Beltline TAD Saved by Constitutional Amendment, Georgia Supreme Court Rules



(APN) ATLANTA — In a unanimous opinion, on June 03, 2013, the Supreme Court of Georgia ruled that the 2008 statewide ballot referendum, which sought to retroactively approve unconstitutional Tax Allocations Districts (TADs) in the State of Georgia, effectively brought the TADs back to life, despite the fact that the same Court had found the TADs to be previously unconstitutional in a 2008 ruling.


The ruling means that diversion of educational tax dollars for redevelopment purposes such as the Atlanta Beltline and the Perry-Bolton revitalization projects, will be allowed to move forward, although a separate legal challenge to the Perry-Bolton TAD bond validations is still pending.


The Supreme Court of Georgia heard oral arguments in the bond validation case that is still pending earlier this year, and there are additional legal issues in that case–including a challenge to the ballot language in the 2008 referendum on TADs–that were not addressed in the June 03 ruling.


John Sherman, President Emeritus of the Fulton County Taxpayers Foundation, was the Plaintiff in the case, John S. Sherman v. Atlanta Independent School System (AISS), et al., commonly referred to as the Beltline II case.


“I disagree completely,” Sherman said of the Court’s ruling, in an interview with Atlanta Progressive News.  He said he was disappointed and surprised.


“Beyond the Supreme Court there’s no recourse, and I’m sad,” Sherman said.


John Woodham, who overturned the original Beltline TAD in 2008, represented Sherman as one of his legal counsel in Beltline II.


Woodham said he could not comment on the case.


“The City of Atlanta is pleased with today’s unanimous ruling of the Georgia Supreme Court in Sherman v. City of Atlanta, which confirms the lawful use of school taxes in tax allocation districts.  In 2008, Georgia citizens ratified a Constitutional amendment to allow use of school taxes to fund redevelopment, and in 2009 the General Assembly enacted a new Redevelopment Powers Law to implement the citizens’ constitutional mandate,” City Attorney Cathy Hampton said in a statement.


“Today’s ruling is a significant victory not only for the city, but for jurisdictions statewide. It clarifies the legality of redevelopment projects throughout Georgia and allows other jurisdictions to continue using these important redevelopment funding tools to create new jobs and economic opportunities.  Specifically, in Atlanta, it upholds the constitutionality of the Tax Allocation District as a crucial means of funding transformative redevelopment projects like the Atlanta Beltline and those in the Perry Bolton TAD. This affirms the will of Georgians to see the redevelopment activities continue to come to fruition,” Hampton said.


In the first Beltline case, the Supreme Court of Georgia ruled that the inclusion of school taxes in the BeltLine TAD tax allocation increments violated the Constitution’s Educational Purpose Clause, which, restricts the use of local school tax funds to the support and maintenance of public schools, public education, and “activities necessary or incidental thereto.”


Sherman argued that as a result of the 2008 decision, the Beltline TAD and Perry-Bolton TAD, were null and void legal entities that could not be brought back to life by subsequent constitutional amendment.


Meanwhile, the AISS and other parties argued that the 2008 Supreme Court decision in the Beltline I case was so narrow that it only applied to the specific proposed bond issuance for the Beltline TAD, but did not invalidate any TAD in its entirely.


However, the Court disagreed with both arguments.


As for the school system’s argument, “Appellees are wrong.  It is clear that, under the law when we decided Woodham in February 2008, the local government approvals for the Perry Bolton and BeltLine TADs would have been ruled unconstitutional to the same extent that this Court held that the proposed funding for the BeltLine bonds was unconstitutional; at that time, local school taxes could not be used for general redevelopment purposes,” Justice David Nahmias wrote.


“That is the effect of a precedential decision of this Court,” Nahmias wrote.


“But Sherman is also wrong – and decisively so – because the subsequent constitutional amendment and revision of the statute governing TADs changed the applicable law, and those changes were expressly made retroactive with respect to the county, city, and local board of education approvals needed to use school taxes for redevelopment purposes,” Nahmias wrote.


