From the Director
Bonds in Economic Development
by Ryan Moore
B
ond, James Bond. Revenue Bonds, Treasury bonds,
derma bond… What is a bond and how do we use it in
Economic Development? Bonds are a tool that can be
used by local government to finance public projects or
to incent private development. Bonds for tle are the most
common bond issued for economic development projects and are
different than a general obliga on bond.
A general obliga on bond is used by local government to finance
projects and is secured by the government’s pledge to use all
legally available means to repay the bonds. Most o en, general
obliga ons are repaid with property tax or sales tax revenue. As an
example of a general obliga on bond, in 2011 Athens‐Clarke
County approved a Special Local Op onal Sales Tax (SPLOST)
referendum that included 35 projects at a total cost of
approximately $195,272,000. These projects will be funded with
periodic general obliga on bond issuances. Bonding these future
revenues allows Athens‐Clarke County to invest in capital
improvement projects that would otherwise be funded through
local property taxa on. These projects will be completed over a
nine year period and include the recent Jail and Classic Center
expansions. Since our community is a net importer of tourism, we
are able to collect sales tax from visitors to our community and use
these revenues to invest in our infrastructure.
As indicated, the local community is obligated to repay general
obliga on bonds from legally available resources, no different than
each of us who writes a check to the mortgage company each
month; this bill has to be paid. But what about bonds that allow for
property tax savings in economic development projects, is the local
community obligated to pay those back as well? No! In most cases,
the community is not obligated financially in these transac ons.
tle. In the State of Georgia, local communi es can u lize a
Development Authority to offer property tax savings to qualifying
projects. Generally speaking, the tle to the project is held by the
Development Authority and the project is leased back to the
company. An equity ramp‐up schedule is put into place that allows
for tax savings over a certain period of me. The company
maintains control of the project at all mes during this
arrangement.
As a part of these agreements, the company will also commit to
certain community benefits that usually include job crea on
thresholds and minimum levels of investment in the project. These
commitments are made at the outset and are backed by