Atlanta, ADA Has Converted Millions of School Dollars to Beltline Slush Fund (UPDATE 1)
(APN) ATLANTA — An effort to “request and encourage” the Mayor of Atlanta and Atlanta Public Schools (APS) former Interim Superintendent Errol Davis to reach an amicable settlement for the over 20 million dollars owed to APS generated by the Beltline Tax Allocation District (TAD) is moving forward, Atlanta Progressive News has learned.
According to APS Board of Education (BOE) Member Cynthia Briscoe Brown (At Large Seat 8), the City Council of Atlanta and the APS BOE drafted a resolution calling on the Mayor and Superintendent to “talk and report” to both bodies on all progress being made to fulfill the 2005 Beltline TAD agreement.
Both bodies will presumably vote on the resolution in their next meetings, possibly next week.
In the original agreement, the City of Atlanta and the Atlanta Development Authority agreed it would deposit 52 percent of its the Beltline Tax Allocation District (TAD) revenue–property tax increment dollars from taxpayers living within the Beltline TAD–into an account to be used for educational purposes.
Attorney John Woodham sued because the remainder of the funds were being used for real estate development, that is, non-educational purposes. In 2008, the Supreme Court of Georgia agreed with Woodham.
However, in 2009, Georgia voters approved a Constitutional amendment to allow educational funds to be used for non-educational purposes..
The campaign in favor of using TAD funds for non-educational purposes misled voters, with organizations like the Metro Atlanta Chamber of Commerce and other pro-business groups pumping millions of dollars into direct mail and TV advertisements. The ballot language also misled voters regarding what they were voting on.
Subsequently, Woodham sued again because he argued that the original 2005 Beltline TAD agreements had become null and void. However, this second time around the Supreme Court of Georgia ruled that the voters could legally approve a constitutional amendment to make something constitutional that previously was not, and with retroactive effect.
But even after the voters of Georgia went out of their way to make it possible for APS educational dollars to continue to be diverted to the Beltline TAD, the City has failed to keep its 2005 promise to return some of those dollars to APS.
Recently, a war of words between the outgoing-Interim APS Superintendent Errol Davis and Mayor Kasim Reed shows how defiant the Mayor is and will continue to be regarding any Beltline money owed to the school children.
Davis had threatened to sue the City over the funds owed to the school district, in an interview with the Atlanta Journal-Constitution newspaper.
Then, at a recent Atlanta Beltline Board of Directors meeting, Reed responded defiantly, according to news reports.
“Nobody’s going to negotiate at the end of a gun. So, if you’re going to take hostages, you’d better be ready to shoot the hostages… [It’s] totally inappropriate to have an executive have that kind of conversation in the newspaper with the amount of support that the City has given Errol Davis,” Reed said.
“The Atlanta Beltline is the most popular public project in the entire City of Atlanta–by a lot–more popular than APS,” Reed said.
“So let’s tee it up, and let’s go. You take the actions you need to take, but I want you to be clear, I’m going to be equally aggressive in addressing whatever you do,” Reed said.
On Monday, June 30, 2014, the Council held a Briefing on the matter.
The Council heard from the CEO Paul Morris of the Atlanta Beltline, Inc., and Patrice Perkins-Hooker, counsel for the Beltline, regarding why the funds from the Beltline TAD have not been released to APS.
Besides offering a history of the Beltline TAD up to where we are today, Morris and Perkins failed to offer much more, cautioning Council that discussing certain items of past arrangements and future negotiations in a public setting would not be wise.
“Where are we in terms of [the Beltline] being delinquent? Who is handling this conversation?” Council President Ceasar Mitchell asked.
“The conversation is being directed by Mayor Reed. The delinquency is a debatable point, Mr. President,” Morris replied.
“A debatable point. Why is that?” asked Mitchell.
“There are two items to consider. First, in 2012, it was agreed that no payments would be made until there was a renegotiation. The second is the 27.5 million dollars that was not fully allocated,” Morris replied.
“The Beltline TAD did not benefit from the number of years it was implemented, from the non- pilot payment obligations or use of the tax increment from that period up to 2009. Discussions were held with APS to renegotiate prior to the due date for any payments,” Perkins-Hooker said.
“Twenty-eight million has been paid to APS under various circumstances… Supreme Court orders… circumstances interject and interfere this agreement. One was the economy; the housing market did not increase, actually it took a major nose dive; the economic decline and how much tax revenue was being received by the TAD,” Perkins stated, not using complete sentences.
According to the Beltline TAD Contract Summary from the APS website, initiated on December 31st of 2005:
– PILOT payments totaling 150 million dollars were to be paid over a 20-year period starting January 01, 2011, at 7.5 million per year;
-QBE Make-whole Payments were to be made to replace the amount by which QBE payments are reduced by the 5 mills of taxes that are levied on the TAD increment [effectively beginning on January 30, 2008];
-Recreational facilities were to be provided by conveying to APS land that is suitable and acceptable for such facilities and ten million dollars for the development of such facilities by December 31, 2008;
Two subsequent revisions were later drafted and accepted, the first was in August 2009, the second in November 2009.
