The Georgia Court of Appeals upheld the December lower court validation orders filed in four bond validation trials that were challenged by a man who challenged the Fulton County’s Development Agency’s policy of giving tax breaks on four new projects totaling $ 333.5 million Grant US dollars. Julian Bene, a former board member of Invest Atlanta, the city’s development division, has historically spoken out against the agency’s policies, including its practice of tax exemptions from projects. In December, after the four bond validation trials were initiated in the Fulton County Superior Court, Bene intervened and appealed, which sparked a judicial review of the legality of the agency’s proposed bond proposals. His arguments included claims that the projects were illegal because the proposed tax breaks violated the Georgia Constitution’s gratuities clause, and that projects in the hot Atlanta real estate markets did not require tax breaks. But on December 30, the Supreme Court dismissed Bene’s objections and issued orders to validate the four loan proposals, and Bene, represented by John Woodham of Woodham Law in Atlanta, appealed to the Court of Appeals. However, the higher court confirmed the validation decisions of the court of first instance in a judgment of October 27.
The projects and the process
Presiding Judge Anne Elizabeth Barnes, Georgia Court of Appeals. (Photo: John Disney / ALM)
According to the court document, the bonds in the lawsuit relate to the following four Fulton projects: $ 88.5 million for an apartment building and $ 115 million for a mixed-use facility).
According to the agency’s lease agreement for the bonds, each project would be exempt from any value tax for 10 years, during which time only the leasehold shares of the development project companies would be subject to taxation.
Through letters of intent, the percentage of the value taxed each year on the completed projects would start at 50% of the market value in the first year and increase to 95% in the 10th year. After the lease expired, companies could purchase their projects for $ 10 each as long as they kept the terms of the lease.
According to the court document, the higher court found on 11 counts that the agency did not break the law or break the guidelines when issuing bonds to the four projects.
Judgment of the Court of Appeal
Presiding Judge M. Yvette Miller, Georgia Court of Appeals. (Photo: John Disney / ALM)
Before the Court of Appeal, a three-person panel made up of Presiding Judges Anne Elizabeth Barnes and Yvette Miller, and Judge Elizabeth Gobeil, decided on the case.
In her opinion, Gobeil, quoting the High Court’s decision, stated that the panel supported the Lower Court, writing, “Hence there is evidence that the ‘bond issuance proposal is sound, workable and reasonable’ and in the face of ‘any evidence’. Standard, the findings of the higher court regarding validity, feasibility and appropriateness must be confirmed in the appeal process[.]’“
Gobeil also wrote: “According to Bene, the High Court placed the burden of proof on him for all actual matters, and this shift of burden was a mistake. We disagree with Benes’s characterization of this problem and cannot find any errors. “
Cary Ichter, Ichter & Davis, Atlanta. (Courtesy photo)
Cary Ichter, partner of Ichter Davis in Atlanta, and Sandy Zayac and Henry Chalmers, partner of Arnold Golden Gregory in Atlanta, took authority on the case. Ichter said the statutes of the state were on his side.
“The law is quite strict on these development bond transactions,” he said, referring to the Georgian Development Agency law. “It basically says that any conflicting laws that have been passed by the legislature and are inconsistent with this law will be subject to this law. It will rule them. It is indicative of the great importance that the legislature has attached to developments in Georgia. This is one of the reasons Georgia is one of the best places to do business today. ”
On the appeal court’s decision, Ichter added, “I think it’s a great decision. The court did exactly what the law should have done it. As a consequence, tax revenues will increase significantly in the future. There will be development projects worth $ 333.5 million and thousands of jobs will result. “
Discussed tax breaks
He defended the agency’s policy of tax-deducting new development projects, saying this helped bring many businesses to the county.
“Business development is a competitive sport. It’s also a full contact sport, ”said Ichter.
