Over the past few days, a lot of new information has come to light on the Gwinnett stadium deal—actually it’s been pried from public officials. For any Gwinnett residents who still had confidence in their elected officials, it all has to be gone by now.
On Friday, Michael Pearson broke the biggest story yet on this issue in the Atlanta Journal-Constitution, finding more taxes and lies. (Strangely, the AJC buried this story online. I only learned of the article after my mother mentioned seeing it in the print edition of the paper.)
Gwinnett County officials have said no property tax increases are planned to help pay for the new baseball stadium, but records obtained under the Georgia Open Records Act reveal that’s not necessarily the case.
The documents show officials discussed a small property tax increase in the context of the overall financing package for the stadium, which will house the top minor-league affiliate of the Atlanta Braves.
One document, handwritten notes on the stadium project, lists four “county actions,” including an increase in recreation taxes:
“— Buy Land — $12 million
— Inact (sic) car rental tax
— Issue Bonds
— Raise Rec. Millage from .80 to 1.00 in 09.”
The tax increase is also mentioned as one of three points under a discussion of the county’s $12 million withdrawal from the recreation fund surplus, according to a printout of a presentation County Manager Jock Connell said he gave to commissioners in a closed session. The presentation reads: “Will require .20 mill increase for recreation in 2009.”
Such an increase would cost the owner of a $250,000 home $18.60 a year.
Still, Jack “we anticipate the stadium to pay for itself from day one” Connell insists no tax increase is in the works.
Connell said at least part of the handwritten notes were his and acknowledged mentioning raising the recreation fund’s tax rate in stadium presentations to the commission, but said it was not tied it to the stadium project.
He said he merely was taking the opportunity to remind commissioners that the rate may eventually have to be raised to meet operating obligations for all the new parks the county has built in recent years.
He said that would be the case regardless of the commission’s decision on the stadium project.
Commissioner Bert “I’ll give you anything you want as long as you bring the Braves to Gwinnett” Nasuti conveniently remembers the same thing.
He said he remembers Connell warning of possible property tax increases, including in the recreation fund, as long as 18 months ago, and said he didn’t interpret the presentation on the stadium as tying the increase to baseball.
“It wasn’t presented to me as, ‘If you do this, you must do that,’ ” he said.
While it is not hard to see through this ruse, Chairman of the Board of Commissioners Charles Bannister seems to admit they are connected while stumbling through his denial to the Gwinnett Daily Post (I’d like to think that my letter had something to do with the story).
“At some time in the future, because of the number of parks we have built, we will need to look at the possibility of increasing the recreation tax,” Chairman Charles Bannister said. “Our indications are, as we see it, the revenue streams will continue to tighten. At some point we will start looking at the budget for ’09. Right now, I don’t think one impacts the other.”
Commissioners voted to spend $12 million out of the recreation fund for the stadium – $7 million for construction and $5 million for the land along Buford Drive, south of the Mall of Georgia near Rock Springs Road.
Community Services Director Phil Hoskins said the reserves in the recreation fund are still three times higher than the required amount, but pressures on the fund have increased as commissioners buy more land for parks, pools and other amenities.
Let’s see, the county just spent $12 million from the recreation fund, yet taxes to put revenue back into the fund are unrelated? It is possible that the county expects to spend more than $12 million (plus potential earned interest) in the future, but this means that taxes must be increased further to cover the shortfall created by the stadium. Plus, let’s not forget about the interest on the $33 million debt on the stadium which the county must pay off.
Make no mistake about it, the coming tax increase is tied directly to the funding of the new ballpark. The county may shuffle funds around so that the stadium does not directly receive any of this money, as new tax revenue can be used to replace redirected funds to cover the stadium. But, the result is still the same: the stadium will cause taxes to go up.
The county has also acted foolishly so as to put taxpayers on the hook for more tax dollars though its bond instrument choice. Tim Tucker reports new information on the bonds.
The three major bond-rating agencies have assigned AAA grades to the $33 million in taxable revenue bonds that will fund the stadium. None of the three agencies attribute their rating to projected stadium revenue. All attribute the rating to the county’s fallback position.
“The … AAA rating reflects the security provided by a pledge of Gwinnett County’s full faith and credit and taxing power,” Fitch said in a report on the bonds.
In an interview, Moody’s public finance analyst Baye Larsen said: “The bottom line is they are pledging their full taxing authority, not just one revenue stream.”
First, while the commissioners have touted the fact that the bonds will get the highest rating, the rating is based on the fact that if the revenue the stadium generates doesn’t cover the cost of construction and operation—and it clearly won’t—taxpayers will be required to cover the shortfall. Hint, hint: more taxes are on the way.
And in their haste to push the bonds through, the commissioners chose bonds that will not be tax exempt, necessitating a higher interest rate.
Documents show that the county also looked at the option of financing the stadium with tax-exempt bonds, which would carry a lower interest rate and save millions of dollars in borrowing costs over 30 years. Gwinnett forecast tax-exempt rates for the stadium project to be about 1.5 percentage points less than taxable bonds, documents show.
Many sports facilities, including the Georgia Dome, have been built with tax-exempt bonds. But the practice has become rarer because of changes in tax law, and the Gwinnett project did not meet the current requirements for tax-exempt financing, experts said.
Comparing the total dollars paid out using a standard mortgage calculation—a calculation that underestimates the debt service, since the county will pay off less of the debt early on—the difference between 4.75% and 6.25% interest rates is over $11 million over the life of the loan. The commissioners have been creative in spinning the funding of this deal to the public, But when it came to getting their citizens a better deal on a loan, they weren’t nearly as creative.
A stadium that gets more than 10 percent of its use from a private business and more than 10 percent of the funds used for debt service from a private business cannot be financed with tax-exempt bonds, according to Atlanta attorney Earle Taylor, who focuses his practice on public finance.
The Gwinnett deal fails to qualify on both counts.
“Basically, in order to do the stadium tax-exempt, you have to give the stadium to the team for free,” said Taylor, a partner at law firm Kilpatrick Stockton. He is not involved in the Gwinnett deal.
In a notable recent case, New York found a way around the restrictions on tax-exempt stadium financing. New stadiums for the Yankees and Mets are being built largely with tax-exempt bonds.
After a lengthy process, the Internal Revenue Service signed off on a creative and complex approach in which New York removed the stadium sites from the property tax rolls and allowed the teams to make payments in lieu of taxes — PILOTs — and to pay no rent. The IRS held that the PILOTs would not count toward the 10 percent cap on private-business payments. The IRS has since issued further regulations on the matter.
Though the commissioners play coy, their secretive actions indicate that they are fully aware that the path they have chosen will result in higher taxes for citizens of Gwinnett. If they are being so obvious in their deception on this issue, I wonder what is going on in other areas of the budget where the money trail is not so easy to follow.
I have a challenge to the Board of Commissioners: respond to my AJC Op-Ed, or any other claim I have made on my website. It would seem to be the appropriate thing to do. If I am wrong, then you should not mind explaining why in a public forum. Just like you, I work for Georgia taxpayers. And in the future, let’s be a little more open with the media. The information is going to come out, and it only makes you look worse when you continue to hide facts and force reporters to use open records requests.