ATLANTA | Development Thread VI

[Street Advocate]

Fuqua Northside & 17th filed impact fees to construct shell of building

[Atlanta3000]

Originally Posted by themaguffin

It's unfortunate that with so much happening that buildings still are being subsidized.

No 🞵🞵🞵🞵 - this completely drives me crazy.

This and Corporate America saying they need Federal tax cuts to create jobs.
FYI - tax cuts DON'T create jobs, DEMAND does. So put the money/tax cuts into the hands of people who have a higher propensity to spend/put it back into the economy. It's really rich the same people bitching about entitlements are the same ones asking for subsidies.....

Sorry to get off topic, but sometimes things need to be put out there.

[Atlanta3000]

Originally Posted by Street Advocate

Fuqua Northside & 17th filed impact fees to construct shell of building

SA, let's just hope they put adequate surface parking there.

[Terminus]

Originally Posted by themaguffin

It's unfortunate that with so much happening that buildings still are being subsidized.

True, but that's the name of the game for almost every new residential deal in Downtown, Midtown, or Buckhead. A lot of times, in the latter two areas, it's through Fulton County. As I understand it, the County takes temporary title to the land so developers don't have to pay taxes for some time. I know this has been a big issue in Buckhead, since it prevents projects form paying taxes that are needed to support infrastructure.

Perhaps somebody is more familiar with the County program and can explain it.

[jwbab]

Originally Posted by Terminus

True, but that's the name of the game for almost every new residential deal in Downtown, Midtown, or Buckhead. A lot of times, in the latter two areas, it's through Fulton County. As I understand it, the County takes temporary title to the land so developers don't have to pay taxes for some time. I know this has been a big issue in Buckhead, since it prevents projects form paying taxes that are needed to support infrastructure.

Perhaps somebody is more familiar with the County program and can explain it.

Invest Atlanta, an arm of the City of Atlanta, and the Development Authority of Fulton County both have the authority to issue 'economic development' bonds. Invest Atlanta's jurisdiction is limited to projects inside the city of Atlanta, where the DAFC has jurisdiction over the entire county, including the City of Atlanta.

In the city of Atlanta, developers can shop both to see where they can get the best deal. Recently, most multi-family developers are going with DAFC because Invest Atlanta has stricter affordable housing requirements. This has been a bone of contention between the current City and County administrations.

Basically, the developer transfers title to the land to DAFC or IA for a specified period (usually 10 years I believe). Because DAFC and IA are government entities, no (or reduced) property taxes are collectible during that time [See post by Martinman below]. DAFC or IA float government bonds to finance the development, which the developer services during agreed upon bond period. At the end of the agreed upon term, the developer pays off the bond, gets the title back, and starts paying property taxes again.

I think these bonds are a valuable tool to have in the toolbox to stimulate economic development where none would otherwise occur, but that is not how they are being used. Virtually every project gets these bonds now as a routine step in the development process. That means that every single development we have discussed in this forum in recent years won't pay their full property tax bill until the latter part of the 2020's. (Theoretically they could "upgrade or renovate" the property and start the whole process over again.)

IMO this is a gross misuse of these programs, especially in the City of Atlanta where the tax base is already woefully inadequate to fund necessary public services/infrastructure.

[Martinman]

Is not correct that these developments don't pay any property taxes. In most cases, they pay at a reduced rate starting at 50% of the tax assessment and increasing 5% each year for 10 years.

[Atlanta3000]

Originally Posted by jwbab

Invest Atlanta, an arm of the City of Atlanta, and the Development Authority of Fulton County both have the authority to issue 'economic development' bonds. Invest Atlanta's jurisdiction is limited to projects inside the city of Atlanta, where the DAFC has jurisdiction over the entire county, including the City of Atlanta.

In the city of Atlanta, developers can shop both to see where they can get the best deal. Recently, most multi-family developers are going with DAFC because Invest Atlanta has stricter affordable housing requirements. This has been a bone of contention between the current City and County administrations.

Basically, the developer transfers title to the land to DAFC or IA for a 10-15 year period. Because DAFC and IA are government entities, no property taxes are collectible during that time. DAFC or IA float government bonds to finance the development, which the developer services during the 10-15 year bond period. At the end of the agreed upon term, the developer pays off the bond, gets the title back, and starts paying property taxes again.

I think these bonds are a valuable tool to have in the toolbox to stimulate economic development where none would otherwise occur, but that is not how they are being used. Virtually every project gets these bonds now as a routine step in the development process. That means that every single development we have discussed in this forum in recent years won't pay a dime in property taxes until the latter part of the 2020's. (Theoretically they could "upgrade or renovate" the property and start the whole process over again.)

IMO this is a gross misuse of these programs, especially in the City of Atlanta where the tax base is already woefully inadequate to fund necessary public services/infrastructure.

Hold the f'en presses....so Invest Atlanta is just not giving away free property taxes for specified period of time, but they are also funding the projects as well through the bonds? I am asking the question.

What happens if the rental market tanks and the management company/developer can't pay the bonds back?

I hope this is not as dire a situation as you have painted. Hopefully I am gravely misunderstanding your overview.

[arctk2014]

Originally Posted by Atlanta3000

Hold the f'en presses....so Invest Atlanta is just not giving away free property taxes for specified period of time, but they are also funding the projects as well through the bonds? I am asking the question.

