Smyrna Deserves a Better Deal
This blog post is based on my understanding of a development deal proposed by the City of Smyrna, Georgia. I’ve observed development projects in metro Atlanta since the mid 1990’s and feel compelled to comment on this issue in similar fashion to the comments I offered in a public hearing on December 12, 2021.
The proposed project would bring a new brewery to the downtown area. I’m concerned people are only ‘for’ or ‘against’ the idea of a brewery without considering the details of the deal the City has proposed. We’ll be stuck with the consequences of this transaction for a very long time, so I developed this post to help us analyze what we’re hearing from our elected officials and City staff.
The Need for Action Now
The City Council will meet on Tuesday January 18th – MLK Day on the 17th (the normal meeting day) is a holiday. It will vote on agenda item 6A: a resolution approving the sale of the property to the owner of a brewery.
I hope you will read to the bottom of this post and consider voicing your opinion (pro or con) to your City Council member and the Mayor. I’ve provided links to contact information at the end of this post.
What
The City has proposed selling approximately one acre of land in downtown Smyrna to StillFire Brewery so the company can build a new brewery on the site. The City plans to sell the property for $600,000. The total undeveloped property is about 1.6 acres. The City plans to use the proceeds from the sale to develop a park on the half acre parcel immediately south of the proposed brewery.
Where
In the image below, the area shaded with an orange tone immediately to the right (east) of the Smyrna community center is the proposed location for the brewery. The undeveloped land below (south) of the shaded area would become a small park.
In the image above, our community center sits just above (north) of the roundabout in the center of the image. Our library is to the left (west) of the roundabout.
The following image is clipped from the site plan included in the information published by the City. In typical municipal form, the City has included only one drawing. It’s a technical drawing (a site plan) that many people don’t know how to read, and the drawing is too small to read easily even if you’re familiar with site plans. You may be able to pick out a bit more detail from the site plan:
The Significance of This Property
The Mayor and City Council have also proposed redeveloping the traffic circle in front of the community center as part of a separate project. This proposed redevelopment comes with a new parking deck across Powder Springs Road on the north side of the community center.
This new development means there’s no place for us to expand our community center and add civic space for citizens even though our community is growing. The community center is landlocked: there will be a new civic plaza on the south side, the existing pond on the west side and the new parking deck on north side.
Our community center is already frequently too busy. We heard testimony to this effect during a recent public meeting. The vacant land east of the community center is unique in that it’s the only place we have left to grow without separating functions (spreading facilities around town - further than walking distance). We need that property so it should not be sold.
What’s Not at Issue
As I said in the public meeting, I don’t care if the property is developed into a brewery. The market will determine whether a commercial use on the property succeeds. Uses are not permanent. Our future need for civic functions on the property is permanent and continues to grow with our population.
Lessons Learned (That Nobody Wants to Discuss)
I believe the City’s plan to sell the property means the citizens of Smyrna won’t get it back. There are any number of city council members, county commissioners, school board members and church building committee members who have made the mistake Smyrna seems determined to make. No one wants to talk about big mistakes so we’re generally not aware of them.
My own church building committee did what Smyrna is about to do. We had a master plan that involved the redevelopment of some adjacent residential parcels. The building committee sold some of the parcels the church owned to raise funds for other work with the idea that we could buy the parcels back when we needed to do so.
The value of those parcels quickly increased beyond our ability to buy them back. Our master plan went on the shelf. That’s a polite way of saying we’ll probably never be able to grow services to our congregation as we hoped - an awful thing to realize in hindsight.
Public Meeting
The Mayor, City Council members and City staff held a public meeting on Sunday December 12, 2021 (pictured below). Mayor Norton opened the meeting by reviewing the agenda. He stated Scott Cochran, the City Attorney, would explain why the property should be sold rather than leased.
The public meeting was broadcast and recorded. You may click here or click the image of the published recording below to access the recording.
Andrea Worthy, Smyrna’s Economic Development Director, began the meeting with a presentation on the project and some budget details. She took time to explain the popularity of breweries in Georgia and their largely positive impact on the communities in which they’re located. We’ll come back to that point shortly.
Property Tax
In her presentation, Ms. Worthy showed an estimate of $251,720 in property taxes collected by the City over ten years. She advocated selling the property so the City can collect property taxes and noted the City cannot collect property taxes on a leased property. (She makes this statement at about 19:30 in the recording.)
I was surprised Ms. Worthy said we should sell the property so we can collect property taxes. This is a premiere piece of real estate in downtown Smyrna that will surely appreciate much more in value than the $252K we could collect in property taxes in that same ten-year period.
So, we would take in $252K in property taxes yet have to pay out much more to repurchase the property. That seems a literal example of penny wise and pound foolish.
For Sale Versus a Lease
As I noted, Mayor Norton opened the meeting with a claim that Scott Cochran, the City Attorney, would explain why the property needs to be sold rather than leased. Andrea Worthy reiterated this same claim at the end of her comments. (Mayor Norton introduces Mr. Cochran at about 38:00 into the recording.)
