On June 3, 2019, the Georgia Supreme Court upheld (in Development Authority of Cobb County v. State of Georgia, — S.E.2d — (2019) (“Cobb County”)) the constitutionality of the so called “catch-all” project provision (O.C.G.A. Section 36-62-2(N)1) of the Development Authorities Law (O.C.G.A. Section 36-62-1 et seq.; the “DAL”) and ruled that a retail development, including a grocery store, proposed by the Development Authority of Cobb County was a permissible project within the catch-all language.  The decision is consistent with past Supreme Court decisions and the gradual broadening of DAL projects by the General Assembly since the DAL was first adopted in 1969.

In 2018, the Development Authority of Cobb County proposed to issue revenue bonds under the catch-all project provision of the DAL. The proposed project would involve the acquisition of land and construction of a facility that would be leased to the Kroger Company. Kroger would relocate from a smaller grocery store space, presumably resulting in more employees at the larger space than at the smaller space. A Cobb County resident intervened in the bond validation proceedings, arguing that the proposed project was not a permissible project under the catch-all provision and that the catch-all provision was unconstitutional. The superior court denied validation of the bonds, and the development authority appealed.

The Supreme Court correctly rejected the argument that the catch-all provision only permits a development authority to finance a project to the extent that the project is “essential” to “the development of trade, commerce, industry, and employment opportunities,” noting that the word “essential” appears in the catch-all paragraph to describe the purpose for which a development authority may finance projects, not the projects themselves.

In fact, the catch-all provision is intentionally broad and the only real limit may be projects that serve a governmental purpose. For example, construction of a public golf course (see Haney v. Development Authority of Bremen, 271 Ga. 403 (1999) (“Haney”)), or the construction and refurbishing of a city hall, a jail, a police station and city streets in Odom v. Union City Downtown Development Authority, 251 Ga. 248 (1983) (“Odom”) were not upheld because they fulfilled governmental purposes. In each case, the proposed project was expected to encourage employment and further development in the area, but the court ruled that the project was not “trade, commerce, or industry” under a common understanding of such terms.

For some historical perspective, the Supreme Court’s discussion in Odom of the differences between the Downtown Development Authorities Law (the “DDAL”) and the DAL as each were in effect at the time is particularly useful, since the DDAL and the DAL are parallel laws and share a common Constitutional source of authority2. At the time, the DDAL contained the catch-all provision and the DAL did not. In Odom, the court noted that, by lacking the catch-all provision, the DAL “does not allow financing of all types of commercial projects” such as a grocery store or other retail facilities and was thus not as broad as Art. IX, Sec. VI, Par. III of the Georgia Constitution allowed (citing Day v. Development Authority of the City of Adele, 248 Ga. 488 (1981). By comparison, the court observed that the DDAL’s catch-all provision “expands the scope of permissible authority projects beyond that of the DAL to include all types of commercial projects.” The current catch-all provision in the DAL was adopted in 1992, after the similar DDAL catch-all provision was upheld and after grocery stores and other retail facilities were found impermissible in Adele.3  Given this history, one can only assume that by adding a nearly identical catch-all provision in the DAL, the General Assembly fully intended to expand permissible projects under the DAL to essentially all commercial projects short of governmental projects.

The Cobb County decision cited its previous decision in Haney to reaffirm that the mere presence of employment opportunities in the process of constructing a project or in managing a project cannot alone transform a governmental project (such as a public golf course) into trade, commerce or industry. In Cobb County, however, the Supreme Court not unreasonably found that a retail facility is so clearly a commercial project that an analysis of the employment opportunities was not necessary.

The intervenor in Cobb County had also argued that the catch-all provision of the DAL was unconstitutional because Art. IX, Sec. VI, Par. III requires any bonds issued by a development authority to have “uniform terms and conditions.” The Supreme Court swatted this argument down by pointing to the “plain and ordinary meaning” of the uniformity clause of Art. IX, Sec. VI, Par. III to mean that the General Assembly may create development authorities under uniform terms and conditions, not that the projects or the bonds must have uniform terms and conditions; indeed, the court notes that the wide variety of projects authorized by the catch-all provision “inevitably” will result in bonds with varying terms and conditions.

The ease with which the Georgia Supreme Court dispatched the challenges in Cobb County almost leaves one wondering how the intervenor ever thought there was a case to be made in the first place. However, when the General Assembly broadened the list of permissible projects under the DAL with the catch-all provision, the General Assembly chose not to curb scrutiny of a development authority’s determination of projects as it did in O.C.G.A. 36-62-2 (A) (agricultural, manufactured, mining, or industrial products), (G) (air transportation), (L) (community antenna television systems) and (M) (research and development facilities).4  Cobb County may be correctly decided, but it is likely not the final word on the catch-all provision.

By: Shaney B. Lokken

1. The catch-all provision authorizes development authorities to finance: “The acquisition, construction, installation, modification, renovation, or rehabilitation of land, interests in land, buildings, structures, facilities, or other improvements and the acquisition, installation, modification, renovation, rehabilitation, or furnishing of fixtures, machinery, equipment, furniture, or other property of any nature whatsoever used on, in or in connection with any such land, interest in land, building, structure, facility or other improvement, all for the essential public purpose of the development of trade, commerce, industry, and employment opportunities. A project may be for any industrial, commercial, business, office, parking, public, or other use, provided that a majority of the members of the authority determines, by a duly adopted resolution, that the project and such use thereof would further the public purpose of this chapter.”
2. Ga. Const. of 1983, Art. IX, Sec. VI, Par. III states that the “development of trade, commerce, industry, and employment opportunities being a public purpose vital to the welfare of the people of this state, the General Assembly may create development authorities to promote and further such purposes or may authorize the creation of such an authority by any county or municipality or combination thereof under such uniform terms and conditions as it may deem necessary.”
3. The Supreme Court had already determined in Development Authority of DeKalb County v. Beverly Enterprises, (247 Ga. 64 (1981) that the projects in question, nursing homes, did not need to be expressly listed in the Constitution or Development Authorities Law in addition to the express provision for skilled nursing homes or intermediate care homes, provided that they furthered the development of trade, commerce, industry or employment opportunities, and that a “nursing home” fits within the definition of “industry;” compare to Adele, in which the Supreme Court stated that “if the Generally Assembly wants to define projects to include grocery stores, it may do so as it did regarding nursing homes.” Adele, p. 277.
4. In each subsection, whether a project is ‘useful’ or ‘necessary’ to the enumerated project category is to be “determined by the authority, which determination shall be final and not subject to review.”