Newcastle Street in downtown Brunswick is part of a proposed Tax Allocation District, or TAD, that city officials are hopeful will spur economic growth. 

The Brunswick News/File

There is no quick fix. No magic wand. No silver bullet.

The road to Brunswick’s economic renaissance — if it happens — will be long, experts agree. But city officials think a special tax district might be the shot in the arm the city needs.

City commissioners are in the early stages of a plan to revitalize large swaths of Brunswick. The plan bets on future tax growth and allows local officials to borrow money, if they choose, in anticipation it can be repaid with new tax money generated by growth.

Simply put, here is how it works:

Cities and counties in Georgia can designate geographic areas as “tax allocation districts,” or TADs.

The Brunswick City Commission has already approved the boundaries of such a district. It spans from Bay and Newcastle streets up Gloucester Street and veering onto Norwich Street, then running down U.S. Highway 17 all the way to Goodyear Elementary School.

Inside TADs, property taxes are set at a baseline level in the year the TAD is established. Then, the city or county begins revitalization. Roads can be repaved, run-down buildings can be demolished, and infrastructure can be upgraded, all to attract developers.

Government can finance these improvements through long-term loans, called bonds, or “pay as they go.” Over time, property values inside the TAD increase, so more property tax is collected. The difference between the baseline tax and the increase after improvement goes into a special account used to pay off bonds, or ensure the continuity of the “pay as you go” model.

Let’s use this hypothetical situation to explain:

You are a business owner on Norwich Street, which is inside the proposed TAD. You own a building worth $100,000, and you paid $1,000 in property tax the year the TAD was created.

Once the TAD is established, the government issues a $10 million bond to improve streetscapes within the TAD. After the improvements, the value of your building rises, because the neighborhood is more attractive. Five years after the improvements, your building is worth $300,000 and you pay $3,000 in yearly property tax. That difference of $2,000 goes toward paying off the $10 million bond. Or it can be stashed in the “pay as you go” TAD account.

THE GREEN LIGHT

There are a lot of hoops local governments must jump through before creating a TAD.

First, all the local taxing authorities — city government, county government and school board — must pass resolutions supporting the use of redevelopment powers, which fall under state law. Brunswick City Commissioners, Glynn County Commissioners and the Glynn County Board of Education did that in late 2014.

After that, the Georgia General Assembly has to authorize the local government to invoke redevelopment powers, which it did for Brunswick during its 2015 session.

But there’s more.

Voters have to weigh in. A local referendum on TAD use was held in November 2015, which voters approved by 65 percent. And this is just the beginning of the process — the green light. City officials have many more steps. They must now approve the TAD’s overall plan, take public comments and convince the county and school boards to sacrifice any increased tax revenue toward the TAD.

Because the school board, the county and the city all collect taxes, a TAD is much less effective if the school board and county don’t agree to allocate increased property tax money toward the TAD.

The school board and county wouldn’t lose any money if they participate — the baseline tax level would remain for the life of the TAD — but they wouldn’t reap any new tax revenue from rising property values.

Think of the hypothetical example on Norwich Street. Remember the $1,000 tax bill you paid when the TAD was created? Let’s say $500 of that went to the school board, $300 went to the county and $200 went to the city.

All of those entities continue to collect that amount as your property value and tax bill rises. It’s the $2,000 in new taxes caused by the rising property value that go toward the TAD.

It’s important to note that property tax rates — called “millage rates” — do not increase because of the TAD. Any increases in a property owner’s tax bill happen because the value of the property has congruently increased. It’s a “rising tide, rising boats” situation.

TADS TAKE TRUST

If it all sounds confusing, it’s because it is. But stay with this. The plan has a lot of benefits, but isn’t without risk.

Katherine Willoughby, a professor of public finance at Georgia State University and an expert on TADs, said the plan can work, but there are caveats.

“I would say don’t be scared of them (TADs),” she told The News by phone. “But due diligence goes a far way toward helping it to be successful.”

It’s important there is a solid, long-term plan for how the TAD will work, Willoughby said. That is required by state law. The city has hired the Atlanta-based firm Bleakley Advisory Group to create its plan. The document, expected to be ready by mid August, will include revenue projections, possible projects and goals.

Having a plan is paramount, but oversight is equally crucial, Willoughby added.

“It (a TAD plan) necessitates trust on the part of the public with their public officials who may be pushing this,” she said. “It takes constant vigilance on the part of government to make sure that financial audits are being conducted in a timely way. These are not easy fixes for governments.”

Jim Drumm, Brunswick City Manager, said there will be an oversight board if the local TAD is adopted. It’s unclear just yet who will be on that board. It could be the City Commission, or it could be an independent board. The TAD board would oversee the use of TAD money and ensure it’s meeting revenue projections and being spent according to plan.

