Opposition report: Buckhead City would mean budget losses for Atlanta, public schools

The formation of a new Buckhead City would blow huge holes in Atlanta’s City and public schools budgets and likely have a dismal effect on bond ratings and taxes, among other impacts, according to a report commissioned by anti-cityhood advocates.

Coming hot on the heels of a study that deemed cityhood to be financially feasible in basic terms, the counter-report sets the stage for a political battle as backers attempt to put the question on the November 2022 ballot. The “Buckhead De-Annexation Fiscal Analysis” was funded by the Buckhead Coalition, an invitation-only nonprofit of 100 civic and business leaders, and circulated Sept. 16 by the anti-cityhood group Committee for a United Atlanta.

“This study clearly shows that breaking up Atlanta is a bad idea,” said CUA co-chair and Coalition member Linda Klein in a press release. “It’s bad for Buckhead. It’s bad for Atlanta. It’s bad for the metro region. And it’s bad for the state of Georgia. … Rather than engage in divisive and self-defeating efforts, let’s work together to improve the lives of our citizens.”

Bill White, president and CEO of pro-cityhood Buckhead City Committee, dismissed the report in a written statement. “This so-called analysis is classic doomsday drivel from the usual suspects,” he said, particularly questioning its assumption about Atlanta Public Schools impacts.

On Sept. 13, the BCC released its own feasibility report, a legally required step to allow the General Assembly to consider legislation enabling de-annexation from Atlanta and formation of the new city. The report, conducted by a research unit at Valdosta State University, focused solely on estimated revenues and expenditures. It estimated Buckhead City would have an annual budget surplus of around $113.6 million. But it cautiously noted that it does not endorse cityhood and does not address other financial and “social, political, and governance issues.”

The CUA/Coalition report was performed by KB Advisory Group, a Midtown consulting firm until recently known as Bleakly Advisory Group, along with two researchers at the Center for Regional Analysis at Virginia’s George Mason University. The consulting firm’s previous work includes the “Buckhead REdeFINED” master plan for the core commercial area and Roswell Road redevelopment concepts on behalf of the City of Sandy Springs.

“Overall, if the Buckhead area of the City of Atlanta de-annexed from the city,” the report says, “both entities, as well as APS, would stand to lose financially, economically and socially.”

The report uses a map of what is today regarded as Buckhead by the Coalition and other local organizations. It’s a bit smaller than the proposed Buckhead City, whose boundaries includes more Northwest Atlanta neighborhoods.

The report uses two different types of estimates of budget impacts. One is a “weighted share” that compares total expenses against local information. The other is “average costing,” which estimates costs as a “per-unit share” of each major category of expenditure. The use of two methods results in two different estimated numbers, which the report presents as the limits of a range of financial impacts.

To read the full report, click here.

Estimates of budget losses

The report estimates that Atlanta would lose around $252 million a year in recurring revenues, mostly from business license fees and taxes on property, sales and lodging. Atlanta also would save somewhere between $135.7 million and $171.7 million. That makes for net fiscal losses around $80.3 million to $116.2 million.

The net loss would be 11.9% to 17.2% of Atlanta’s 2020 budgeted general funds, the report says.

The report claims a bigger loss for APS revenues, with Buckhead estimated to provide around 55% of the local tax base. The current revenues from the Buckhead area are estimated at around $332 million. The savings of not operating in Buckhead are estimated at around $98 million, amounting to an estimated $232 million annual loss.

Estimates for major expense categories for the Buckhead area, as broken down in the KB Advisory Group report on cityhood impacts.

The report does not include any references to the BCC’s statements that Buckhead City would seek to cut deals with APS and the City of Atlanta to continue such services as public schools, trash collection and water and sewer service. In turn, those statements are not reviewed in the BCC-sponsored feasibility study, either, and remain unquantified.

“The most fundamental flaw is the assumption that Buckhead City will not continue as part of Atlanta Public Schools,” said White, the BCC leader, about the CUA/Coalition report. “There are details to work out, of course, but the suggestion that APS would forfeit more than $300 million in revenue by electing to not serve Buckhead City is not plausible. We are confident of the legal strategy to maintain APS services for Buckhead City.”

Bonds and other impacts

Beyond the numbers, the CUA/Coalition report offers opinions about “qualitative aspects,” including “service of current debt and future debt, economic development disunity, and reduced community services,” which are “all likely to be significant difficulties for both the City of Atlanta and the Buckhead area.” The report does not give any detailed background information for that analysis.

Debt service on existing City bonds and cost of financing future bonds are “perhaps the most economically important issue,” the report says. If Buckhead left Atlanta, that would require renegotiating the debt service on existing bonds, which is “likely to be contested aggressively” and could draw lawsuits from community groups. Such bonds include those that currently help to fund roads, water and sewer systems and parks.

In addition, the report says, the cost of future debt is likely to be higher for the City because “Buckhead represents an outsized share of overall revenue generation in Atlanta.” And for a new Buckhead City, tax rates could be increased to refinance assumed debt and to fund startup costs.

“It is almost certain that both the City of Atlanta and a newly financially independent Buckhead will see tax rates rise because of a loss of combined financial resources,” the report says.

The report makes several other speculative claims, including that the budget impacts would be likely to force funding cuts to nonprofits and that “young, talented workers” might choose to go to other metro areas due to the political battle over cityhood. Another is that Atlanta and Buckhead City could end up competing for large businesses. “The result could easily be a race to the bottom with both entities giving away critical financial resources in a zero-sum game of economic development gamesmanship,” the report says.

CUA co-chair Edward Lindsey made other political and economic claims in the press release that are not detailed in the report. He notes that forming a new city out of part of existing one has not been done in modern times and says it would be a “dangerous precedent.”

“De-annexing the Buckhead area would likely have a destabilizing impact on the state of Georgia,” Lindsey said. “… Other neighborhoods in cities throughout Georgia may suddenly decide to break up key parts of their city. No doubt, it will risk the reputation of Georgia as the best state in the country for business.”

Such a major controversy already happened in Stockbridge with the attempt of a neighborhood to secede for a new city called Eagle’s Landing; that effort failed on the ballot in 2018. Lindsey and CUA did not mention that situation, which has political resemblance to the Buckhead City movement.