On May 14, 2008, three months following the Beltline I decision, the General Assembly proposed

a constitutional amendment to allow school taxes to be used for general redevelopment purposes and projects, the ruling noted.  The amendment was ratified at the November 2008 general election and took effect on January 1, 2009.


The 2008 Amendment revised the Redevelopment Powers Clause to authorize the enactment of a new general law after January 1, 2009, allowing such use of school tax funds “notwithstanding [the Educational Purpose Clause] or any other provision of this Constitution.”


The Amendment required local approval of diversion of educational funds for redevelopment purposes, but specifically also authorized the General Assembly to give effect to such approvals in the new general law “regardless of whether any county, municipality, or local board of education approved the use of such tax funds for such [redevelopment] purposes and programs before January 1, 2009.”


Therefore, the Legislature and the voters specifically set forth that the Redevelopment Powers Clause would override any contradictory language in the Educational Purpose Clause, and that any prior local approvals could be retroactively brought back to life.


On April 3, 2009, the General Assembly repealed and reenacted the Redevelopment Powers Law as authorized by the 2008 Amendment.  The new Law stated in part, “Any consent by a local board of education to the inclusion of educational ad valorem property taxes as a basis for computing tax allocation increments and any authorization to use such funds for such purposes that was approved before January 1, 2009, and not rescinded or repealed prior to the effective date of this Code section is ratified and confirmed.”


“Sherman’s argument reflects ‘a failure to keep in mind the difference between the power of the

legislature to pass laws, subject to the constitution of the State and the limitations imposed thereby, and the power of the legislature to propose and of the people to ratify, in the prescribed method, an amendment to the constitution,’” Nahmias wrote, citing a Georgia case, Hammond v. Clark (1911).


“The Georgia Constitution ‘is the supreme State law,’ and our Constitution can be amended to make constitutional things that were once declared by this Court to be unconstitutional.  This process was explained a century ago in Hammond,” Nahmias wrote.


“The same process has been followed in this State on numerous occasions; it is indeed an essential aspect of our republican form of government, in which the people, not the judges, have ultimate control over the law under which they live,” Nahmias wrote.


Sherman had argued “An unconstitutional act is not a law… it is, in legal contemplation, as inoperative as though it had never been passed,” citing a federal case, Norton v. Shelby County (1886); and that the “time with reference to which the constitutionality of an act of the general assembly is to be determined is the date of its passage, and, if it is unconstitutional, then

it is forever void,” citing a Georgia case, Jones v. McCaskill (1900).


However, Nahmias wrote that, “such statements reflect a general legal principle, not an existential one.”


“Put another way, while the Constitution generally prohibits retroactive legislation… a constitutional amendment can expressly authorize an exception to that general rule,” Nahmias wrote.


“Thus did the amended Constitution and the new statute it authorizes resurrect the TAD approvals that Woodham had rendered lifeless,” Nahmias wrote.


The ruling also rejected three additional arguments made by Sherman.


First, Sherman argued that the Atlanta City Charter has its own limitation on using educational tax dollars for redevelopment purposes, separate from the previous limitation in the Georgia Constitution.  However, the Court ruled that state law overrides.


Second, Sherman argued that the original City of Atlanta legislation in 2004 approving the Intergovernmental Agreement (IGA) for the Perry-Bolton TAD had not received the final approval of the City Council before the Mayor signed it, and was thus illegal.  However, the Court ruled that this defect had been cured when the City Council passed a resolution on October 03, 2011, expressly ratifying the Mayor’s 2004 execution of the Perry-Bolton IGA.


Third, Sherman made a procedural argument that the Court did not agree with.


A ruling in the Perry-Bolton TAD bond validation case should be forthcoming in the next few weeks or months.


As noted, outstanding issues in that case include a challenge to the referendum ballot language, which, as previously reported by APN, was clearly confusing and misleading to the public, as is so often the case in Georgia.  In addition, the challengers to the Perry-Bolton bond validation argue that the bond order did not contain adequate findings of fact and conclusions of law as required by law.





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