What are Tax Allocation Districts?

The Athens-Clarke County Mayor and Commission passed six Tax Allocation Districts (TADs) on Tuesday in an effort to spur development in under-served areas of the county. 

TADs have a “strong track record of promoting redevelopment” according to ACC staff. This new development would be guided by the public through a citizen’s advisory committee working in collaboration with developers and the commission. The ACC Board of Education will also have to approve the TADs before they are finalized.

So, what are TADs again?

Tax Allocation Districts create special funds separate from the local government’s general fund that can be used only in specific areas of the county for specific projects. It’s a tool for redevelopment of under-served or blighted areas that may have barriers preventing their development by the private sector right now. TADs can also be used to guide development in a way that benefits the community by providing incentives for developers to do so.

Tax Allocation District gnomes
UnderpantsGnome graphic created by user Underpants on Wikimedia Commons [CC-BY-SA-1.0]

How do they work?

Phase One: Collect Tax Increment

The current TAD proposal would set a property tax baseline on December 31 which would last for twenty years — through December 31, 2040. As tax revenue slowly increases over that time, it would be diverted to a special fund and saved. 

TAD diagram

This extra money, or “tax increment” as seen in light green in the chart above, would not be available for the mayor and commission to spend during their yearly budget negotiations. For the time being, it would simply be put aside and saved.

The Board of Education would need to approve the TAD before it is finalized. That is because they would be contributing property taxes from their budget as well. Property taxes in Athens are split between the unified government, which taxes property at a rate of 13.7 mils, and the Board of Education, which taxes at the maximum rate of 20 mils.

Phase Two: ???

As the TAD fund accumulates, developers will presumably begin plotting to acquire it with greater and greater intent the more it grows. At some point, they will surely begin to submit proposals to the TAD Citizens’ Advisory Committee explaining why they should receive some of the available funding.

With enough incentive, they might even be willing to build projects that primarily benefit the public. If such a project is submitted to the citizen’s committee, they’d give their stamp of approval and pass it on to the mayor and commission. After receiving final commission approval, the project would be given the green light and construction using TAD funds would begin.

We don’t yet know what these projects would entail, but the commission has already given some guidance for what they’d like to see. The commission’s TAD goals include support for:

  • Public infrastructure
  • Housing Opportunities
  • Economic Development
  • CCSD and Youth Development

Even though we don’t know any details about what projects will be submitted, we do know that they would have to be approved by a citizen’s committee as well as the mayor and commission. They would also have to include a community benefits agreement to ensure developers pay attention to community needs as the projects are designed and constructed.

If the commission discovers a worthy project that is larger than the current amount saved up in the TAD fund, they have the option of issuing bonds against future TAD revenue (i.e. they could borrow the money up front). This is not currently being proposed by the commission, probably due to the fact that no specific project has been approved yet.

Phase Three: Profit!

After twenty years, the TAD would expire, bringing the entire tax increment back into the local government’s general fund. If the TAD was successful, the TAD areas would be more vibrant, productive and profitable at this time. That means we’d see a large increase in the tax digest, and it would be larger than we’d have seen without a TAD.

We don’t know if the ACC Board of Education will support these particular TADs. They might be unwilling to commit their tax revenue for projects that are not specified in advance. However, if the TAD is successful, they will certainly see a boost to their budget once it’s all said and done. 

This budget boost after the TADs expire would be much higher, over the long run, than the investment they would be committing to the TADs over the next twenty years. This is the ultimate purpose of a TAD — it’s an investment intended to reap development for under-served areas and increase budgets for both government and school district partners alike.

What are the specific TAD areas in this proposal?

TAD #1: The Mall 

TAD One map

Expected tax increment: $51,677 per year going into a TAD fund

TAD #2: West Broad / Hawthorne Ave

Expected tax increment: $56,853 per year going into a TAD fund

TAD #3: Newton Bridge Road

Expected tax increment: $1,519,169 per year going into a TAD fund

TAD #4: East Downtown / N. Oconee River

Expected tax increment: $2,521,299 per year going into a TAD fund

TAD #5: North Ave / Loop 10 Area

Expected tax increment: $34,477 per year going into a TAD fund

TAD #6: Lexington Highway / Gaines School Road

Expected tax increment: $62,965 per year going into a TAD fund

Not all TADs are created equally

The astute reader may notice that not all of these TADs are created equally. Some seem almost pathetically inadequate for the desired function of encouraging redevelopment. There isn’t much redevelopment that can be done for $34,477 a year, unfortunately.

TADs Three and Four have ongoing development projects that are expected to increase tax revenue significantly in coming years — this revenue will be captured by their respective TAD, and put to use encouraging even more development (and more development that is desired by the community).

TAD Three includes the upcoming Westclox mixed-use development, and TAD Four includes the site of the future Classic Center Arena and is quite close to the site of the North Athens Project. As a result, the expected tax increment is much higher in these two than in the other TADs (enough to actually build something).

TADs One, Two, Five and Six seem to have been included solely as a gift to commissioners in those areas and will probably not be very useful to anyone except them. On the other hand, they shouldn’t cause any harm, either.

Mayor Kelly Girtz, a big supporter of TADs, disagrees with this assessment. He says that even the smallest TADs on this list might be successful at attracting new development. In fact, just the existence of a TAD, since it is a signal to developers that the government is serious about attracting investment, may be enough. If that’s true, their funding values would increase dramatically over what is listed above.

If you have a comment on these specific TADs or on the idea of TADs in Athens in general, your best bet at this point is to direct them to the Board of Education, who essentially have the power to approve or deny them (at least for their portion of the tax increment). 

If the Board of Education chooses to deny support for the TADs, any remaining tax increment the commission could muster on their own would probably be inadequate for redevelopment purposes. In this case, the commission would choose to delay the TAD until next year at the earliest, giving them more time to seek the Board of Education’s approval.

2020 TAD Proposal Summary

  • TAD #1: The Mall ($51,677 per year)
  • TAD #2: West Broad / Hawthorne Ave ($56,853 per year)
  • TAD #3: Newton Bridge Road ($1,519,169 per year)
  • TAD #4: East Downtown / N. Oconee River ($2,521,299 per year)
  • TAD #5: North Ave / Loop 10 Area ($34,477 per year)
  • TAD #6: Lexington Highway / Gaines School Road ($62,965 per year)

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