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As Atlanta Surges With Apartments, CIDs Push For Them To Pay Their Share

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Metro Atlanta's 27 community improvement districts have risen in prominence over the years as a powerful tool to improve communities without having to rely on city and state funding alone.

Known as CIDs, the districts add a small additional tax on commercial property owners, which is pooled to fund projects such as intersection improvements, sidewalks and even transportation projects, such as new express lanes or bridges.

But a key commercial property type has been exempt from paying into CIDs since their inception: apartment owners. Some CID executives would like to see that changed.

Chamblee
View of Peachtree Boulevard heading north in Chamblee toward Interstate 285

“I think it would be far more equitable if commercial residential properties contributed, because they are without question benefiting,” Midtown Alliance CEO Kevin Green said.

Since Georgia legislators adopted a state constitutional amendment that allowed for the formation of CIDs in 1984, their establishment has become an increasingly popular method for public-private partnerships to tackle infrastructure in communities.

In the first 22 years after the CID law passed, 11 such groups formed. Since 2010, 16 have been established, Taylor Morison, the director of policy and government affairs at the Council for Quality Growth previously told Bisnow.

The debate will likely be among the topics addressed — including affordability and possible overbuilding — during Bisnow's upcoming Multifamily Annual Conference Southeast Sept. 10 at the Westin Buckhead.

Existing metro CIDs have raised more than $1.5B in tax revenues that helped spur more than $5B in infrastructure work in the state.

But that state law also exempted residential owners from paying into the system, and not only single-family and condominium owners, but also developers and owners of apartment complexes, many of which are increasingly becoming infused into mixed-use projects in Atlanta's densest neighborhoods.

That makes Georgia an outlier in the Southeast and a minority across the U.S. Of the 10 Southeastern states, only Georgia expressly prohibited commercial residential owners from CIDs, according to a 2017 Georgia State University Center For State and Local Finance study.

“As our communities and our districts become mixed-use and vibrant, it has evolved to the inclusion of more residential,” International Downtown Association CEO David Downey said.

The IDA is an organization focused on public-private partnerships in urban centers and neighborhoods and advocates to include apartment owners into CIDs and business improvement districts, as they are called in some other states.

“The nature of the improvement district environment is recognizing what takes place in between the buildings,” Downey said. “We're trying to promote more live-work districts as a stress on quality of life. We're promoting more residential in urban centers and mixed-use everywhere.”

Examining the Downtown, Buckhead, Cumberland, Midtown and Perimeter CIDs, which jointly commissioned GSU's study, the university found that the groups were missing out on more than $5M a year in revenues combined from the 2017 property values of apartments with at least five units within their districts. 

“It's a substantial amount of money,” said Laura Wheeler, GSU's Andrew Young School of Policy Study's senior research associate. Wheeler was a co-author on the 2017 report.

Lexicon Strategies
Lexicon Strategies partner Malaika Rivers, who also heads the Chamblee-Doraville CID

Lexicon Strategies partner Malaika Rivers, who also acts as the executive director to the recently formed Chamblee-Doraville CID, said that since the Great Recession, apartments have emerged as a prominent component of new development in urban centers, the prime stomping grounds for CIDs.

She cited how in the 30 years of the Cumberland CID's existence, properties within its district shrank from 90% commercial to 60%, with residential rising.

“Apartment owners and their investors are benefiting otherwise what commercial owners pay into,” Rivers said. “You can see that transition in Midtown as well.”

Some apartment operators say forcing them to pay the tax — especially as housing affordability is a mounting issue in Atlanta — would be the wrong move.

“The more municipalities impose taxes and other burdens on apartments, the more difficult it's going to be for developers to deliver affordable apartments to people,” Cortland Senior Managing Partner Bruce Cohen said.

Across the nation, Atlanta is viewed as one of the most affordable apartment markets among major metro areas, especially as population and jobs increase in the area, Cohen said.

But construction costs have been rising due to labor issues, making it harder for apartment developers to control rent growth. The U.S. trade war with China is not aiding in cost certainty either, especially when it comes to raw materials for countertops and cabinets, many of which are sourced in China.

Cohen said the high-priced rents in markets like New York and Los Angeles are in part due to taxes and other financial impediments imposed by municipalities.

Another apartment executive, who wished to remain anonymous over concerns about upsetting municipalities while pursuing rezoning approvals, said apartment residents only look at the bottom line rent when deciding where to live.

The fact that a portion of that rent would go into creating new sidewalks near a complex wouldn't matter to a resident who may only be staying there for a couple of years versus, say, an office occupier who leases space for a decade or more on average.

“I can't pass that along. [Renters] don't see the value,” the executive said. “It's an affordability issue for them. People are paying a larger percentage of their income on rent these days.”

Atlantic Residential CEO Richard Aaronson also agreed that adding taxes to apartment owners would complicate the mounting issue of affordability in Atlanta. But his larger concern would be overall equity: Conversations about CIDs only focused on apartment owners and not other residential owners within a CID district.

“If they're going to put it on all residential uses, including condos and single-family homes and townhouses, then I would say fine,” Aaronson said. “But if they're going to exempt single-family homes, you're putting sort of an unfair burden on renters versus owners, which I would not be in favor of.”

As Atlanta Surges With Apartments, CIDs Push For Them To Pay Their Share
View of the Midtown Atlanta skyline from Piedmont Park

For now, the idea of altering the CID structure to allow for apartment owner contributions is more wish than reality as the political battle would be uphill, at best. Since it is a statute in Georgia's constitution, two-thirds of state legislators would need to approve the constitutional amendment to allow the change. And even then, it would still need to be approved on a ballot by Georgia voters, experts say.

But Rivers said there may be other vehicles communities can take to involve apartments, including the establishment of Special Service Districts. These are similar to CIDs, but are not prohibited from involving commercial apartment owners.

Rivers, who formerly ran the Cumberland CID, said an SSD was established in the area when the Atlanta Braves began to develop the mixed-use development around SunTrust Park.

The SSD levied an additional millage rate on the total value of commercial properties in the district, including from apartment owners, to help fund the various infrastructure programs to address the stadium project.

“The Braves were clearly going to be a stimulus for the area, so there wasn't a lot of blowback on that,” she said.

Hear more from Atlanta's top multifamily players, including Bruce Cohen, Richard Aaronson, Greystar Senior Managing Director Lisa Taylor, Common founder Brad Hargreaves and The RADCO Cos. CEO Norman Radow at Bisnow's Multifamily Annnual Conference Southeast beginning at 8 a.m., Tuesday, Sept. 10, at the Westin Buckhead.