Amazon is presently inviting US cities to outbid each other in a contest to host its “second headquarters”, waving the promise of 50,000 jobs and $5bn of investment in front of the winning applicant. Maryland offered $5bn of tax incentives – dollar for dollar the same as the pledged investment – for the company to opt for Montgomery County, while California offered between $300m and $1bn of breaks. New Jersey even promised $7bn of tax incentives – $2bn more than Amazon’s maximum investment. Whichever city wins, it seems likely that tax will influence its decision-making: the firm’s published criteria for bidders cites “a stable and business-friendly environment and tax structure” as a high priority.
The paragraph above shows you the end result of governments pursuing growth at any price. Cities attempt to outbid each other in an effort to secure a business that they want located in their city limits.
We’ve seen taxpayers on the hook for financing professional sports stadiums for the very same reasons: the promises of the positive economic impact.
Presently, the City Johns Creek is discussing whether they should create a Development Authority. It’s purpose would be to offer property tax abatements, financing and other incentives to locate here in Johns Creek.
Before we go further let me ask you this question, “What was your incentive to locate to Johns Creek?” Did you need property tax abatements, better financing options, or other offers to help you make the decision to locate here?
In past conversations regarding the Central Business District, I have consistently taken the stand that the private sector is the is best suited for determining what will be built on commercial properties. This would also include the scale for such buildings.
The decisions for the development of commercial properties should be left to the private sector. Based upon their analysis on what their profitability will be given the market, their location, and the cost of their funds, they must decide whether or not they take the risk and start or relocate a business.
The proposed Development Authority, however, changes that equation.
A Development Authority can lead to a lower cost of funds for a business. And while it’s hard for me to believe that any viable business could not get the funds they needed to open or relocate over the last 5-10 years with interest rates at artificially low levels, there are some on our City Council that want to work to get those businesses even lower rates. Don’t you wish they were doing the same to get you lower rates on your home mortgage?
A Development Authority would offer tax abatements on said properties for ten years. This abatement applies to local, county, and school taxes. The first year the property taxes will be 50% of the appraised value. The 2nd year it will be 55%. This will continue through year ten.
We are told that this is never a loss in revenue because the new value of the property will generate more property tax revenue at 50% of the new value than it did at the old undeveloped value.
They cite this reason for treating new businesses with a cut in taxes, whereas currently established, loyal businesses would have more competition and not benefit from the tax break.
And here is what they are NOT telling you. Our property tax valuations in Johns Creek, specifically commercial properties are so out of whack that they make no rational sense. There’s a well discussed campus in Tech Park which is used as an example of how valuable it is to use a Development Authority to retain them. And maybe that has some merit. But can someone explain why there are some acres on that campus that have the land valued at $720,000 per acre and the adjoining parcel, which is used for parking, is valued at $60,000 per acre?
Some of our elected officials claim that we need the Development Authority to take some of the pressure of residential property taxes. Perhaps we should start with having the commercial properties in Johns Creek fairly assessed.
Then, let’s make sure whatever tax decisions made are applied to all property owners and not just a select few.
Leave the development business to the private sector.
The City should provide a level playing field for everyone. Anything less is wrong.