He pointed to recent news that Gilead Sciences Inc., a California-based pharmaceutical company, has decided to relocate its headquarters to Raleigh, North Carolina, which offers $ 12 million in tax breaks, rather than Atlanta, which just does Proposed $ 7 million.
“If the cost of doing business is higher here, companies will go elsewhere,” said Ichter.
Woodham said the fact that all but one of the four projects, with the exception of the hotel, were under construction even after the lawsuit and tax breaks were frozen means they didn’t need breaks and proves they were illegal.
“But the story from the developers and the development agency is that these projects cannot move forward without this tax incentive,” said Woodham. “What we do know is that after these cases were appealed, they [the projects] went forward. From a lending perspective, lenders do not close or fund multi-million dollar home construction loans for projects that are financially unsustainable without a tax break that is not yet in effect. The lender’s actuarial decision to close and finance these acquisition and construction loans without the applicable tax breaks proves without question that these were not needed, which objectively shows that the loan proposals for three projects are unconstitutional. So we will at least try to resolve these three obviously illegal things.
“The Court of Appeal’s analysis speaks of all of these ‘public benefits’ that will result, such as jobs and economic development. If you have this anyway, the tip analysis breaks down on your part. With this appeal court ruling, we now know that these projects are illegal. Somebody’s going to have to monitor what’s happening to the Fulton County Development Agency in the future, and the developers say with a winking nod, ‘Of course we need it.’ “
In a statement e-mailed praising the Court of Appeal’s decision, Michel “Marty” Turpeau, the agency’s chairman, responded to three of the four projects under construction.
“Because the various parties involved in these bond transactions were deemed to have a very low risk of an adverse Georgia Court of Appeal outcome based on longstanding jurisdiction, we believe that some of the developers have made preliminary efforts to obtain them Projects from the ground, ”he said. “With the official support of the Georgia Court of Appeals, we hope these preliminary efforts can result in real capital improvements that the community can enjoy for generations.”
Woodham pointed to the record of the Supreme Court trial in which Ichter Al Nash, then CEO of the agency, asked, “Are you asking these developers this question? Ask them, ‘Can you go ahead with this project without the incentives?’ “
“Yes,” replied Nash.
“And would the development agency encourage developers to say, ‘Sure, we’ll do this; no problem? ‘”asked Ichter.
“That’s not our intention,” said Nash.
“Okay,” said Ichter. “Did any of the developers in connection with these special transactions -“
“As far as I can remember, all four were asked either by us or by my staff; and in most cases they were asked at the board meeting by one of the board members, “said Nash.
Authority scandal “Separate”
In June, the agency was embroiled in a scandal over their old practice of daily charges after jointly investigating two Atlanta media companies, where their board members would charge the county $ 200 for the agenda item of each meeting, much more than the others elected directors of Fulton. According to the report, then chairman Bob Shaw made just under $ 1 million in daily allowances (an average of $ 66,667 per year) from 2005-21, said board treasurer Sam Bacote.
Lawyers representing both sides of the trial were asked whether the scandal should have affected the appeals court’s decision. Ichter said, “No. It doesn’t and shouldn’t. These administrative matters are completely separate. “
But Woodham said, “I would say that maybe some of the things that happened to this board in the fall of 2020 are compatible with their approval of every deal that is ahead of them and not reviewing them because some deals have incentives . Three of the four projects, which in any case did not need a tax incentive, show where their priorities lie.
“As for the Court of Appeal’s decision that we presented to it, I don’t think it would be compatible with the daily allowance to argue the appeal, but now that we have three of the four projects that look illegal, the dynamics around the board contributed to this problem. “
Woodham said he hoped that state lawmakers will amend Georgia’s law on development agencies to have projects more scrutiny before approving them for tax breaks they may not need. As for next steps, Woodham said he was “pretty sure” that he and Bene will take the case to the Georgia Supreme Court.
The case is Bene versus State of Georgia et al. (A21A1143, A21A1144, A21A1145, A21A1146).
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