Mr. Cochran, in his comments, suggested the proposed brewery is similar to the development on the Village Green in front of City Hall. Those businesses were developed as part of a master plan. The parcel for the brewery is unique in that it’s the only place we can use to expand our civic buildings. We’re landlocked everywhere else. That wasn’t a problem with the earlier development so I would argue the two projects are not at all comparable.
Mr. Cochran comes to the point about lease versus sale at about 42 minutes into the recording and seems to be candid in his retelling. Mr. Cochran explains the City asked the brewery owner to consider a lease and the brewery owner declined. So, the City plans to sell the property. He noted the brewery owner described the idea of a lease as “a nonstarter” and they “needed to own this”.
The Mayor and Economic Development Director told us Mr. Cochran would explain why the land should be sold rather than leased. I felt the only thing Mr. Cochran explained was that the brewery owner rejected the idea of leasing the property.
That’s not a reason why the land should be sold (unless you’re only concerned on behalf of the developer). Mayor Norton and Ms. Worthy’s promises of an explanation went unfulfilled. There was only an admission that the City has not yet been successful in working with a potential development partner to figure out a deal that allows the City to lease the property.
I encourage you to watch Mr. Cochran’s comments for yourself and consider whether they leave you feeling as though the City is negotiating the best deal for our future.
Zoning and Deed Restrictions
Mr. Cochran also explained the layers of control attached to the property: zoning conditions and deed restrictions to prevent unwanted uses of the property. There’s literally a list of prohibited uses in the proposed land sale agreement.
The City would attach conditions to the site with any project in the downtown area. We shouldn’t think of that as a win for the City because any developer would have expected these conditions.
The Fallacy of a Repurchase Clause
Mr. Cochran also explains the proposed sale would include a clause giving the City of Smyrna a right of first refusal to purchase the property back from the buyer. This is the meat of the issue and I consider any sense of security from this option to be a complete fallacy.
The City may not be able to buy the property back. Even if we could, I’ll explain how that could be extremely wasteful.
The City plans to sell the property for $600K. The City can’t buy the property back at $600K since the brewery plans to invest $5.5 million in a new building. If StillFire decided to sell the property on its first day, the City would have to come up with at least $6.1M.
The longer the brewery operates, the more expensive the property will be to repurchase. That repurchase cost will increase as our need for additional civic space increases. That’s not a good deal for Smyrna.
Even if We Had the Money
Most cities don’t have $6M+ to spare in their budgets. That would be an enormous bite out of Smyrna’s annual budget, potentially at the expense of other services and investments.
The redevelopment cost would be even greater. Let’s say the brewery operates for ten years. The redevelopment costs of the property might (speculating at the appreciation/inflation) look like this:
Repurchase the property $2M
Purchase the building $6.5M
Demolition of the building $750K
Construction of a new civic building $8M
Total redevelopment price = $17.25M
A ground lease would mean we’d avoid the cost of repurchasing all together. Once the lease runs out, the improvements revert to the owner. The number in my speculation above would drop to less than $10M, a savings of $8.5M.
The Cost of Short-Term Thinking
Even if we could afford to repurchase the property with money from our annual budget, by raiding the SPLOST coffers or issuing a bond, we would potentially waste millions of dollars that could be invested elsewhere.
Our local and state governments are flush with cash right now. The State of Georgia is planning to give back $1.6B to taxpayers. Cobb County plans to stash excess funds in its long-term cash reserves. Our City of Smyrna is on a buying a redevelopment binge using SPLOST funds – tax money.
It’s hard to get people to think about the future cost of a project when the prevailing attitude is we’ve got plenty of money. The issue is not that we have funds available. The issue is what’s the best use of those funds.
More aggressive negotiations with more potential developers could position us to avoid the repurchase price altogether. I’d like to use the potentially millions of dollars in savings to pay for services and civic improvements rather than kicking the can down the road and having to pay much more later.
Moving at the Speed of Government
I don’t want to spend much attention on this issue, so I’ll only mention it. The agreement the City wants to execute gives the City just 35 days to agree to repurchase the property and an additional 30 days to enter into a purchase agreement.
We’re going to come up with the entire repurchase cost in 65 days? That repurchase clause could be triggered at any time by the property owner. That makes it very difficult for the City to plan for such a significant expense.
A Ground Lease
So, how do you entice a business owner to develop a property with a ground lease? The cost of the lease must be low enough and the term of the lease must be long enough for the brewery’s economic model to work.
The initial lease might be ten, fifteen or twenty years. The brewery must generate enough revenue to cover development costs and make a (healthy) profit within the initial lease period. Smyrna could write the lease for $1 per year if that’s what it takes to incentivize the development.
Based on local enthusiasm for the brewery, it seems the brewery will do a huge business. In return, the brewery should take some of the economic risk while acknowledging the importance of the site for Smyrna’s future civic buildings.
The best part of the ground lease for Smyrna is that it allows us to plan. During the term of the lease, we can decide what use will be most appropriate for that site, design the improvements and budget for the project. We could even provide additional, shorter-term lease periods following the initial long-term lease if we’re not ready for redevelopment.
