Atlanta plans poison pill strategy to rebuff Buckhead City effort
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.