Report on the Lilliput TAD MOU meeting.

Click on images to enlarge. By the way, in this first table below, you will see that if projections come true, it is not long before the annual incremental taxes exceed the annual debt service on the bonds. Under the law, the city could either opt to use those funds to pay off the bonds early OR put the excess annual taxes back into the general fund

Well, I just got back about 30 minutes ago from an awful dining experience at St. Johns Seafood and Steaks after spending 2 hours and twenty minutes at the TAD meeting. I went just to report, but when it became painfully obvious that the entirety of our elected officials, our city manager, and the Watchdog folks had either not actually read the law or had not understood what they did read, I found that I had to jump in for a quick tutorial. I'll give you the full scoop tomorrow. I just got off the phone with my dear friend and housekeeper, Sarah. She went in locally this morning for a stress test then unexpectedly had to go straight away to the Shands cath lab in Jax for a cardiac catheterization. The good news is no blockages. I'll miss her for the next few days, but I'm greatly relieved to know she's AOK. Update @ 1305 HRS on Tuesday, 7/21: After numerous interruptions this morning, I've finally finished reading all 86 pages of the proposed MOU. Let me get some lunch, do a little more research, then I'll get back to y'all. 1404 HRS. Here's a good TAD FAQ site: http://www.atlantada.com/buildDev/tadFAQs.jsp#top 1520 HRS: I just finished reading an excellent 82 page report on TADS in Georgia conducted by Georgia State University. I do blieve that this is that same study which Tom Cyphers, on behalf of Watchdogs, presented in voluminous hard copies to each of the elected officials, the city manager and attorney, the paid media reps, (1600 HRS. Just got off the phone with Chip Drury making sure that I had a perfect understanding of what he wants to do.) and Mr. Drury. http://aysps.gsu.edu/publications/researchatlanta/Ga%20Redevelopment%20Powers%20Law.pdf 1617 HRS. Okay, folks, I'e been studying up on this business all day. I know my biggest readership is from 1700 to 1800 HRS, so I better get crackin'. The mayor and all city councilmen except Bird were there last night. So were the city manager and city attorney as well as the Public Works and Planning and Zoning directors. Once I get in 30 minutes early and get a front row seat, it is difficult for me to look back over my shoulder. I got the feeling it was well attended though. I know I saw Kingfish slink out early so he would not have to face me. Mercifully, he did not speak. Mr. Drury gave his presentation. Having read the law Saturday, I listened intently to see if anything he was putting out was at odds with the facts of the applicable state law. It was not. He was dead on honest and accurate. The only thing I remained a little dubious about at the end of his presentation was how in the world could an abandoned, ante bellum rice plantation qualify as a "redevelopment" project. I told him as much there in the meeting. However, in subsequent reading today, I've learned that the legislature has enthusiastically given developers and sponsoring cities and counties very wide lattitude which now convinces me that the current consensus intent of the legislature is such that neither Mr. Drury nor the city wil have any difficulty passing that sniff test. The problem he is going to have is educating the public on the true nature of TADS, per se, and his in particular, in time for a referendum this year. The first thing needed is to dispel some untruths that are still bouncing around from the last TAD attempt. Let's deal with the knee jerk opposition's claim that the authority created to handle this TAD (and any subsequent TADS ) will have the power of eminent domain. It will not. The only way that could happen would be if the council did not do its homework and used the existing Downtown Development Authority, which does have eminent domain powers. If they do it correctly, and set up a brand new TAD Authroity, the law specifically states that such an authority will NOT have eminent domain authority and goes on to state specifically that any such power which might be exercised in conjunction with a TAD will be reserved to the city (i.e. city council) and not exceed or differ from their regular powers of eminent domain. Moreover, there is no element of eminnet domain in the Laurel Island plan. You can read it for yourself. Moreover, Mr. Drury has said there is neither an interest nor a need. Okay, so how does a Tax Allocation District Work. Let's use Laurel Island for example. Right now, according to Mr. Drury, the property to be placed in the TAD generates a total of about $120,000 annually in property taxes. When the TAD is approved, the state will set a base value of the property for tax purpsoes. Let's say it is exactly the same 