The Atlanta City Council on Thursday made its strongest statement yet that the time has come to declare some urban renewal projects complete so that property taxes collected from them can pay for city services.

The position sets up a potential political confrontation between the council and Invest Atlanta, the city’s development arm that collects management fees by administering Atlanta’s 10 TADs. Property taxes collected in a TAD, or tax allocation district, can be spent only to provide new public amenities in that TAD.

Twelve Centennial Park provides condo homes, hotel rooms, offices, and retail shops in a building supported by the Eastside TAD, which Mayor Kasim Reed wants to close. Credit: Invest Atlanta via flickr

“This is the juice for Invest Atlanta,” said Councilmember Yolanda Adrean. “They take all their administrative charges and they smear them like peanut butter across these 10 TADs. Well, I mean, they [TADs] were designed to be retired. Mission accomplished. Yeah! Close it.”

“We have to pry the special-interest fingers off this money,” said Councilman Howard Shook, who co-chairs Mayor Kasim Reed’s Commission on Waste & Efficiency in Government.

“Understood – message received on all fronts,” Atlanta CFO James Beard said in response to comments from four councilmembers during the council’s first hearing on the mayor’s budget proposal. “We’ll double-down and relook at the TADs.”

TAD is an acronym for “tax allocation district,” which is a geographically defined area that meets the state’s definition of blight. Because of this designation, property taxes collected on new developments in these districts can be steered into public amenities – roads, parks, sidewalks, parking structures – to attract development to that TAD.

Adrean recommended having a consultant review Atlanta’s TAD situation and make recommendations – presumably to restructure it.. Adrean’s suggestion was affirmed by Councilmember Joyce Sheperd, who had served for several years on the board of Invest Atlanta and said the council could consider bringing in a TAD consultant who’d impressed her at a recent meeting of the National League of Cities.

Mayor Kasim Reed’s proposed budget was the springboard for the conversation Thursday, during the council’s first hearing on the mayor’s spending proposal for Fiscal Year 2015, which begins July 1.

Reed’s budget proposal would close down the Eastside Tax Allocation District by retiring the debt with the unspent money in its account.

The mayor serves as chair of Invest Atlanta, which is Atlanta’s development arm and the entity that is to sell more than $200 million in bonds to help pay for the Falcons stadium. The former CEO of Invest Atlanta, Brian McGowan, resigned to take a job at the Metro Atlanta Chamber.

The sum in the Eastside TAD account is large enough to pay off the debt, which the budget proposal indicates is about $40 million, and return $5 million to the city’s general fund for Fiscal Year 2015, which begins July 1.

It was not clear Thursday if any money will be returned to Fulton County or Atlanta schools, because it wasn’t clear if they participate in funding the Eastside TAD.

Tension over the city’s TAD program has risen since a 2012 city audit that determined $226 million in TAD proceeds were in city coffers, with no records to indicate if the money was encumbered or available to be spent. Invest Atlanta later released a report showing the unencumbered funds amount to well under $200 million.

In 2013, the council called for Invest Atlanta to provide monthly reports on the incentives it offers businesses to locate in the city. The council acted after Invest Atlanta offered more than $2 million in incentives in just the month of June 2013.

On Thursday Beard framed the emerging controversy in a lengthy response to remarks by the four councilmembers – Adrean, Shook, Sheperd, and Finance Committee Chairman Alex Wan.

Beard said:

• “The issue becomes one of, let’s call it divergent interests. Obviously there’s a group of people who want to keep the TAD in place and do a lot of projects within that particular area.
• “Versus, the general consensus of finance [department officials] to bring the TADs back into the general fund stream.
• “There are various conversations that are taking place between Invest Atlanta, law [department], finance, and a few others to kind of flush through that. Hopefully in the next two weeks we’ll have one page about what can and can’t happen from a legal standpoint and a finance standpoint.
• “Politics, I just try to avoid that at all costs.”

Shook responded with a lengthy comment that included the notion that the Commission on Waste & Efficiency in Government is looking for annual savings in the range of $75 million:

• “We don’t have the luxury of avoiding the politics, but we have to understand the players. Right now, I can only make educated guesses about that. I want to flush everybody out of the tall grass and have them sit at a table so we can have a frank discussion.
• “It needs to be a two-part discussion: First, we have to understand what the law says, we have to understand the financial implications.  But then the second part is people have to inform us as the clients here about such recommendations as may be made to work around what come out of these discussions as problems or obstacles….
• “You have to put trust in somebody at some time. We’re not going to get there without you guys [finance department] and law.
• “We have to pry the special-interest fingers off of this money. If we can realize saving out of these TADs, you realize what these efficiency commission’s recommendations are going to have to be to find $75 million?
• “It’s going to be headcount, headcount, headcount, headcount.”

The council’s next budget hearing is scheduled for May 6 at Atlanta City Hall.