ATLANTA — Atlanta exists because of railroads. In 1837, the city was founded as the terminus of the Western & Atlantic Railroad line. Atlanta’s name even comes from the word “Atlantic.”
So it’s fitting that the railroad has again entered into public conversation.
[READ: Can Opportunity Zones Revive Struggling Cities?]
The Gulch, a 40-acre sunken expanse of rail tracks and parking lots in the heart of the city, has become a political and legal battleground. Real estate investment firm CIM Group proposed a mixed-use development for the long-underutilized area — a mini city within downtown with office towers, apartments, hotels and retail.
Atlanta Mayor Keisha Lance Bottoms championed the Gulch deal, even leading a much-publicized campaign to “Green-light the Gulch.” In November 2018, after about 10 hours of public debate, the majority of the Atlanta City Council approved almost $1.9 billion in public subsidies to fund nearly 40 percent of the private development — sparking fierce disagreements about the idea of public money supporting private enterprise.
The scale and cost of the Gulch deal has spurred legal challenges over what taxes can be used for the development and whether the city has gained the necessary approvals to use them. On Jan. 16 the county Superior Court will hold the latest hearing over which taxes can legally be used toward the Gulch. The validation hearings — typically more of a formality — are legally required before bonds can be issued, but they have become a flashpoint in the Gulch’s case.
The group that has argued as part of the hearings is the Redlight the Gulch Coalition. So far, the group’s crowdfunding campaign for the litigation has raised more than $13,000. Some members are concerned the deal will benefit the wealthy while doing little for the city’s struggling residents. In 2016, the Brookings Institution named Atlanta as the city with the highest rate of income inequality among large metros in the U.S.
“It’s a giveaway to billionaire developers without anything for the neighborhoods and the city that’s going to be impacted by it,” says Vincent Fort, a member of Redlight the Gulch and a former Democratic state senator in Georgia. “It’s striking how little the city’s getting in return, and ultimately, we think that it’s going to add to the gentrification of the city of Atlanta.”
Julian Bene, a member of Redlight the Gulch and former board member of Invest Atlanta, the city’s economic development agency, agrees.
“In general, given the depth of poverty that afflicts quite a large proportion of our public, our residents, I would say the onus is on the developer or the private entity to explain why we would divert our tax resources towards them rather than doing what the taxes are designed for, which is to pay for schools and pay for public services which benefit everybody.”
Proponents of the Gulch argue the development will give an economic boost to a part of the city that has long been overlooked.
While the northern end of Atlanta has received a great deal of economic development the past few decades, the Gulch’s part of downtown hasn’t seen much investment since the 1970s, says Michael Julian Bond, one of the council members who voted yes on the deal.
“There really hasn’t been any substantial development in the southern end of downtown, period,” Bond says. “Supporting the Gulch is a step in that direction. By attracting new businesses and commerce in that end of downtown, it will effect a counterwave to the development in the northern end of the city.”
Another argument in favor of the Gulch development is that it could act as an additional way to incentivize more large corporations to move to the city. Some hoped that the Gulch would attract Amazon in the search for its second headquarters, though that didn’t materialize. Norfolk Southern said if the deal wasn’t approved, it wouldn’t move its headquarters from Virginia to Atlanta, a move it had already considered. “I would hate to see this slip away,” the CEO said at the time. “But if it does, we will move on.” (The railroad giant owned key land in the Gulch that CIM wanted to buy.) After the deal was approved, Norfolk Southern announced it was moving to Atlanta.
The City of Atlanta did not return multiple requests for comment. But after the City Council approved the deal, Atlanta’s mayor released a statement saying the Gulch is the largest development in the city in nearly 50 years.
“Never in the history of our city has a single development deal been negotiated in a way that will have such far-reaching, generational impact,” Bottoms said in the statement. “The Gulch redevelopment will not only physically bridge the gap between the east and west sides of Atlanta, bringing economic vitality to a long-undeveloped part of downtown, but also affordable housing, workforce training, enhanced public safety and job opportunities throughout the city.”
Cities and states employ a variety of means to support private development — bonds, tax relief for the developer and agreements to carry out infrastructure projects such as road or water system improvements. But when large amounts of public money are involved, people often develop strong opinions.
“It’s not a new phenomenon, and there has always been some question about it and some resistance,” says Clarence Stone, research professor of political science and public policy at George Washington University. “But over time, I think the question of what is the actual public benefit has gotten more prominent.”
Often, to make sure residents benefit from deals that use public dollars, neighborhood groups sign a community benefits agreement (CBA) with developers. These contracts require developers to provide specific assets. Though Atlanta’s mayor expressed support for the idea of CBAs during her campaign in 2017, the Gulch deal doesn’t include one despite some asking for it.
Instead of a CBA, Atlanta secured a promise from CIM of $26 million spread across workforce training, a citywide economic development fund and construction of a new fire station. In addition, the developer must contribute $28 million to an affordable housing trust fund and set aside at least 20 percent or 200 affordable housing units priced at 80 percent of the area median income.
That totals $54 million of monetary investment from CIM against Atlanta’s almost $1.9 billion.
Fort, the former state senator, calls the affordable housing element weak. By 2018 numbers, rent would be $1,122 for a one-bedroom apartment and $1,347 for a two-bedroom. “That’s not affordable for the people that need housing most in the city of Atlanta,” he says.
Fort, who has been in politics for 30 years, says city hall used to look at development deals with a more critical eye, debating whether the deal would happen anyway without taxpayer money and what benefits it held for the city and any affected residents. He recalls that early in his time as a state senator, City Council was discussing a development in Midtown Atlanta.
“One council member brought up the idea that, ‘Hold it, this deal would happen anyway. And why are we subsidizing it?'” Fort says. “The deal was not done.”
Private enterprise is sometimes subsidized with public money in both the North and South of the U.S.. But there is a pattern in the South of governments granting business developers’ requests without guaranteeing benefits for the public, according to Stone, who has written books on Atlanta’s political development. He says this stems historically from the North industrializing while the South remained more reliant on agriculture.
“The South then is a region that in a sense aged thinking, ‘We’ve got to catch up. The North industrialized first, and we got left behind,'” Stone says. “So it has always been sort of looking at ways to develop … One of the things that marked Atlanta was that it was very aggressive in: ‘How do we build Atlanta into a place with a significant economy?'”
As a result, he says, the city has historically had a friendlier attitude about using public money for business development.
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Atlanta Divided Over Gulch Development Deal originally appeared on usnews.com
