxes within that boundary.
“It’s not a giveaway or what I would call a donation,” Rich said. “If you’ve got areas that are underdeveloped and/or in need of redevelopment, a TAD is an exceptional tool to attract new investment.”
The physical improvements can include everything from public infrastructure such as water and sewer line extensions or capacity upgrades to improved roads to the actual construction of new retail, commercial or even residential properties. Rich said typical developers are not doing a project out of the goodness of their heart and are looking for a return on their investment.
“It’s expensive to just be in construction, and if you’ve got any tear down or any environmental issues that you’ve got to deal with, whatever is available (incentive) they’re going to look to latch on to,” Rich said. Sometimes the TAD makes the difference between a project moving forward or dying in a notebook on the shelf.
Cities and counties then collect the increase in tax revenues, which is set aside in specific accounts, and use it for the improvements within that district. Those funds are used initially at least to help offset the costs associated with the initial investment made by the private developer who asked for the assistance in the first place. Any additional funds are then earmarked for further improvements within that specific TAD district.
Rome has created three TADs in two specific districts over the past two decades and is considering two more. The original TAD was created over a decade ago when the first discussions of a hotel on West Third Street were being floated. It is a rather large district that includes the West Third Street/North Fifth Avenue area, extending across Turner McCall Boulevard including the shopping center where Publix is located. It also extends out Riverside Parkway to the area around State Mutual Stadium.
The second TAD district is essentially the area where the RiverWalk shopping center is located.
R.H. Ledbetter Properties actually submitted the first TAD package for creation of the RiverWalk retail development at the intersection of Turner McCall Boulevard and Riverside Parkway. The Courtyard by Marriott project was next to receive TAD assistance, then came the Charles Williams REIC RiverPoint upscale apartment complex.
The two that are in the works involve completely new districts around Mount Berry Mall, sought by Hull Property Group, and the old Kmart site at Hicks Drive and Turner McCall Boulevard.
When a district is initially established, a baseline or a benchmark for the value of the property taxes is established. For example, if the amount of taxes being generated within that boundary before any redevelopment starts is $500,000, that is the baseline. As redevelopment gets underway that tax may increase to $600,000 the second year. Government will still collect the first $500,000 into its general treasury. The additional $100,000 is earmarked for what is happening within that district. A certain pre-agreed upon amount is returned to the developer who is actually responsible for the increased value of the property to begin with. After 15 years, the tax value of that property may be $2 million. Once the initial time frame for the TAD expires, all of the increased property taxes go back into the government entities’ general treasury and the entire city and county get the financial benefits of the redevelopment.
Ledbetter Properties is receiving $55,000 annually in TAD “rebates” for the RiverWalk development. Those payments will continue through 2024. The TAD district generated $83,444 above the baseline tax value in 2018, so the community was able to put aside $28,444 for future improvements within that district.
Duke Hospitality, developers of the Courtyard by Marriott, received a TAD package that would provide the group with $2.5 million in assistance over a 12-year period. Duke will receive approximately $208,698 a year for 12 years.
Rome and Floyd County agreed to a $3.3 million, 15-year TAD plan for the developers of the RiverPoint Apartments. They will receive $220,000 a year for 15 years. That project is still expected to spur economic development in the area around State Mutual Stadium, and did play a role in the decision to put the new Lumina Coffee shop at the corner of Braves Boulevard and Ga. 1 Loop.
The Augusta-based Hull Property Group has initiated the process of making a TAD-financed makeover of their Mount Berry Mall. The last time city officials met with HPG leadership, the company revealed that it would seek $1,146,378 in TAD assistance for their project to resuscitate the mall. A specific time frame for that project is yet to be determined. The first phase of the mall project involves the demolition of the Sears end, the north end of the mall. It’s what HPG executive John Mulherin refers to as a “sacrificial investment.” That will be followed by a major interior renovation project.
Last July, Mulherin said the company had hopes to “expedite the project,” and get it done “sooner rather than later.” The downsizing of the mall has been seen as critical to HPG’s ability to retain existing stores as well as attract new merchants by reducing the vacancy percentage.
Rich said he had not heard from HPG officials in several weeks and is not quite sure where the specific HPG application for TAD assistance stands today.
Ledbetter Properties is seeking $1.96 million for the TAD on four parcels at the former Kmart site. The deal would see the company receive $131,231 a year for 15 years.
The Rome Redevelopment Agency has approved the plan, however it has yet to go before either the city or county commissions.
Wright Ledbetter told members of the redevelopment agency earlier this month that Ledbetter has a feasibility gap of approximately $2.38 million associated with the redevelopment of the old Kmart property. He said the $1.9 million from the TAD would go a long way toward closing that gap and the company was willing to take the risk and is optimistic that they could see a return on their investment within six years.
Of course, none of the specific TAD assistance numbers reflect the money that is generated for the community in terms of increased sales tax revenue and business licensing fees.
The licensing fees for restaurants that sell beer, wine and pour liquor-by-the-drink adds up to a substantial amount of money.
The Olive Garden and Las Palmas in RiverWalk Center, and Courtyard by Marriott collectively paid $21,115 in beer, wine and liquor fees.
The Courtyard by Marriott also paid $175,929 in hotel/motel taxes in 2018 and paid another $57,880 in hotel/motel taxes for the first quarter of 2019.
All of that is money that would not be flowing into the city’s coffers had it not been for the availability of TAD assistance to make the projects happen.