The Keys to Negotiating
I wondered why Ms. Worthy said her job was to find a place for businesses interested in Smyrna. She spent significant time talking about how popular breweries are. Indeed, a search for the term “brewery” on the City’s website turns up results dating back years in which the City is speaking with breweries interested in Smyrna.
In thinking about Mr. Cochran’s comments, I eventually realized StillFire would have no interest in discussing a ground lease because there are no other interested parties. What was missing from all the public meeting presentations was competition for the project site.
Our officials and staff are supposed to serve us in good faith. I believe they were excited by the scale of the proposed investment. Mr. Cochran notes it may be the largest single investment in downtown.
Any savvy negotiator creates competition and is always prepared to walk away from the negotiation if the terms are not favorable. I haven’t gotten any sense of the City’s willingness to do either as a means of getting a better deal for us.
Is This A “Sweetheart Deal”?
Some citizens have objected to the sale of the land since the parcel was never advertised as available. Using proceeds from the sale of the property to develop an amenity immediately next to the property that will attract patrons looks pretty sweet for StillFire.
In the public hearing, Mr. Cochran noted this may be the largest investment in downtown Smyrna. The City seems to have allowed or encouraged StillFire to significantly reduce the size of the building. That would reduce the company’s investment in Smyrna yet they still get the other benefits of the proposed deal. That looks very sweet for StillFire.
The Current Proposal Isn’t What Was Discussed in December
One of the more frustrating aspects of dealing with land development projects is the common practice of a City negotiating with a developer and not keeping the public informed. That takes away our ability to voice our opinion to our elected officials who proceed with the mistaken assumption that we approve. We don’t necessarily approve – we just didn’t know the deal changed.
That seems to be what’s happened in this case. The plan presented in December (at the public hearing) called for a three-story building of 28,000 square feet. The Marietta Daily Journal reports the design has since been scaled down to about 15,000 square feet.
The building’s capacity has been reduced by nearly fifty percent. A substantial part of the building was brewing operation. Did the scale of that remain the same and the public spaces are now tiny? The citizens of Smyrna deserve another public hearing to discuss the proposed changes so we may determine if the substantially changed project will still meet our needs.
I had not heard about the change in the project from my City Council representative. I’ve received other messages from him, yet he’s doesn’t seem to be helping us understand what’s happening. Maybe he doesn’t want to talk about it?
The significant reduction decreases the brewery’s investment in Smyrna so it now makes even more sense to entertain other offers from competitors who would construct a similar project.
Other Factors
Contrarians rarely succeed. You can’t get ahead by saying “no” to everything. There’s plenty of compromise suggested here. People who are ruthlessly promoting the brewery may view (and dismiss) this as a contrarian post. That’s not its intended spirit.
Also, I’m aware the City purchased land adjacent to the Reed House. I believe the City can build civic buildings on the site (though I don’t think the neighbors will be happy). That doesn’t change my outlook on the parcel on which the proposed brewery will be located. It’s unique and should be valued as such.
I don’t think better negotiating will cost us an opportunity. We’re talking about developing the most premier piece of property in downtown Smyrna. I’m sure we can find and support the community partner who will do the same for us.
In Conclusion
It’s nice that the owner of StillFire has moved to Smyrna. That doesn’t mean we owe him the deal that’s been proposed, especially considering the changes reported by the Marietta Daily Journal. The City leadership owes us the best deal possible, even if we need a different development partner.
The pictures of the proposed building we saw in December are no longer what’s proposed. The City should do a much better job collecting and publishing the details of the revised proposal. It should also give us time to discuss the details in a public meeting. I hope you’ll consider making these requests if you contact your City Council representative and our Mayor.
I’ll close by noting anyone who thinks we don’t need more space didn’t come to the public meeting. We tried to have a meeting about an issue in which a fraction of a percentage of our residents were interested and (during a pandemic) we couldn’t seat everyone in one room. There we people on folding chairs in the lobby watching a television over the stairs. We need more space, so we must plan for more space.
Sincerely,
Ryan
How to Contact Your Elected Officials
I hope nothing in this post comes across as partisan. I have tried to remove any biting criticism and focus on the details of the proposal rather than on the parties involved.
I’ll forward these comments to my representatives in the hope that I can learn more about their concerns and benefit from their insights. I encourage you to do the same.
Mayor Derek Norton contact information
Smyrna Ward Map (to find your City Council representative)
City Council contact information
Upcoming Meetings and Agendas Calendar
One Last Thing: Thank You
Whoever was responsible for getting the word out about the public meeting in December did a good job. The signs posted around town were particularly helpful. Thanks to anyone involved in that effort - well done!
Also, City Clerk Heather Peacon-Corn responded promptly (and after business hours) when I asked a question about documents posted on the City’s website. The first page of two documents posted is the same so I thought one of the links was incorrect. She politely noted the documents are not the same: one document is much longer (I hadn’t noticed) and she made a change to help clear up confusion. Thanks to Heather for her prompt and professional response!
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