By David Pendered
The Atlanta City Council on Wednesday is slated to enact a defensive position that could force a proposed Buckhead City to pay Atlanta possibly tens of millions of dollars within its first year.
The tactic was called a poison pill in the 1980s heyday of hostile corporate takeovers. The purpose is to make the target less attractive for those trying to exert control. Atlanta is the target in this scenario.
The council is set to adopt an otherwise routine paper to refinance up to $198 million in outstanding debt.
The poison pill is a provision in the refinancing legislation that requires any area that is deannexed from Atlanta to pay its share of the debt “immediately following” the 12-month anniversary of the deannexation. The provision is known as an “extraordinary optional redemption.”
If the procedure is approved Wednesday and enacted, Buckhead City would be required to pay Atlanta the amount due as a lump sum, according to terms outlined in the legislation:
“The Extraordinary Optional Redemption Price, shall be payable on the Payment Date as defined in the Ordinance immediately following the twelve-month anniversary…”
The poison pill vanishes if voters reject the deannexation proposal, according to the legislation. Following a description of steps by which Atlanta can provide for the money to be collected, the terms empower voters to make it all go away.
“Notwithstanding the foregoing, in the event that the referendum question in favor of deannexation shall fail such fees, taxes, or assessments shall automatically and without further legislative action be reduced to 0.00 mills,” the legislation reads.
A mill is a $1 tax on every $1,000 of assessed property value. The general obligation bonds to be refinanced are exempt from federal taxes and serviced with property taxes collected in the city, according to the legislation. Atlanta could retain influence over the amount Buckhead City would have to pay.
The influence could be in the form of Atlanta’s authority to appoint a valuation expert who is to determine the taxable value of property in the deannexed territory. The description of qualifications of the entity Atlanta is to retain portrays someone with deep knowledge of the city’s tax digest:
“[A] person or firm qualified to examine the tax digest of the City and to calculate and determine the taxable value of real property subject to ad valorem taxation therein,” it reads.
The paper does not appear to establish terms for the deannexed area to object to the property value determined by the valuation expert. The property value determined by the expert is part of the mathematical equation that is to determine the amount the deannexed area must pay Atlanta to satisfy the area’s share of the $198 million debt.
The paper to be considered Wednesday would be the second to provide for refinancing the debt. The council adopted the first version Oct. 18 and is seeking to amend that paper in light of the continuing discussions of the Buckhead City movement. Mayor Keisha Lance Bottoms signed the legislation on Oct. 19, according to the pending paper.
The paper approved Oct. 18 did not include language for an “extraordinary optional redemption.” As the current proposal notes:
“Subsequent to the adoption and approval of the Ordinance, the City determined that it is in the best financial interests of the City to provide for a special ‘extraordinary optional redemption’ feature for a portion of the Series 2021C Bonds, exercisable by the City in the event that the General Assembly of the State enacts a Deannexation Act (as defined herein)…”
Buckhead may be flush in cash after its first year of operation.
The first-year surplus is projected at $133.6 million. This is based on projected total revenues of $203.5 million and anticipated expenditures of $89.9 million. The revenue figure includes $119.6 million in taxes to be collected on real property in Buckhead City, according to the “Fiscal Feasibility Study of a Proposed Buckhead City,” released in September by an affiliate of Valdosta State University.
The date the money would be available does not appear to be cited in the report. The amount that a Buckhead City could use to pay off its share of the debt does not appear to be calculated.
The proposed Buckhead City represents about a fifth of Atlanta’s land area and population — 23.6 percent of Atlanta’s land area and 20.8 percent of its 2020 population, according to the report.
Rather than engaging in sophistry, low cunning and bureaucratic violence, Atlanta should approach Buckhead humbly and explain in good faith what Buckhead has to gain by staying with Atlanta.
Coercion and intimidation via the bond market or any other mechanism will not work on Buckhead. The people of Buckhead are smarter, stronger and richer than the bureaucrats of Atlanta. We have nothing to fear from them – even their worst weapon is nothing to us.
If Atlanta’s government recognized the reality of the situation, that they have failed to uphold their obligations and are losing their chief revenue source because of this failure, they could begin to remedy the situation through positive action, such as deploying hundreds more APD to Buckhead, formally requesting federal police defense of Buckhead (and other sectors of Atlanta), and granting Buckhead much greater autonomy in the use of its tax dollars. If Atlanta were to do this, they would prove themselves benevolent and avoid the worst outcome.
But Atlanta has lived too long by corruption, incompetence and propaganda, and so their very first action is to make threats and play games when their place is down on their knees in contrition. If Atlanta continues down this ruinous path, losing Buckhead will be the least of their problems.
If the erudite “smarter, stronger, and richer” were any hedge against “corruption, incompetence and propaganda,” Buckhead wouldn’t be such a magnet for the challenges that confront all of Atlanta, and many other US cities.
Federal police in the streets? That’s called martial law and the last time it was necessary here was to thwart another campaign for secession.
Because one man’s sophistry is another’s Sherman necktie, your fundamental arguments for Buckhead de-annexation and cityhood are simply not supported by the cultural or political history of Atlanta.
A lost cause by any other name is still a lost cause.
Atlanta, and Buckhead are in a symbiotic relationship: Atlanta is fed off of tax dollars, a large majority of which come from purchases made in Buckhead made by people who do not necessarily live in Buckhead. Atlanta is a globally cosmopolitan city – visitors from all over the world , they come to Buckhead to shop, and its a realtors paradise (the realtors want Buckhead City the most, that’s why they’ve hired trolls like you to argue for them)
You claim to be smarter, however, have you fully analyzed the ramifications of your actions? The feasibility study you paid Valdosta state (the analytical power-house) is fish-wrap, from what ive seen of it – pretty sure that the reason no “ok” schools like; GA Tech, refused to do that analysis is because it would anger their donors, duh. What is your experience south of North Avenue? Have you ever been to Little Vietnam, The Bluff? My best friend through high school lived in Little Viet., the guys I met in his hood make the mall urchins look like how you probably make waiters feel; toddlers.
When will Talibuckiadians realize that as soon as credit contracts even 25 bps your mask falls, and then you realize that you’re no better than anyone else?
“The people of Buckhead are smarter, stronger and richer than the bureaucrats of Atlanta.”
Stopped reading what seemed to be a well sorted comment, here: because you seem to be implying that Buckhead city should be call “Aryan Area.”
Isn’t that right Adolf?
It’s hard to argue against taking out 40% of the tax digest and 20% of the people. On the surface, sounds like a no-brainer.
But people like “John Smith” are overstating their case, which reads like an invitation to a race war. That’s how Birmingham behaved 60 years ago,. when Alabama and Georgia had close to the same population. Alabama now has half Georgia’s population, because of the economic dynamism the Civil Rights era began.
while the author portrays the council’s action as a “poison pill” it is not an unusual step, and would fall under the category of “stranded costs”. That is, a neighborhood that seeks to de-annex should expect to reimburse the city for all of the sunk costs the city’s taxpayers incurred for infrastructure, water, sewer, facilities, etc. since Buckhead was originally made part of the city. there are many precedents in the corporate world and some in municipal finance as well.
Bravo, great analysis. The wannabe ‘analysts’ on the Buckhead City side think they’re top-tier analysts because Jerome Powell tell their trading account they were.
Is there any provision for recurring revenue derived from municipal expenses
(such as: construction, lost productivity etc)?