On June 26, 2009, John Sherman, a taxpayer and resident of Fulton County, filed on behalf of himself and all others similarly situated, a petition for declaratory judgment, injunction, and mandamus against the Fulton County Board of Assessors and its chief appraiser and members in their official capacities FCBOA. The trial court permitted the Development Authority of Fulton County DAFC to intervene. In his petition, Sherman contends that the method of valuing leasehold estates arising from a local development authority sale-leaseback bond transaction is illegal, unconstitutional, ultra vires and constitutes a failure of FCBOA and DAFC Appellees to perform their duty. A bond transaction leasehold estate is created when a local development authority, in accordance with its redevelopment powers, enters into a bond transaction agreement with a private developer of certain real property. The local development authority issues revenue bonds under a financing program to the developer, who conveys to the authority fee simple title to the property. The development authority and the developer then enter into a multi-year lease arrangement whereby the authority, as owner, leases the property to the developer. The resulting lease payments are used by the local development authority to make the principal and interest payments on the revenue bonds. The terms of the agreement allow the developer to repurchase the fee simple estate for a nominal amount once the revenue bonds are paid down or retired.
As part of the transaction, the parties enter into a written agreement that sets forth a specific method for determining the fair market value of the resulting leasehold estate held by the private developer. The method estimates the initial fair market value of the leasehold estate to be 50 percent of the fair market value of the fee simple estate. The estimated value of the leasehold estate is then “ramped up” by five percent per year. By the eleventh year, the leasehold estate is valued at 100 percent of the fair market value of the fee simple estate.