The August 2009 amendment, effective August 17, 2009:
– Reflected the impact of the court case that suspended the TAD from its inception to until April 2009 and required remittance of all “Retroactive Increment” to APS ($26 million);
– Amended the PILOT payments to total $162,436,302 over 18-year period beginning January 01, 2013, as described in a schedule of payments;
– Extended the deadline for recreational facilities land conveyance, but not the 10 million dollars for the erection of recreational facilities, to December 31, 2009;
– Restarted the QBE Make-whole Payments on January 31, 2011;
The November amendment, effective November 09, 2009:
• Established a pro rata, or proportional payment, provision for PILOT in the event that the increment is inadequate to pay debt service and all PILOT payments
The Fulton PILOT of 1.35 million dollars was paid in fiscal years 2012, 2013 and 2014. The APS PILOT for FY13 of 1.95 million was paid in arrears in FY14, but the APS FY 14 PILOT of 6.75 million remains unpaid.
• Established PILOT payments to be subordinate to debt service and senior to any other redevelopment costs incurred for the Beltline, such as the purchase of Morris Brandon property;
• Provided for a four-year period to cure a material breach of contract due to failure to make PILOT payments;
• Increased interest rate penalty by two percent when a PILOT payment material breach occurs;
While almost half of City Council was missing for the Briefing, those who were present aired their concerns.
“Does the Beltline have the money in the bank to make any payments?” Councilman Andre Dickens (Post 3-at-large) asked. The answer, according to Morris and Perkins, was no.
Temperatures rose when Dickens, Mitchell, and others started to realize that they were not going to get the answers they wanted at this meeting. The Mayor was traveling internationally and his Chief of Staff offered nothing substantial. Mitchell, grasping at straws, looked out into the audience of less than ten and asked if there was anyone from APS present.
Quiet and confident, Atlanta Public Schools Board of Education Member Cynthia Briscoe-Brown (At-large Seat 8) took the podium.
“I can assure you, as a liaison to the Beltline, we at APS are having the same conversation and considering all our options. We want to resolve this in the best interests of all parties. This [the Beltline] is the most important project to the City; the well-being of Atlanta’s children is the most important project for APS,” Briscoe-Brown said.
She went on, in an almost song-like fashion, reassuring Council that total transparency and meeting goals together, while tending to Atlanta’s children, is her personal priority, as well as the School Board’s priority.
Profusely thanking Briscoe-Brown for participating in the Briefing, Council Members took turns discussing their pet issues surrounding funds owed to APS via the Beltline TAD.
Councilwoman Cleta Winslow (District 4) talked vaguely about economic development.
Councilwoman Joyce Shepard (District 12), who represents one of the lowest-income districts in the City, talked about people moving out of her District because of the economy and poorly run schools.
“I love the Beltline, but what about the schools? Young folks are slowly moving back into my district; education is key to keep them there,” Sheperd said.
“We don’t want to miss out on any opportunities that Atlanta Public Schools has with the City. I want to know what will happen with the Civic Center. There is talk of turning it into a high school. There could be room for a creative partnership,” Councilwoman Mary Norwood (Post 2-at-large).
Saving the best for last, Councilwoman Felicia Moore (District 9) spoke, enumerating points usually missed by the Council as a whole.
“I have a copy of the agreement here; there are a few things I need to know. I don’t know if they can be answered here, but I would like the numbers if that’s possible,” Moore said.
“First, what is the balance on hand at the Beltline? What is the operational cost of the Beltline? What is the breakdown between the City, the School Board, and the County? I want to see the payments made to the School Board, what’s owed and what’s due. Who made the agreement to suspend the payments and when did it go into effect?” Moore asked.
These are the questions indeed, which the Council should know the answers to, before making any decisions that the Mayor’s Office may attempt to fast-track.
The Beltline TAD, today, is apparently broke, after subsidizing a sprawling bureaucracy. A couple of years ago, an audit showed that Beltline funds, under former CEO Brian Leary, were used by staff members to buy such items as fancy catering, champagne, and wedding presents.
In a follow-up interview with APN, Briscoe-Brown said, “I am greatly encouraged by the spirit of cooperation and collaboration between the APS Board and City Council. I look forward to working together and getting great results.”
“If the roles were reversed and APS owed the City money, what would that look like? It doesn’t give me great comfort that we are so combative about this issue in the media. It is unfortunate that is issue has gone public in a negative light,” Councilwoman Moore said at the Briefing.
UPDATE 1: EDITOR’S NOTE: Atlanta Progressive News has received an inquiry from Carlos Campos, spokesman for the City fo Atlanta, regarding the use of the term “slush fund” in this article. The term “slush fund,” which appears in the title, is used in the colloquial sense, and is not intended to suggest that the funds are used for illegal purposes. We use the term because the Beltline TAD funds are managed by Beltline, Inc., under the oversight of the ADA, rather than as part of the City of Atlanta or APS budgets; thus, oversight is at least one arm’s length removed from democratically elected officials. Given that the Beltline is, according to its own officials, out of money and cannot pay the money it owes to the school children of APS, oversight and budgeting appear to be problem areas. The sprawling bureaucracies of the ADA and Beltline Inc. manage to be funded, year after year, along with certain development projects–diverting money away from the APS budget as well as the City’s general fund–but Mayor Reed is content to allow Atlanta’s schoolchildren to make up the shortfall. In addition, as noted above, a City audit found improper spending by Beltline, Inc., on items such as champagne and wedding gifts. These factors together make “slush fund” an appropriate term in the colloquial sense. Indeed, the Beltline TAD seems pretty slushy to us.