2008 valuation which now generates $120,000 in taxes. So, for the balance of the 40 years it takes to pay of all of the bonds (about which more shortly), the applicable current millage rates for the county, the school board, and, after anexation, St. Marys will be assessed against the base value. That value will not change for 40 years (or sooner if the debt is paid of early). But, as infrastructure is put into place and housing and commercial units are built and sold, the total value of the property will increase. The tax allocation district will be taxed upon the new TOTAL value every year. However, after the taxes are collected, the difference between the taxes generated by the base value and the added "incremental value" will be used to service the debt service on the bonds (pay them off). The bonds may be issued by the city so that the city may then give then entire $140,095,000 of bond proceeds to the developer up front (in seqeuntial disursements as he completes successive phases of the infrastructure). That money will come from the sale of the tax-exempt municipal bonds to private investors, i.e., the big pension funds like the one Drury mentioned last night. There is another method available under the law: the developer issues bonds himself, spends them as he gets them from sales of bonds (build-as-yo-go) then gets reimbursed annually to the extent that TAD incremental revenues exceed the base value revenues. As you can imagine, for Mr. Drury's project to go forward, he will need the version where the city issued the tax-favored municipal bonds so that he has the money up front. Remember, the $140,o95,000 is just for the necessary infrastructure to be put in place before he can go get additional private financing to build the actual homes and businesses. I'll post the list of such infrastructure costs here shortly. (See top of post). What are the city's obligations, so far as paying off the bonds? Well, legally, the city is NOT, I repeat NOT, obliged to pledge the "full faith and credit" of the city's general funds to the repayment of the debt. They are only legally obligated to first use the taxes generated within the TAD (by the way, that includes the county and school board taxes) by the incremental value. In any year that those funds are insufficient to pay the debt service, the city may legally use the TAD base generated taxes. If that is still insufficient, the city is NOT, I repeat, NOT, legally required to dip into the general fund to pay the debt service. Legally, the bond holders would just be out of luck. However, as a practical matter, if the city did not voluntarily cough up general funds to cover the debt service, the city's bond rating would take a hit. That would not be the case in the pay-as-you-go version, but that version would be a deal killer for any developer in todays market. Okay, it's 1700 HRS, so I'm posting what I have so far then continuing on. One thing I found interesting last night when Tom Cyphers got up to speak for the Watchdogs (after Winston Barlow made a very brief non-committal appearance and split for a "previous engagement") was that he questioned the provision of applicable law which says that any given governmental unit is limited in the TADs they can approve to no more than 10% of the community's real ad valorem tax revenues . In other words, if the base amount of taxes for the Laurel Island TAD is only $120,000 now, in order for it to use up the whole 10% allowance, the total tax revenues of St. Marys could be no more than $1.2 million. Clearly, we would be nowhere near the 10% limit if this TAD passes. I found it interesting because , A, Tom and the Watchdogs had misread that section of the law, and B, because I got the feeling that the downtown folks (The Watchdogs) have an interest in a wholly different redevelopement TAD of their own for downtown. If so, they are no doubt torn between shooting this one down (typical downtown dog-in-the-manger-syndrome) or seeing it pass so that they can more easily piggy back on it when a TAD Authority is already established. After Mr. Drury had made his presentation, replete with lots of expensive, large artist's concept watercolors and arial maps, the city councilmen all asked questions, seriatim, begining with Councilman Johnson and ending with Councilwoman Hase. Having read the law on TADs, it soon became obvious that no one on the council had. I think they were mostly just putting on a "due dilligence" dog-and-pony show for the rubes, especially DeLoughy and Weaver, who are both up for re-election. I could stand it no-longer. Like I said, I had originally come just to report, but I found myself giving the mayor and council a mini-seminar on just how the law actually read and what it actually meant. Both Drury - whom I had never laid eyes on or spoken to before that moment (a fact which, at my request, he confirmed for the council) and his "expert" on TADs he brought