Introducing my friend (and yours) — T.A.D.
Allow me to introduce my friend T.A.D. He is a special guy, who works wonders with finance. T.A.D. has been very helpful with redevelopment around the state of Georgia, probably the most notable instance being the Atlantic Station development in Atlanta.
If you, the voters of Fayetteville, authorize the city in the upcoming referendum to have “redevelopment powers,” T.A.D. may help facilitate revitalization of the city of Fayetteville, too.
So who is this guy TAD? Well he isn’t really a guy. T.A.D. stands for Tax Allocation District and is a tax leveraged financing mechanism that typically accounts for 5-15 percent of a redevelopment project cost.
The way it works is that the city, the county and the school board agree to freeze the property tax on a specific piece of property (the “District” of the T.A.D.), at the current level of taxation for the duration of the T.A.D.
Then, typically, bonds will be issued that would cover a percentage of redevelopment cost. These bonds are in turn repaid out of the proceeds from the increase in property tax on the improved property.
Note, these are REVENUE BONDS and there is no recourse against the city (or you the taxpayers). The risk is fully borne by the bond holders.
Once the bonds have been paid off, the full amount of the taxes are then paid to the respective governments.
With a TAD, the city, county and school board are, in effect, practicing the valuable discipline of delayed gratification. We agree to forgo an immediate increase in taxes (that may never come without the T.A.D.) in exchange for redevelopment now.
Meanwhile, your property taxes have NOT increased; only the owner of the property in the “District” of the TAD sees any change in taxation (although sales tax collections may be increased, depending on the type of redevelopment), but we benefit from a “fresher” look to the city.
For an example of how it might work in Fayetteville, take for example the property on North Glynn Street where the Longbranch Saloon was originally located.
That property sold in 2001 for approximately $1.8 million and was foreclosed on last year for approximately $1.1 million.
This is a loss of $700,000 in the tax digest and with the property vacant and bank owned, it is not going to increase in value any time soon. In fact, vandalism and neglect could even decrease the value further.
However, if the referendum should pass and a developer should come forth with a plan to redevelop the property that would increase the value to, say, $4 million.
The governments will continue to receive the taxes on the current $1.1 million value, but the taxes on the $2.9 million difference (4-1.1=2.9) would be used to pay off the bonds.
None of the governments have lost any of their current tax revenue. To the contrary, further erosion of the value of the property has been been halted along with the resulting decrease in tax collections.
Now if this redevelopment included a retail component, sales tax collections should increase. The net taxes received from the property would thus be increased, at least marginally.
When the bonds are paid off, typically 10 to 15 years, the governments would receive the full property tax on that $4 million. All the while the city and you the citizens have benefited from replacing an eyesore with a much better property.
Quite frankly, I see no downside to the TAD concept and I think I am not alone in this. In fact, with over 13 years of TAD financing in GA, there have been approximately $450 million of projects financed with zero defaults, even in this down economy. So it is a well-tested and proven low-risk financing tool.
Remember, TAD is your friend — Vote for TAD!
To do so, however, will require voting in two places for a number of our citizens. For those who live in the city of Fayetteville but vote for county elections somewhere other than the LaFayette Center or the Library, you will also need to go to whichever of those polling places you vote for city elections in order to cast your vote for TAD.
Alternatively, you can vote early starting Oct. 15 and vote both the city and county/state/national ballots in one stop.
Thank you for your consideration.
Greg Clifton, mayor
[Clifton is in his first term as Fayetteville mayor, having been elected last fall.]