This month’s unanimous Georgia Supreme Court ruling greenlighting $35 million in revenue bonds for a new Kroger in east Cobb isn’t getting unanimous praise from local analysts.
The ruling will have an immediate impact on east Cobb’s Marketplace Terrell Mill, of an estimated $120 million, on a 24-acre mixed-use development near the intersection of Powers Ferry and Terrell Mill roads is set to be anchored by the grocery store. The project will also include 298 apartment units, a 100,000-square-foot storage facility, four restaurant and retail outparcels and about 13,000 square feet of shops.
But Benita Dodd of east Cobb, vice president of the Georgia Public Policy Foundation, says she hopes the ruling “will encourage taxpayers to urge legislators to look at the kind of wide-open authorization that development authorities can operate under and start reining them in.”
“What (the ruling) tells me is that we need to go back and examine the authorization behind these development authorities, and tighten it up where taxpayers are protected and authorities don’t have carte blanche with taxpayer obligation,” Dodd said. She added that she classified the state Supreme Court decision as “expected.”
“We need to see efficient use — I mean, this is Cobb County, we’re supposed to be fiscally conservative, and these kinds of decisions that seem senseless to me involving a retail company that simply does not need such an incentive,” she said. “It’s mystifying to me.“
Marietta attorney Tom Cauthorn, a former Superior Court judge who represents the Downtown Marietta Development Authority, said the decision was “good news” to development authorities.
“The Supreme Court made it real clear what the case law is and what the development authorities and citizens can expect,” Cauthorn said. “And it’s good news for folks who are involved in economic development.”
Under the Development Authority of Cobb County’s agreement with Kroger, the Development Authority will take the title to the property, removing it from the tax rolls. Kroger will pay no taxes on the improved property during the first year, with payment increasing each year until it reaches 100% after 11 years.
ABATEMENTS A ‘WORK-AROUND’?East Cobb activist Larry Savage issued a legal challenge against the authority, and Cobb Superior Court Senior Judge Adele Grubbs sided with him in September, denying validation of the bonds.
That ruling was later overturned by the Georgia Supreme Court.
Greg LeRoy is executive director of Good Jobs First, a national policy resource center for those promoting corporate and government accountability in economic development. LeRoy said last year that he did not see Grubbs’ ruling as one that would hurt Georgia in the long run.
“Georgia will not be harmed by any decision to deny bonds and abatements to retailers,” LeRoy said at the time. “Indeed, it could benefit because schools and other public services will be protected.”
But LeRoy said last week the bonds and abatements offered through the Development Authority of Cobb County and similar entities serve as a “constitutional work-around” as Georgia and several other states “effectively or partially prohibit the granting of property tax abatements.”
Savage said last week the overruled local decision gives the Development Authority of Cobb County and all development authorities in the state free rein to award “tax abatement deals to any and all projects that suit their pleasure.”
Cauthorn disagreed with Savage’s assertion that the ruling presented the authorities with a “blank slate.”
“I think development authorities by and large take their roles seriously and examine all the facts and circumstances before they initiate a program like the one Cobb authority had developed for the Kroger,” Cauthorn said. “I don’t look at it as a wide open, unrestricted, undisciplined process. My experience in dealing with the members of the (Downtown Marietta Development Authority) is that they take the role very seriously … and I think other authorities in Cobb do the same. I don’t think (the ruling) is a dangerous sign, I don’t think it’s something to be worried about.”
Marietta attorney Tucker Hobgood previously dealt with another bond-related measure, joining with Savage and Austell activist Rich Pellegrino in a July 2014 appeal against the issuance of up to $397 million in bonds to finance the construction of SunTrust Park.
The Georgia Supreme Court unanimously ruled against the appeal, allowing the bonds to be issued by the Cobb-Marietta Coliseum & Exhibit Hall Authority, a governmental organization that owns the Cobb Galleria Centre and the Cobb Energy Performing Arts Centre.
“In the Braves stadium case, the Georgia Supreme Court was willing to adopt the government’s argument that a professional baseball ‘park’ came under the authority of the County’s constitutional power to provide ‘parks, recreational areas, programs and facilities,’” Hobgood said. “Go see if you can find “SunTrust Park” on the list of county parks or recreational facilities. “With that kind of fiction, it is obvious the Georgia Supreme Court is not going to curtail government overreach.”
While Hobgood said he believes those involved in the Kroger project “mean well,” once a government “starts a program of giving money away, like tax abatements, it has a life of its own.”
“Only large businesses qualify. Wouldn’t the County prefer to have 10 businesses employing 10 people each, than one with 100?” Hobgood said. “If the county taxes are too high for businesses to locate here or develop here, how about reducing the tax rate for everyone?”
KROGER HAD BEEN OK’D BY SCHOOL DISTRICTWhen the DACC’s proposal for the Kroger development project was presented in front of the Cobb County School Board in May 2018, neither Superintendent Chris Ragsdale nor the district’s seven board members voiced any objections to the proposals during the presentation, the MDJ previously reported.
“There was no opposition and very little discussion. I can’t remember specifically, but I may have asked a couple of questions,” board member Randy Scamihorn said earlier this month. “To be fair, we may, as a board, be a little biased in that the old Brumby Elementary School was a part of that (development).”
The proposed Kroger store is slated to be built on the site of the old Brumby Elementary School, which opened in 1966 and was replaced by a new $22.7 million replacement Brumby Elementary that welcomed its first students this fall.
The site, as school property, pays no property taxes to Cobb County or to the school district, but if it became commercial, it would, though its tax payments would gradually ramp up under the 10-year tax abatement schedule.
“We do get less tax in the first few years, but we’re not harmed in any way,” Scamihorn said. “The Development Authority’s argument is, ‘How much tax would you get after 10 years if we didn’t give them the tax abatement and nobody built (on) or improved the property?’ That’s one aspect of it, but in my mind, Cobb County has been growing even through the recession and somebody’s going to pick up on it eventually. But it’s a gamble, it’s a bet either way — I’m betting that we could still probably find somebody without a tax abatement in my mind, and they’re betting that it would be a lot more difficult, and maybe never, if we didn’t offer the tax abatement.”
As for whether Kroger was a good bet by the development authority, Scamihorn added, “We’ll let others decide.”
WHAT’S NEXT?The ruling in Kroger’s favor also presumably paves the way for a favorable decision for Smyrna-based Floor & Decor.
The Development Authority of Cobb County approved a $16 million bond and tax break plan in November aimed at allowing the retailer to move its headquarters to Cumberland. Floor & Decor has said the move will allow it to double its workforce of 420 people over the next five years.
Savage disputed issuing the bonds on grounds similar to his opposition to the Kroger project, and Cobb Senior Judge Grant Brantley pointed to Grubbs’ ruling and pending decision by the state’s highest court in his delay of a decision on the matter.
Following the state’s top court ruling, Floor & Decor can now return to a Cobb courtroom for bond validation proceedings.
“It can be brought back by (attorney Kevin) Brown and the Development Authority at any time and go before whichever judge is presiding on that day to be ruled on in accordance with the opinion of the Supreme Court,” said Tom Davis, staff attorney for Cobb Superior Court senior attorneys, who added that a hearing date on the matter has yet to be scheduled.