The Development Authority of Cobb County has made its way into the spotlight by offering a property tax abatement on a $103 million project, Riverwalk, containing luxury apartments and a 10-story office tower.
The audit released in December by the state calls for local development authorities to do a better job of ensuring members are ethical and discussions take place in public meetings.
Clark Hungerford, chairman of Development Authority, says the unelected board, appointed by the Cobb Board of Commissioners, is ethical despite the audit’s conclusion that transparency is a problem on such authorities statewide.
Just two of the 11 local authorities auditors visited during their study had a written ethics policy.
Cobb’s authority has no such document, though Hungerford said members do their best to follow the Georgia law that established a code of ethics for members of state boards.
Most of the ethics enforcement is based on an assumption that members are honest because they are expected to recuse themselves from discussion about companies with which they have a financial tie.
“A good example of it is at this upcoming meeting we’ve got on our agenda to approve a project for Bake One, which is one of my customers, and I’ve already announced that I will recuse myself from any consideration,” said Hungerford, an executive with Vinings Bank.
Bake One, a bread company in Smyrna, is under consideration to receive funding for production equipment. In August 2012, the business owned by Atlanta Bread Co. was loaned $3.25 million to purchase and install production line equipment at its Smyrna processing plant. Hungerford recused himself from that vote, according to Development Authority minutes, but the bank where he serves as executive vice president was an escrow agent in the deal.
An escrow agent is a bank that distributes money on behalf of a lender, but Hungerford said Vinings Bank does not charge a fee for that service.
“They are a customer of the bank that I handle and as such I felt there was a conflict of interest for me to participate,” Hungerford said.
Many players involved in tax deal
The case of the Riverwalk development, financially backed by real estate tycoon John Williams, involves a tangled web of wealthy and well-connected business leaders, many of whom are playing dual roles.
Cobb Chairman Tim Lee denied incentives the county can dole out but sent Riverwalk developers to the Development Authority for a tax break.
Another influential figure is doing double time.
Tad Leithead is the consultant for Riverwalk and signed the application given to the Authority seeking tax abatement.
But he is also the chairman of the Cumberland Community Improvement District, a district made up of business owners who agree to tax themselves and use the cash to improve the area.
That district was also founded by Riverwalk backer and mogul Williams.
Riverwalk didn’t meet the county’s requirements of creating 25 jobs and contributing $500,000 to the tax digest, but the Development Authority is still forging ahead with the tax break.
The Cobb Board of Education has mounted a legal challenge citing the potential impact the tax break could have on the county’s school district, which faces an $80 million shortfall.
If Riverwalk were constructed without a tax break, Cobb schools would get $7.8 million in revenue. With the tax break, it would get $3.5 million.
Audit: More sunshine needed
Local authorities typically follow Georgia’s Open Meetings Act, which requires giving notice of special meetings 24 hours before they take place, providing an accurate agenda and requiring minutes to be kept.
There’s one exception, according to the audit.
Many local development authorities go into closed-door meetings to illegally discuss issues that are not exempt from the Open Meetings Act, the audit alleges.
Public boards are allowed to retreat from a public meeting and go behind closed doors for what’s called an “executive session,” provided no decisions are made in closed session and discussion is about the sale or purchase of real estate, pending or potential litigation or personnel matters dealing with specific employees.
Boards must state the specific reason for going into closed session, sign an affidavit stating only that item was discussed, and record conversations in their minutes.
At a Jan. 3 meeting, the Development Authority passed a communications policy in response to the school board’s complaints the Riverwalk tax break cuts into precious revenue. The Development Authority approved the policy requiring it to alert the school board when it files applications for tax breaks that have the potential to impact the school’s cash.
But it first discussed the policy behind closed doors.
That’s not allowed under the Georgia Open Meetings Act, David Hudson, attorney for the Georgia Press Association, told the MDJ.
Hudson argues in the Georgia Press Bulletin that while state law may allow public boards to meet in the dark, it’s not required.
Attorneys for public commissions and boards often discourage members from discussing what is said behind closed doors in public, but Hudson said there is no consequence from disclosing conversations had in closed session.
Looking for more transparency
Some members of Cobb’s local delegation have suggested they may take up the state laws that govern authorities to require school boards to be kept in the loop about tax deals that could impact their bottom line.
State Rep. David Wilkerson (D-Austell) says the audit could be the beginning.
“I expect to see some type of adjustments, and I think the audit by the state is definitely a good place to start that conversation,” Wilkerson said.
He couldn’t say exactly how the law might be changed but acknowledged there’s a need for more transparency and said his priority is bringing schools into conversations around tax subsidies.
“To me, the biggest thing is making sure that all parties are aware of what’s going on,” Wilkerson said.
State Sen. Lindsey Tippins (R-west Cobb) said he had not read the audit.
“Until this story came up I really have not been paying that much attention to what they’re doing,” Tippins said.
But he acknowledged ethics and transparency should be “fundamental” to any public board.
“If they are dealing with the taxpayers’ interest then I think they absolutely need to adhere to both of those,” Tippins said.
Tippins said most discussions should take place in public and openness increases trust, but said there are exceptions.
“The public may not always understand why you go into executive session and there are cases that absolutely may need to be discussed in executive session, but it shouldn’t be an abuse of power,” Tippins said.
State Sen. Hunter Hill (R-Smyrna) declined to comment on the audit, noting he had not yet read it.