In Smyrna, it’s an empty 48-acre tract of land that once was an apartment complex. In Clayton County, it’s a vacant slice of a 155-acre site that was supposed to house a hotel and conference center.
From one end of metro Atlanta to another, there are examples of governments using taxpayer-backed bonds to buy property with the hopes redevelopment will bring new life to these areas and boost tax collections. But in some cases, the developers have yet to come, and the deals aren’t paying off as planned.
Marietta city leaders this fall want to ask voters to approve $68 million in bonds mostly to buy and bulldoze aging apartments to clear the way for future redevelopment in a struggling area. Critics say projects like those in Smyrna and Clayton County are proof the government shouldn’t use taxpayer dollars to gamble on real estate, while city and county officials say there are other ways to measure success than resale value.
“Don’t speculate with taxpayer money. Learn from Smyrna,” said Alex Backry, a longtime Smyrna resident and former mayoral candidate. “Leave it to developers and other people in real estate to do this.”
The projects in Smyrna and Clayton illustrate what can happen when governments or quasi-government entities use taxpayer-backed bonds to purchase property for redevelopment.
Marietta wants voters to approve a 2 mill tax increase — $160 annually for a $200,000 home — mostly to revitalize Franklin Road, a strip that parallels I-75 in Cobb County and is currently occupied by run-down strip malls, 40-year-old apartment complexes and abandoned businesses.
Originally, the 2 mill tax increase was expected to generate $35 million over 20 years, but new estimates just released show it would bring in $68 million, the bulk of which would go toward buying and tearing down apartment complexes in the area. The city’s plan is to recoup the money in the future years as new commercial businesses move into the area and increase the tax base.
Critics say the city has no place in the real estate business. Supporters say the city’s involvement is necessary to kick-start a makeover of the troubled area.
In 1996, the city opened the Marietta Conference Center & Resort, which lost millions during its first several years in operation. At the time, the $27 million center was part of a debate about whether a municipality should be in the hotel business.
Marietta officials say they’re confident the prime Franklin Road location will quickly attract developers in a way projects elsewhere have not. Mayor Steve Tumlin said the city is trying to engage developers early on to ensure the property is resold quickly.
“We don’t want to own it one day longer than we have to,” Tumlin said. “We’re not just tearing these down and hoping something comes along in its place.”
About seven miles away, the city of Smyrna is still waiting for a developer to come along and buy the site of an old apartment complex the city bought and bulldozed in 2011. Smyrna took out $15.9 million in bonds, the first payment of which will be due in February 2014.
City Administrator Eric Taylor said there have been offers on the site, at the corner of Windy Hill and Old Concord roads, but none remotely close to the purchase price.
If the property isn’t sold by February, taxpayers will be on the hook for the payments. But Taylor said the city made the right decision by buying and tearing down the old apartments. He said the complex was the source of many of the city’s 911 calls.
“We’ve already seen positive changes in the area,” he said.
Analysts said recent real estate ventures aren’t necessarily the best indicator of whether government-led investments will be a success. Steve Palm of SmartNumbers, a real estate analysis firm, said the volatile real estate market put a kink in many investments that may have otherwise been sound.
That’s what happened to Clayton County’s multimillion-dollar “Gateway Village” project, said county leaders. Originally, the county envisioned a 225-room hotel with a conference center, a golf course, office buildings with a commuter rail station surrounding Clayton State University.
The county agreed to back $29.8 million in bonds to buy commercial and residential properties, including an old apartment complex. The properties haven’t sold, and taxpayers have paid about $8 million since 2009 toward the bond payments, according to Chief Financial Officer Ramona Thurman.
Now dubbed “University Station,” the plan to build a conference center has been dropped, but the vision still includes a hotel, senior living, office space and potential apartments for students, said Grant Wainscott, Clayton’s director of economic development.
Wainscott said about 70 percent of the original project has been completed, including roadwork, landscaping and the opening of the national and state archives. He said the success of the project can’t be measured alone by real estate profit — new jobs, tourism and commercial spending are all part of the end result.
“It’s all about a better product, a better quality of life,” Wainscott said. “The government’s job isn’t to be in the real estate business. We’re not trying to compete with the private sector, but when there are areas that need attention and the private sector is not investing, this is why development authorities were created.”
Some government-led projects have been a success. In Atlanta, special “tax allocation districts” were created to repay bonds used to spur redevelopment. The TAD that covers Atlantic Station has poured nearly $330 million in bonds into transforming a former steel mill into one of the city’s biggest retail attractions.
Tax money collected from the increased property value is used to repay the city of Atlanta’s bonds — but the deal differs slightly from Smyrna and Clayton County because taxpayers are not liable if the bonds default.
Longtime Clayton resident Carl Swensson started a local taxpayer watchdog group before moving in February to Henry County. He’s skeptical of government-led projects and questions their benefit to taxpayers.
“That property is sitting there as it has been for years,” he said of the project. “And the only people on hook are the citizens of the county. It’s ever-expanding government.”
Atlanta Journal-Constitution editor Lois Norder contributed to this article.
A sampling of metro Atlanta investments
- Smyrna is still waiting for a developer to buy land the city bought in 2011. Its first payment on the $15.9 million in bonds will be due in February 2014.
- Clayton County had plans for a hotel, golf course and office complex dubbed “Gateway Village,” using $29.8 million in bonds to buy commercial and residential properties. The properties haven’t sold, and taxpayers have paid about $8 million since 2009.
- In Atlanta, special “tax allocation districts” that cover Atlantic Station used $330 million in bonds to transform a former steel mill into a major retail attraction.
By the numbers
$68 million: Amount in bonds Marietta wants voters to approve
$160: Annual taxes on $200,000 home if measure is approved
20: Number of years on the bond