Rocked by payment scandal, Fulton Development Authority faces board shakeup
By John Ruch and Maggie Lee
The Development Authority of Fulton County board has been rocked by a financial scandal at the very moment its membership is undergoing a reform-minded shakeup to include representatives of public school systems that are staunch critics of tax breaks DAFC grants to luxurious real estate projects. And more shakeups could come, as two current board members are up for renewal or replacement in a once-quiet process that now will be in the spotlight — and the county commission chair is openly questioning whether DAFC should exist at all.
Fulton County School System Superintendent Mike Looney and Atlanta Public Schools policy advisor Erica Long already were poised to join the board this month as an answer to their districts’ longstanding complaints that DAFC tax breaks cost them millions of dollars a year without notice or input. And current members Sam Bacote — who is also an Atlanta City Council candidate — and Steve Broadbent are serving terms that expired in May and are due for keep-or-replace decisions by county commissioners.
Those moves are now in the harsh spotlight of a scandal over “per-diem” payments of tens of thousands of dollars DAFC made to some of the volunteer board members for work as basic as signing documents. Revealed by the Atlanta Journal-Constitution and Channel 2 Action News based on records found by longtime DAFC critic Julian Bene, the scandal led former board chair Bob Shaw to withdraw from the body after 26 years.
Bene says the planned and potential changes to the board membership “could shake things up.”
“In light of the board conflicts of interest that are now out in the open, the new board may be more inclined to listen to Atlanta City Council and APS and stop the tax break gravy train,” he said.
Robb Pitts, the chairman of the Fulton Board of Commissioners, gets to nominate the person who holds the DAFC board seat currently filled by Bacote, who acts as the body’s treasurer. Pitts said through a spokesperson that he is “disturbed” by the payment scandal and has made no decision yet on his board nomination. And he had an even bigger question.
“With Fulton County being almost entirely incorporated and several of those cities having their own development authorities, this prompts the question: Does Fulton County even need a development authority?” asked Pitts. “This has been debated through the years and I expect it will continue to be discussed as the situation unravels.”
Bacote said in an email he intends to remain on the board and is not required to withdraw while running for the City Council District 5 seat.
Commissioner Liz Hausmann, who nominates the holder of the seat currently filled by Broadbent, did not respond to a comment request.
The BOC is scheduled to vote on the school district nominees at its June 16 meeting.
For a guide to which DAFC board seats are in play and who nominates whom, see the end of this story.
Tax break controversies
Development authorities are created by county and city governments, but fund themselves and operate independently. Cobb, DeKalb and Gwinnett counties also have development authorities, as does Atlanta and many other metro cities. Founded on the notion of promoting economic development, the authorities can offer incentives and property tax abatements through various mechanisms and fund themselves by taking a small percentage of the deal as a fee. A big mechanism is issuing tax-exempt bonds on behalf of a real estate developer, effectively gaining property tax abatements that last 10 years or more. The rationale is that such developments boost the tax base in the long run after the abatements expire.
But development authorities are increasingly controversial on a number of points: turf battles between city and county authorities; lack of tax-break input from or notice to local governments and school districts; and especially the concern that many tax breaks go to projects that would be built without incentives, essentially giving away public money that other taxpayers must cover.
The DAFC has been especially controversial, as it has granted tens of millions of dollars in abatements to projects in some of the Southeast’s hottest real estate markets, including Buckhead, Midtown and the Atlanta BeltLine corridor. Concerns about such incentives being unnecessary affected one case in 2019, when the DAFC made a rare — possibly unprecedented — rejection of a $2.2 million tax break for a Buckhead office tower that whose developers previously said they would reapply for the incentive. That site remains undeveloped, and the developers continue to cite market conditions, said DAFC board chairman Michel “Marty” Turpeau.
Turpeau says that DAFC provides notice of tax incentive deals to FCS and APS and that Looney has never complained about DAFC tax incentives. However, officials with both districts have expressed concern about losing millions of dollars in revenue and the difficulty of calculating the impact of incentives. Turpeau says DAFC’s own estimate of its 2019 and 2020 cumulative deals is over $42.3 million in new tax dollars for FCS and more than $82.2 million for APS over the 10-year abatement periods.
The DAFC has ignored formal calls to stop granting tax breaks within the City of Atlanta made by the Atlanta City Council, the Atlanta Board of Education and Invest Atlanta, the City’s own development authority. That led critics like Bene — a former Invest Atlanta board member and legal challenger on tax breaks for such projects as Downtown’s Centennial Yards — to suggest some financial self-interest was involved and to start digging in public records.
One discovery Bene made was the per-diem payments, including more than $90,000 to Shaw since early 2019, which led Shaw to withdraw from a renewal nomination after his term expired last month. Bacote says the DAFC board had already reined in per-diem spending late last year, capping it at $200 per day.
Musical chairs of board reform
Ironically, Shaw was up for nomination because of a musical-chairs shakeup initiated by county Commissioner Lee Morris, a prominent DAFC critic who found himself in the awkward and unexpected position of trying to appoint Shaw as the scandal broke.
Morris spearheaded the 2018 legislation that, starting this month, will dedicate the DAFC board’s two at-large seats to representatives of APS and Fulton County Schools. (The version of the law on the books only specifies membership for FCS, which Morris said was an oversight that will not change the commission’s intent in putting an APS representative on the board.) And in 2019, Morris successfully nominated Thomas Tidwell, another DAFC skeptic who has become the only “no” vote on several tax breaks.
However, the deal to get school district representatives on the board came with a political price. Shaw held one of the at-large seats and was set to be displaced by the school representatives but wanted to stay on the board. Morris says he made a behind-the-scenes deal that, when the time came, he would ask Tidwell to resign mid-term and nominate Shaw as his replacement. That’s the nomination that was tanked by the payment scandal, with Shaw withdrawing before a BOC vote and leaving the board.
“I was willing to [nominate] Bob Shaw who’s been an old, dear friend of mine for a long, long time,” said Morris. “Of course, I was as shocked as everyone to find out about the per-diem practice at the development authority.”
Now, says Morris, “Tom Tidwell will remain as my appointee on the development authority.” Tidwell declined comment but confirmed he has not resigned and intends to serve out the term.
Morris noted that beyond the nomination process, the BOC has no direct power over DAFC. “Once we’ve appointed someone, we can’t even remove them involuntarily,” he said.
Executive director vacancy
The board shakeup is affecting yet another DAFC leadership position that is in flux: the vacant executive director staff position, sometimes dubbed the “CEO” job. Al Nash announced his retirement in September 2020 after six years on the job, saying he would stay on during a replacement search.
“Unfortunately, our initial search was unsuccessful,” says DAFC board chairman Turpeau, who also became interim executive director in April pending another search that will begin once the board membership has shaken out. “Our new search process will begin as soon as the commissioners make their appointments. We want the new board members to be a part of this important process,” he said.
Nash retired at the end of 2020 “but remained onboard in a limited consulting role from January to March 2021,” said Turpeau. “He is available to DAFC in a limited consulting capacity and only on an as needed basis. If we required his support he would be paid hourly for any work he were to complete.”
Turpeau himself just won another four-year term after a nomination by Commissioner Marvin Arrington that was approved by the BOC on its consent agenda, a package of items that is approved in a single vote without discussing the details.
Correction and update: A previous version of this story incorrectly reported that concerns about abatements a Buckhead development proved true when the building was constructed without incentives; in fact, the structure has not been built. This story has been updated with further comment from DAFC board chairman Michel “Marty” Turpeau.
Tax break controversies