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The Potential Conflicts of Georgia's Community Improvement Districts
Wednesday, August 3rd, 2011
Robert Wechsler
In Georgia, Community Improvement Districts (CIDs) are a creation of
state government (they're in the amended 1984 state constitution)
that involves local governments in serious potential conflicts of
interest, in order to allow developers to fund their public
infrastructure with tax-free bonds. CIDs are a clever idea, but
cleverness is often inconsistent with government ethics. Smith,
Gambrell & Russell, a law firm, has a
good, short overview of CIDs.
The county and/or city in which a CID is located approves and even participates in the management of the CID (the local government(s) gets one seat on the CID board). Approval by landowners is not based on one-person one-vote, but rather on the value of real estate, which gives the power to commercial entities. The major landowners also vote for board members. But all landowners pay the assessments, along with their county taxes, so that the county is involved in this aspect, as well.
CIDs can also enter into cooperation agreements with counties or cities, so that, for example, a county may agree to maintain the roads built with bonds issued by a CID.
Despite all the municipal involvement with CIDs, they have many fewer restrictions on their issuance of bonds than if the bonds were to be issued in other ways. For example, they do not have to publish or conduct a public hearing.
Cobb County, outside of Atlanta, has been the leader in creating CIDs, passing their CID ordinance in 1985. It is also the center of a current controversy involving CID support for regional transportation referendums.
According to an article in the Marietta Daily Journal this March, two CIDs donated a total of $150,000 to an advocacy group supporting the first referendum. One of the CIDs said that its contribution was made on the condition that it be used "for nonpartisan neutral and accurate voter education activities and not to advocate for the passage or defeat" of the referendum. But this is clearly disingenuous, as critics pointed out. Money to an advocacy group will be used to advocate, not to educate.
Bill Byrne, a former chair of the Cobb County board of commissioners and current candidate for the same position, says that what the CIDS have done "is legal. However, I believe it is unethical. Their viewpoint is it's not tax money, but I'm sorry it is. The money they get comes from the people who buy products and services within that jurisdiction."
In an open letter to the Cobb County board of commissioners two weeks ago, Larry Savage, who ran against the current county board chair, takes a different approach to the same issue involving the advocating activities of CIDs: "Their investments and their influence are intended to make their properties more attractive to enhance the value. The Cobb County government is different. It should consider equally the interests of all citizens of Cobb County. There should be clear daylight visible between Cobb government and the CIDs. At present it can be difficult to determine where one ends and the other begins, or who leads and who follows. Cumberland and Town Center CIDs were created by the Cobb County Board of Commissioners and the Board of Commissioners must take responsibility for getting them to operate as intended."
If a county board is not permitted to support an advocacy group, a CID also should not be, and the county board should be the one to prevent this, whatever its members' view on regional transportation. Otherwise, it looks to the public as if the county board is effectively contracting out its advocacy. Yes, the board did nothing, but inactivity when responsible, and when a vote would have easily and quickly cured the problem, is no different from activity.
In other words, if a local government is going to give developers special rights and be involved in a CID's management, tax collection, and road maintenance, it must recognize the potential conflicts of this relationship and be very careful to deal responsibly with these conflicts. It does not have the luxury of inaction.
Robert Wechsler
Director of Research-Retired, City Ethics
203-859-1959
The county and/or city in which a CID is located approves and even participates in the management of the CID (the local government(s) gets one seat on the CID board). Approval by landowners is not based on one-person one-vote, but rather on the value of real estate, which gives the power to commercial entities. The major landowners also vote for board members. But all landowners pay the assessments, along with their county taxes, so that the county is involved in this aspect, as well.
CIDs can also enter into cooperation agreements with counties or cities, so that, for example, a county may agree to maintain the roads built with bonds issued by a CID.
Despite all the municipal involvement with CIDs, they have many fewer restrictions on their issuance of bonds than if the bonds were to be issued in other ways. For example, they do not have to publish or conduct a public hearing.
Cobb County, outside of Atlanta, has been the leader in creating CIDs, passing their CID ordinance in 1985. It is also the center of a current controversy involving CID support for regional transportation referendums.
According to an article in the Marietta Daily Journal this March, two CIDs donated a total of $150,000 to an advocacy group supporting the first referendum. One of the CIDs said that its contribution was made on the condition that it be used "for nonpartisan neutral and accurate voter education activities and not to advocate for the passage or defeat" of the referendum. But this is clearly disingenuous, as critics pointed out. Money to an advocacy group will be used to advocate, not to educate.
Bill Byrne, a former chair of the Cobb County board of commissioners and current candidate for the same position, says that what the CIDS have done "is legal. However, I believe it is unethical. Their viewpoint is it's not tax money, but I'm sorry it is. The money they get comes from the people who buy products and services within that jurisdiction."
In an open letter to the Cobb County board of commissioners two weeks ago, Larry Savage, who ran against the current county board chair, takes a different approach to the same issue involving the advocating activities of CIDs: "Their investments and their influence are intended to make their properties more attractive to enhance the value. The Cobb County government is different. It should consider equally the interests of all citizens of Cobb County. There should be clear daylight visible between Cobb government and the CIDs. At present it can be difficult to determine where one ends and the other begins, or who leads and who follows. Cumberland and Town Center CIDs were created by the Cobb County Board of Commissioners and the Board of Commissioners must take responsibility for getting them to operate as intended."
If a county board is not permitted to support an advocacy group, a CID also should not be, and the county board should be the one to prevent this, whatever its members' view on regional transportation. Otherwise, it looks to the public as if the county board is effectively contracting out its advocacy. Yes, the board did nothing, but inactivity when responsible, and when a vote would have easily and quickly cured the problem, is no different from activity.
In other words, if a local government is going to give developers special rights and be involved in a CID's management, tax collection, and road maintenance, it must recognize the potential conflicts of this relationship and be very careful to deal responsibly with these conflicts. It does not have the luxury of inaction.
Robert Wechsler
Director of Research-Retired, City Ethics
203-859-1959
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