down from Atlanta, told me that my explanation was spot on accurate. I also had to educate the Watchdog rep, Tom Cyphers, on a few misreadings his group had as well. Okay, so what are the possible benefits versus the possible risks? Well, we now have way too much water and sewer capacity. You know we are having a bit of a tough time paying for it, as witnessed by the recent water / sewer rate increase in St. Marys. When and if enough homes in the development become water /sewer customers, the city could and should decrease our water/sewer rates for the ENTIRE city. During the 40 years before we would start realizing 100% of the property taxes in the TAD, we would be getting ever -increasing sales taxes from the residents and business owners. In fact, three cents on every dollar spent by new folks at Laurel Island (LOST, SPLOST, and ESPLOST). Building materials would be bought. Tradesmen and laborers would be hired to build it. At the end of 40 years, we would get all of the tax revenues from a projected 1.4 billion dollar development. We landlubbers might have a nice meal or an upscale shopping trip to the island from time-to-time. Okay, so what are the risks? First, abuse of eminent domain is not one of them, as I've already explained. This project would come nowhere near exhausting the "10% maximum" I discussed earlier. If the project precipitously went belly up, the TAD remains with the property. Anyone who came in behind Drury could not only pick up the slack as far as the developemt, but would be eligible to receive any remaining and as yet undisbursed bond funds. Oh, by the way, I don't believe Drury would get he whole $140 mil in one sum, I believe it gets doled out as phases of the infrastructure plan are completed. That helps limit exposure. At any rate, worst case scenario, if it goes to hell in a handbasket, you could be faced with the possibiltiy of a choice between the city defaulting on paying bonds or dipping into the general revenues to avoid a bad bond rating. I think those dire straights would be very unlikely. According to Chip Drury, in my conversation with him today, so far, no TAD project in Georgia has ever failed. Atlanta is eat-up with them. Drury last night proposed to have his own fire and police protection. Bill Shanahan pointed out to him that while he could have private security, Georgia law does not permit private police and fire forces within a city. As time wore on and it got close to build out, we might have to add and extra cop and car or two. No biggie. The increased LOST and SPLOST revenues and the ad valorem taxes onthe base amount should cover that. Oh, by the way, in the MOU, Drury agress that when he builds structures (i.e, hotel ) up to the 65 foot height limit, if need be he will buy an appropriate hook-an-ladder to put in the fire station he will also pay to build. Tom Cyphers brought up the question of funding more school children, given that the school board would also have to agree to give up taxes from within the TAD on all but the base amount. Drury's response was that these would be mostly older, empty -nesters buying these homes. He's no doubt right, but there might be a few younger professionals and trust fund babies who will be able to afford to live there. His estimate was, at buildout, 60 kids at most. Well, in my reading today, I discovered something that he either did not know or wanted to keep quiet about. Relevant Ga. law has been amended to allow the developer to use some of the TAD money he gets to VOLUNTARILY make annual per capita payments to the school system for every school-aged child living in his TAD for the first 40 years or until all the bonds are paid off, whichever comes sooner. If we install the water and sewer lines from their closest present point to his TAD and he goes belly up, we are stuck with lines producing no revenue. Moreover, there is the initial cost of putting in the lines. Solution: negotiate with him to either cost share or fund the pipes entirely. In conclusion (mercifully), my mind is still open on this one. At this point, barring no futher info to the contrary, I'm beginnig to think that the potential benefits might just justify the risks and that the risks, if handled properly by a competent authority with good counsel, could be held to a minimum. However, as I told Chip Drury this afternoon, he really has his work cut out for him. He not only has to explain this thing in undestandable terms via all possible local media, but he starts at a deficit by having to overcome the false propaganda put out by the usual, knee jerk, anti-progress, dog-in-the-manger types. Special message to Chip Drury: Chip, to really appreciate the kind of genuine misgivings and deliberate falsehoods you will have to overcome, click on this link: http://www.topix.com/forum/city/kingsland-ga/T24E9PDU285EB3KJ1 You should also follow:http://www.topix.com/forum/city/kingsland-ga/TMOAT47B98TA1N62D