Is Northlake Ground Zero For the Success of a City?

I’m recycling a topic I discussed last year, since it continues to come up.  It came up again in Scott Holcomb’s town hall meeting this week. I’ve got some more detailed info now, so this version is a little more accurate than the guess I did last year.

If you read the AJC, or watch WSB-TV, you may think that Northlake Mall is a drop-dead property. If you don’t “get” it, you can’t finance your city. So there has to be one winner and everyone else loses.

 Or is it simply a problem of how to cut your sandwich?

 This is a long analysis – sorry.  But the punch line is very simple -- the decision about whether the mall and surrounding areas are in the City of Tucker or the City of Briarcliff (or Lakeside) has essentially no effect on the financial viability of either city. Read on if you’re curious.

 There are two big math issues in the financing of cities that gets missed in the news stories. First, the numbers are not that big. And secondly, if revenue goes down; costs go down. If management roles go down; costs go down.

 In Tucker’s feasibility study, they were given some details about the ITP Northlake commercial area. I’ll use Tucker’s feasibility study numbers illustrate the financial impact. Tucker’s numbers are smaller and their functions are more limited, so it’s easier to do a comparative analysis on their activity. Their study way overstates the costs of their city, but I’m just using those numbers to show the effect of this one factor.

TUCKER:

Start off with property taxes. The property tax from the ITP Northlake area is about $100,000. There are really no costs associated with that revenue, since all the appraisal and billing work would remain at the County.

Then there’s all the business license and related taxes and fees. That’s less than $850 thousand in the ITP Northlake area. And insurance taxes, Bank Shares tax, Franchise Fees and HOST tax that could be as high as another $400 thousand.

 But look at the other side of the equation. The estimated administrative and code enforcement costs in the Tucker study (as is) are $8.1 million. If all of the zoning, enforcement, billing and other administrative requirements went down by 10% (proportionate), the costs of operation would certainly go down by 7% -- $600 thousand.

Putting those elements together, without ITP Northlake, Tucker would have maybe $1.35 million less revenue, and maybe $600 thousand in reduced expenses.  So, you could imagine a decrease in the “surplus” of Tucker of $650 thousand. So the surplus would be near $2.6 million. If you’re doing the math, there would be a change in the excess available margin of error from 25% of expenses to 24%. Nothing in that changes the viability of the City.

BRIARCLIFF (or Lakeside):

 The same kind of analysis of Briarcliff is a lot harder to do, but you can make some grossly generalized estimates. And the overall numbers would be comparable for Briarcliff or Lakeside, since they’re performing the same services with the same tax rate.

 The property tax millage rate being transferred to Briarcliff is about seven times the value transferred to Tucker.  That’s because Briarcliff is taking over police and roads. Using the same gross estimates as I did above, the property tax revenues of Briarcliff would decrease $700 thousand, with no significant change in costs.

 The business tax change would be the same amount in the Briarcliff version -- $850 thousand. It’s hard to be precise about cost reductions in Briarcliff, because there are so many functions involved.  But just to use a rough estimate of 3% of the expenses, we would get a reduction in cost of $800 thousand.

 Put those together, and you’d get a decrease in Briarcliff’s surplus of around $1.2 million. The margin of error would change from 14% to 13%. Nothing in that changes the viability of the City.

The point of all of this calculation is that the decision about whether the mall and surrounding areas are in the City of Tucker or the City of Briarcliff has essentially no effect on the financial viability of either city.

 And being realistic about this kind of analysis, it’s easy for gross assumptions to be inaccurate. But, again, the overall numbers aren’t that great, so any error is not going to be significant.

 So what’s left to talk about? 

 The Briarcliff folks started out with a principle of “clean and clear” borders that would be recognizable by everyone inside and outside of the cities themselves.  Who does not know what ITP and OTP mean?

 The Tucker folks tried to map what they thought of as “Tucker”.

 The Briarcliff folks looked at the overall geography; the Tucker folks looked at Tucker.

 Is one “right” or one “wrong” in their perspective?  No.

We have two right answers that come to different conclusions. Is that a killer issue? How do you solve that kind of problem?  Stay tuned.