What happens if the rental market tanks and the management company/developer can't pay the bonds back?

I hope this is not as dire a situation as you have painted. Hopefully I am gravely misunderstanding your overview.

Think of it this way....What happens when you don't pay your car payments to the bank who has your car title?

There are substantial repercussions for them not paying up if it were to come to that.....

[Atlanta3000]

Originally Posted by Martinman

Is not correct that these developments don't pay any property taxes. In most cases, they pay at a reduced rate starting at 50% of the tax assessment and increasing 5% each year for 10 years.

That still doesn't sit well with me. Most of these don't even have any workforce housing units. They are strictly above market luxury apartments.

This brings up another issue I have noticed. I am looking at buying another house and I see $1 - 1.5 Million dollar houses that have a tax assessment value of $500K. However, homes under $500K have a tax assessment value close to their market value.

🞵🞵🞵 is going on here????

[jwbab]

Originally Posted by Martinman

Is not correct that these developments don't pay any property taxes. In most cases, they pay at a reduced rate starting at 50% of the tax assessment and increasing 5% each year for 10 years.

Thank you for the clarification.

[Atlanta3000]

Originally Posted by arctk2014

Think of it this way....What happens when you don't pay your car payments to the bank who has your car title?

There are substantial repercussions for them not paying up if it were to come to that.....

There is a hell of a big difference between an individual not paying back a loan and a Limited Liability Corporation not paying. You do agree with my statement don't you? If not I am more than happy to send you the details. Net, net - THERE IS A MAJOR DIFFERENCE.

Real Estate Developer and our current "President" has had 6 bankruptcies. The repercussions don't seem so substantial do they?

Bankruptcy No. 1: The Trump Taj Mahal, 1991
Bankruptcy No. 2: Trump Castle, 1992
Bankruptcy No. 3: Trump Plaza and Casino, 1992
Bankruptcy No. 4: Plaza Hotel, 1992
Bankruptcy No. 5: Trump Hotels and Casinos Resorts, 2004
Bankruptcy No. 6: Trump Entertainment Resorts, 2009

[jwbab]

Originally Posted by Atlanta3000

Hold the f'en presses....so Invest Atlanta is just not giving away free property taxes for specified period of time, but they are also funding the projects as well through the bonds? I am asking the question.

What happens if the rental market tanks and the management company/developer can't pay the bonds back?

I hope this is not as dire a situation as you have painted. Hopefully I am gravely misunderstanding your overview.

My understanding is that the developer is still the one providing all the capital to back the bond. Any financial commitment by IA is minimal to none. These are structured so that they do not count against the City/Invest Atlanta's balance sheet in terms of creditworthiness.

I don't know the answer to your second question. I assume there are built-in protections to minimize that risk like a guarantee from a lender or a substantial sum being required up front.

[ATLmangum]

Could this be the metropolis of downtown?

[Atlanta3000]

Originally Posted by jwbab

My understanding is that the developer is still the one providing all the capital to back the bond. Any financial commitment by IA is minimal to none. These are structured so that they do not count against the City/Invest Atlanta's balance sheet in terms of creditworthiness.

I don't know the answer to your second question. I assume there are built-in protections to minimize that risk like a guarantee from a lender or a substantial sum being required up front.

Still doesn't really make sense. So the developer/owner is paying interest on the loan from the finance company and paying the interest on the bond held by the COA/(De)Invest Atlanta? Just so can they reduce their property taxes +/- 50% over 10 years? Seems like another banking scheme.

Also, the Fulton County property tax rate is only 1.144% on a yearly basis. The interest cost on the bond has to be twice that. Again this doesn't make sense.

[jpk1292000]

Originally Posted by ATLmangum

Could this be the metropolis of downtown?

I'd live there if I were 25 and single...

My gut tells me to bet on downtown...I think it's going to undergo a stunning transformation in the next 5 - 10 years. I wish I had the money to buy up derelict properties there because I think it will be like buying in Old Fourth Ward in 2001.

[Street Advocate]

NCR's crown glass is being installed. Not close enough to snap a pic.

Downtown is certainly where you can get relatively affordable one bedrooms in a walkable area

[Verge]

Invest Atlanta Bonds come with a considerable requirement for affordable housing--

[Martinman]

Originally Posted by jwbab

My understanding is that the developer is still the one providing all the capital to back the bond. Any financial commitment by IA is minimal to none. These are structured so that they do not count against the City/Invest Atlanta's balance sheet in terms of creditworthiness.

I don't know the answer to your second question. I assume there are built-in protections to minimize that risk like a guarantee from a lender or a substantial sum being required up front.

Right. The projects are not being financed by bonds so the risk to the public is very low. The bonds are only sold in order for the government entity to assume the title to the property as you have said which is a requirement of state law to recieve the tax breaks.

Yoo on the Park for example, had been approved for this deal since around 2008 I believe. But it was of no benefit to them until they were able to secure financing and actually build the tower.

[Atlanta3000]

Originally Posted by Verge

Invest Atlanta Bonds come with a considerable requirement for affordable housing--

The Development Authority of Fulton County doesn't and they are the one who has funded/reduced taxes for most of these developments.

[Street Advocate]