SOMETIMES, TADS FLOP

Most TADs are planned to last about 30 years. They are dissolved after any bonds are paid off and goals are met. After the TAD ends, property taxes stay the same. The additional revenue that was going to the TAD fund reverts back to the local taxing authorities. Using the Norwich Street example, that means the additional $2,000 in newly generated revenue would stop going to the TAD. It would switch back to going to the school board, county and city.

It’s prudent to mention TADs are pretty common across the United States. All 50 states and the District of Columbia use TADs. California was the first, starting in 1952. Georgia adopted TADs in 1985, and Atlanta was the first in the state to use the newly crafted powers in 1986.

Since then, a total of 73 TADs have been created in 39 jurisdictions around Georgia, according to a 2016 study by Georgia State University. At least 46 localities have adopted redevelopment plans, as dictated by state law governing the creation of TADs. Of those 46, though, only nine have succeeded in recovering property values since the Great Recession.

Atlanta continues to be the state leader in TAD usage. Objectively, the city has done well. Atlanta saw a 75-fold increase in property tax revenue when it implemented the Atlantic Station TAD, according a study by Georgia State University. Atlantic Station, if you’ve never been there, is a now-thriving commercial and residential district near Georgia Tech. It was built on the site of a former steel mill.

While Atlantic Station is mostly a success story, TADs sometimes flop.

“Oh, they do flop,” Willoughby said. “They sure can flop. Revenues don’t come in, so initial investment isn’t paid for through benefits that accrue. You can have erosion of the tax base over time. The redevelopment can improve, but then it becomes static over time because of the displacement effect.”

Essentially, this is when poor residents can no longer afford to live in areas inside the TAD because of rising property values. By law, TADs can only be applied to “blighted” or underserved areas, so it’s common for residents in TADs to be poorer.

TADs can also flop because local school districts or other overlapping governments don’t allow their taxes to be included in the TAD. And sometimes, developers pull out of plans because investments don’t materialize.

“You’re betting that it (the TAD) is going to improve the area, and it’s going to continue to progress and generate strong economic activity,” Willoughby said. “… It takes tending to, like a garden.”

SLOW AND STEADY WINS THE RACE

Atlanta isn’t the only city to use TADs — not by a long shot. Just down the road from Brunswick, St. Marys has established a TAD. It’s about 4 percent of the city’s total tax digest, and city manager John Holman said it’s garnered $12,000 since its inception.

That might not seem like a lot of money, but so far, St. Marys is choosing not to take out bonds to finance TAD projects. Instead, they are using the “pay as you go model.”

That’s probably for the best. Since the Great Recession, only two series of TAD bonds have been issued in Georgia — both in Atlanta. Jurisdictions are increasingly using the “pay as you go” model, which has been particularly successful in Augusta.

In 2009, Augusta and Richmond County created one large TAD that enveloped most of the city’s downtown. When the economy went belly up, city, county and school board officials agreed to reimburse developers for some of the costs of land development.

The model works well, because it avoids the risk of a TAD bond default, and 100 percent of the TAD revenues can be spent on development. If Augusta had used a TAD bond model, portions of the revenue would have to go toward the interest and principle paying off the bond.

GOVERNMENTS WORK BEST TOGETHER

Participation by all local taxing authorities is the linchpin of the whole TAD idea. It’s easy to see why a school board might not want to give up new tax revenues. TADs have been “weakened, if not eviscerated, by lack of school district participation” in counties like Bibb, Cobb and Cherokee, according to the study by Georgia State University.

There are compromises that can entice school boards, though. In Acworth, the amount of TAD money leveraged in a bond is capped. In other jurisdictions, the school board is reimbursed for the cost of bond debt service. In other places, school-specific projects are built into TAD redevelopment plans.

And it just so happens Glynn Academy is inside Brunswick’s proposed TAD.

City Commissioner Julie Martin, a major cheerleader of Brunswick’s TAD initiative, thinks public opinion will help sway the school board and county commission toward participating in the TAD.

If either of the boards decided not to enter into the TAD agreement, “it would be going against what the voters voted for (in the 2015 referendum),” she said. “We’ve spent a lot of time educating the board of education and the board of commissioners so we would be able to move forward.”

Geoff Koski, president of the Bleakley Advisory Group, which is putting the TAD plan together for Brunswick, agrees.

“The impact gets dampened if schools and counties don’t participate,” he said.

NO FREE MONEY

Drumm, Brunswick’s city manager, said he hopes to have the TAD up and running by the end of 2017. But before that can happen, the redevelopment plan has to be adopted by city commissioners, public hearings must be held and then the county and school board have to weigh in on the plan.

And Willoughby, the professor with nearly 30 years experience in public financing, noted an important factor:

“There is no free money,” she said. “Getting engaged in these type of things (TADs), there is some risk. It’s best for government officials to be up front, clear, transparent and get input from the public.”