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Click to enlarge photos.By Ashley Hungerford
ahungerford@mdjonline.com
KENNESAW - Fred Bentley Jr., as attorney for the city of Kennesaw, reviewed the documents and advised city employees as the payment in lieu of taxes, or PILOT, financing deal for a private redevelopment project progressed.
Although Bentley also represents the county in zoning matters, he was "within the bounds of ethics" by not revealing the deal to county leaders, Chairman Sam Olens said Thursday.
"His client in this case was the KDA (Kennesaw Development Authority)," Olens said, pointing out that Bentley would likely have violated the lawyers ethics code by discussing the matter with the county.
"Would I like it more if he wasn't involved in this? Yes," Olens said. In 2007, the Bentley, Bentley and Bentley law firm received $345,839 for county work.
Bentley said he never felt he had a conflict of interest, and that the KDA ran legal ads as required when the bonds were issued a year ago.
"After the TAD, we told the school board we would look for other ways to fund the project," he said.
A $100 million development featuring retail, office space and a Sheraton hotel is under way at the corner of Kennesaw Due West Road and Highway 41. George Nemchik's McGuire Realty is the developer.
On Dec. 20, 2007, the development authority issued $13.5 million in bonds to help pay for the project. The authority, a government body, holds the title to the property until the bonds are paid off. Because government property is not taxed, the project may be removed from tax rolls. A PILOT does not require notice to any other governing bodies affected by the deal, so county officials were blindsided earlier this year when the KDA requested tax-exempt status for the property.
The 34-acre site is valued at $8 million, with a current tax bill of about $125,000. If the property is removed from tax rolls for 33 years, the full length of the bonds, the Cobb school district would lose at least $2 million in revenue. The county would lose more than $1 million. That money would be diverted to pay off the bonds.
"It clearly is inappropriate, but the majority of lawyers believe it is perfectly legal," Olens said.
Tax assessors will decide in January whether to grant the tax-exempt status. If they refuse, a lawsuit would likely ensue. Bentley said he would recuse himself if that happens. Olens said the county would support the assessors in any legal action.
Kennesaw officials insist the public financing was necessary to redevelop and improve the site. They openly acknowledge that they did not give the county or the school district the courtesy of a phone call for fear the deal would be stopped.
In 2006, developers sought an $8.5 million tax allocation district subsidy for the same site. TADs require consent of the other bodies, and the Cobb School Board refused.
The city, with the assistance of underwriter Gordon Morton, and bond attorney Earl Taylor, of the Atlanta law firm Kilpatrick Stockton LLP, then worked the $13.5 million PILOT.
"So not only did they work in the dark of night, but they increased the value of the subsidy," Olens said. "The county does not view Gordon Morton or Earl Taylor with any favor because of this transaction." When county leaders met with the two earlier this year, Morton and Taylor were "both extremely smug and comfortable with their prior actions," he said.
Morton would not speak on record about the transaction.
As for making sure more PILOTs do not pop up, the county already has some allies in the state legislature.
State Rep. Earl Ehrhart (R.-Powder Springs), chairman of the powerful House Rules Committee, said he will push legislation to require the consent of all government bodies involved before a PILOT deal is done. The legislature will convene in January.
Ehrhart is already an outspoken opponent of TADs, and is just learning about the rarely-used PILOT.
"TADs, with all their issues, at least require all the approvals," he said. "I think it's an abuse if you allow one jurisdiction to take the taxes of another jurisdiction off the books. You need to have a collaborative agreement."
On Nov. 4, Georgia voters approved a constitutional amendment allowing tax-allocation district subsidies. In the new session, legislators must redefine how a TAD can be used, and Ehrhart plans to add restrictions for PILOTs.
Olens said he has spoken with mayors in some of the county's cities, and does not believe any such deals are in the works.
"From a political standpoint, they don't want to get into this fray," he said. "The majority of the mayors don't want to put their city in the position Kennesaw is in. They support transparency."
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Posted Comments
Wow! Honesty is a thing of the past. It is sad to see good people allow themselves to be void of good character in exchange for the all mighty dollar! Just because something is legal doesn't mean it is right. Just another example of America's downward spiral. Mr. Olen's is correct when he says, "It clearly is inappropriate...".
Who are the people that serve on the Kennesaw Development Authority (KDA)? The media has yet to mention who these people are. They are the ones that made the decision to move forward with the PILOT. The KDA is a governing body in itself and deals with bonds and land deals for the City of Kennesaw.
I find it interesting that Kennesaw is bound and determined to put 13.5 million into developing largely commercial and retail given current economic conditions, including declines in retail sales, increases in retail bankruptcies, and increased commercial and retail vacancy rates. This is about like going into the buggy building business after the invention of the automobile.
I can assure anyone that anything Mr. Bentley is involved in will be done with honesty and integrity. It sounds like Mr. Bentley is also an outstanding attorney who operated within the parameters of the law and did an outstanding job for his client. Change the laws if you don't like it.