Beltline funding to APS in question

The Atlanta Beltline project has delayed making a payment due to Atlanta Public Schools, creating an $8 million hole in the school system’s budget.

Property tax revenue for the popular urban revitalization project has fallen short of expectations, officials say. Under the Beltline’s complex funding structure, the project uses a portion of property tax revenue and, in exchange, makes fixed payments to the school system and Fulton County.

It was set to pay APS nearly $2 million last January and owes another $6.75 million in early 2014.

Now the city of Atlanta and Invest Atlanta, the city’s economic development arm that oversees the Beltline, have asked APS to renegotiate those payments and terms of their 25-year, $162 million agreement. They want to revise payments while moving forward with transforming a 22-mile loop of blighted land into a necklace of trails, parks, transit and mixed-use development.

While school leaders say they’re open to changing the fee agreement, the district had counted on $8 million from the Beltline in its tentative 2014 budget passed earlier this month. Now it must find that money elsewhere by the end of June, when the budget is scheduled for final approval.

“We’re scrambling a little bit. … There’s no obvious place to make cuts,” said Board of Education Chairman Reuben McDaniel. “Both sides will have to sit down and work through a reasonable renegotiation.”

McDaniel said the school system may dip further into already-diminished reserves to find the $8 million. The school district previously planned to spend $21.5 million of its savings, dropping its account balance to $41 million, which is as low as the board wanted it to fall.

The school board will meet Tuesday to decide how to balance the budget, something APS Superintendent Erroll Davis said he’s confident can be done even after searching for any bit of savings over the last few months.

“It’s an almost $600 million budget,” he said. “We can find the money.”

Atlanta officials note APS has already received $36 million in payments not envisioned when the Beltline tax allocation district, or TAD, was formed in 2005. That money was paid as a result of lawsuits challenging the use of property tax revenue for economic development. The state ultimately amended its constitution to allow it, a change approved by voters.

APS and the city changed the payment plan after the litigation. In the most recent agreement, the Beltline project was set to begin paying APS in 2013 through the life of the Beltline TAD, which expires in 2030. After the deal ends, Atlanta Public Schools, the city of Atlanta and Fulton County expect a windfall in tax revenue from development and rising property values.

The Beltline TAD is current on its annual payment of $1.35 million to Fulton County, as well as all bond payments funding the popular green space project. The agreement with APS is at issue because the scheduled payments quickly escalate from $2 million this year to more than $7 million in annual payments by 2016.

Last week, Invest Atlanta’s board of directors delayed approving the Beltline’s proposed $22 million 2014 budget, which included a $417,247 payment to APS.

“Economic conditions have changed dramatically since 2005, as everyone knows,” said Brian McGowan, CEO of Invest Atlanta which oversees the Beltline project. “We continue to negotiate in good faith as the original projections for TAD increment have been lower than we anticipated.”

It’s a common post-recession theme. Property values plummeted after the housing bust, and taxes fell with them. Values still haven’t recovered, pressuring public budgets. Atlanta officials, for example, just passed a budget that is $100 million smaller than in 2008.

“Basically, they’re a homeowner that can’t afford their mortgage,” said Atlanta Public Schools CFO Chuck Burbridge said of the Beltline project. “They’re in a tight spot.”

City and Invest Atlanta officials say the financial outlook will improve as the economy gains strength and the Beltline continues its build-out.

More than $350 million has been spent on the Beltline to date, with $41 million coming from private sources through the nonprofit Atlanta Beltline Partnership.

“In the longer term, enrollment will increase as a result of population growth from Atlanta Beltline development, fueling a growing tax base of sustainable funding for public education,” McGowan said in a statement.

The payment discussions are the latest hurdle for the Beltline project, which last year ousted its chief when an investigation by The Atlanta Journal-Constitution revealed Brian Leary used tax dollars for gifts, events and personal items.

Last week the nonprofit announced it hired Paul Morris, a veteran transportation and urban planning consultant, as its new director.

Staff writer Steve Visser contributed to this report.

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