When Brookhaven Mayor John Ernst announced the details of the tax abatements offered to secure the $50 million Hawks Practice Facility in Brookhaven’s Executive Park, he said, “This is a good deal for Brookhaven.”
A close look at the tax abatements indicates that the Brookhaven tax abatement, unlike the ones done by the county is in fact a $4.5 million windfall for the city, a $4.5 million abatement to the Hawks, but leaves the county and school tax digests high and dry.
Mayor Ernst said in his Tuesday night statement that the Hawks found Brookhaven a perfect place that fit their needs while the city’s position was that waiving taxes to attract a new neighbor is a necessary evil.
“It’s a use it or lose it situation that all municipalities face.”
What is unusual about the $4.5 million tax abatement given to the Hawks, is that the city collects a disproportionate share of taxes from the Hawks over the next 15 years, while denying any tax revenue to DeKalb County or the school system which generally collect the lion’s share of property taxes.
The deal is structured so that the Hawks turn over the title of its training facility, valued at $36 million to the Brookhaven Development Authority, making it the new legal owner, which is exempt from paying taxes. The Hawks will then make an annual lease payment to the Development Authority of $302,900 for 15 years. The lease represents half of the total taxes the Hawks would have to pay without the abatement.
While other recent abatements offered by the county reduce taxes for 15 years, the abatements usually decline over the abatement period to gradually increase taxes back to 100 percent. The abatements are proportioned based on the legal share of county, school and city taxes.
In the Brookhaven deal, the Hawks are paying $302,900 a year or $4.5 over 15 years solely to the city of Brookhaven as a Payment in lieu of taxes, commonly known as a PILOT. Meaning, the city gets all proceeds, with the county and school system receiving nothing until the end of the 15 year period when the Hawks will start paying the full $600,000 a year tax bill on its facility, most of which will then go to the county and the schools.
It is not surprising that the city has chosen to cut out the county, which ruffled feathers last year when it gave out three separate tax abatements to businesses located in Brookhaven. DeKalb granted tax breaks of $6.3 million to Seven Oaks Company for a new 15-story office tower at Perimeter Summit, a $1.1 million tax break to Source One Direct for a plant expansion, and a $6 million tax break to Cox Automotive for a $100 million renovation of its existing headquarters on Lake Hearn Drive.
In those deals, taxes are never completely abated but start at 85 percent and drop ten to twenty percent a year, dropping to one percent by year fifteen. The county, school and city continue to receive taxes, although reduced by the abatements, from the entities throughout the 15-year period.
What irritated city officials at the time, is that the county development authority, Decide DeKalb, negotiated and approved the deals which abated hundreds of thousands in city taxes without even notifying the city.
The most unusual deal was done for Cox Automotive, which moved the existing 1,000 employees from its Lake Hearn corporate headquarters to its Sandy Springs campus, and then petitioned Decide DeKalb for an abatement threatening not to bring them back unless it got a tax break.
According to the Bond Inducement Application, Cox Automotive writes, “Without the support of the Development Authority of DeKalb County, the facility located at 1400 Lake Hearn Drive has the potential to be completely vacated following the move of Cox Communication employees to Fulton County, and Cox Automotive will continue to consider other options…”
Decide DeKalb granted Cox Automotive its $6 million abatement, but the building remains vacant and all remodeling work has stopped. The former headquarters building has been stripped to the studs, but work has stopped with no explanation from officials. Some speculate that the Cox property that abuts I-285 may still be in negotiations with the Georgia Department of Transportation as it makes its billion dollar improvements nearby. And no one seems to know if there is anything illegal about accepting a tax break for promised improvements, and then not making them.