Georgia Senate committee debates development agency reform

Development agencies, appointed by elected county and city officials, act like shadow governments and often have little oversight. Proponents say the boards’ ability to operate outside of local government allows flexibility to attract businesses, citing blockbuster deals like future Rivian and Hyundai Motor Group electric vehicle plants.

But critics claim that recent ethical abuses, including a subsistence allowance scandal at the Fulton County Development Agency, underscore the need for change. They also argue that many deals that authorities strike would happen without tax breaks.

“These deals are very complicated,” Senator Margaret Mary Oliver, D-Decatur, a committee member, told The Atlanta Journal-Constitution. “We need more transparency”

hundreds of authorities

Each county and city in Georgia has the ability to establish its own development agency or industrial development agency. Cities can form authorities for their inner cities, while joint authorities can represent multiple jurisdictions. Some established years ago are inactive but can be restored.

For example, DeKalb County has 12 cities and part of Atlanta. The county board chairman said at a recent committee meeting that he didn’t know how many other boards there were in DeKalb.

“Part of the challenge for this committee is to be open about how many development agencies there are in the state of Georgia, and we don’t know how many there are in DeKalb County,” said committee chair Sen. Max Burns, R -Sylvania. Burns said he doubts a list maintained by the Georgia Department of Community Affairs is accurate.

State lawmakers turned their attention to the activities of development agencies after AJC reporting revealed a culture of loose financial oversight at the Fulton Agency, also known as the DAFC.

DiscoverOur coverage of the Development Authority of Fulton County

The AJC found that a former chairman and two former board members were at times paid $200 in “per diems” or stipends for every document they signed, every item discussed at meetings, and sometimes required multiple payments for attendance at more than one event in a single day.

Per diem, Latin for “per day”, is generally understood as a subsidy for meals and additional costs. However, state law allows authorities in Fulton and three other major counties in the greater Atlanta area to pay per diems for board members’ time.

DAFC officials later tightened policies, and much of the board was replaced. Governor Brian Kemp signed into law a bill authored by Oliver that enacted new ethics and subsistence allowance rules.

But the committee’s investigation could prompt lawmakers to go further. Ideas include eliminating per diems, changing training requirements, or requiring certain community members to be appointed to governing bodies, e.g. B. a representative of the school board. Some critics want to prevent county boards from doing business in cities that have their own boards to limit incentive purchases.

The urban-rural divide

Critics say municipalities could cost themselves tax revenues by offering incentives when none are needed.

An AJC review of the DAFC tax breaks over a three-year period found that the agency has approved approximately $328 million in tax breaks on an interim or final basis, often in hot neighborhoods in the city of Atlanta, which has its own agency. Many of the projects involved luxury apartments, warehouses or office buildings with little public utility.

Photo credit: HYOSUB SHIN / AJC

Photo credit: HYOSUB SHIN / AJC

A 2018 study by Michigan-based WE Upjohn Institute for Employment Research found that 75% to 98% of the time, a company given incentives would have made the same choice without local or state subsidies.

Critics of incentives often say that they should only be granted if the project could not be built “without” the tax break. Few, if any, agencies require a “but-for” standard before granting tax breaks.

Two joint development agencies, or JDAs as they’re known, each provided hundreds of millions of dollars in local property tax breaks: Hyundai’s $5.5 billion EV factory near Savannah and Rivian’s $5 billion EV Factory in Social Circle. Cox Enterprises, owner of The Atlanta Journal-Constitution, also owns about 4% of Rivian and provides services to the company.

A judge recently rejected local incentives for Rivian. The state and local JDA are appealing the ruling, saying the incentives are vital to a “transformative” project that promises 7,500 jobs.

DiscoverState appeals ruling overturning Rivian property tax breaks

Ed Wall, managing director of public finance investment banking at Piper Sandler, told the AJC that some development agencies have a rubber stamp reputation.

“If you show up at the Fulton and DeKalb County Development Board while you’re breathing, your ass will get free taxes,” he said.

DeKalb Development Authority Chairman Don Bolio defended his agency.

“For every $1 (tax) we save, we expect $3 in additional tax revenue over the life of this project, which we think is a pretty fair number,” he said.

But much of the discussion at a hearing this month centered on the differences between urban and rural authorities.

Jason Dunn, who heads the Fitzgerald Ben Hill Development Authority in South Georgia, said sparsely populated corners of the state need stimulus. Ben Hill County, population 17,000, does not have direct access to a highway.

“Trying to get the industry into a small county like this is challenging,” said Sen. Steve Gooch, R-Dahlonega.

Ben Hill’s unemployment rate has fallen from 11% to 4.5% in recent years. Dunn credits tax breaks from his agency.

“If our development agency hadn’t done what we’ve been doing for the past seven years, Ben Hill County would be dead,” he said.

Study Committee of the Senate Development Authority

When: Thursday, 2 p.m

Where: Room 307 in the Paul D. Coverdell Legislative Office Building (CLOB), located at 18 Capitol Sq. SW