MADISON, Ga. — A Morgan County judge has ruled in favor of residents who challenged a main part of the incentive deal for electric vehicle maker Rivian to build a $5 billion production and research facility partly in Social Circle.
Ocmulgee Superior Court Chief Judge Brenda Holbert Trammel today, Sept. 29, denied the petition by the Joint Development Authority of Jasper, Morgan, Newton and Walton counties for validation of $15 billion of Taxable Revenue Bonds "for the purpose of financing the costs associated with Rivian's development of a proposed electric vehicle manufacturing plant on land located in Walton and Morgan counties."
The JDA has argued that the Rivian lease is a usufruct — a lease agreement in which the tenant is not subject to property taxes. Rivian and the JDA agreed on a payment in lieu of taxes plan — also known as a PILOT.
The company is set to pay taxes of around $300 million to local governments and school systems — including Newton County — over 25 years.
However, Trammel ruled the JDA “failed to establish” that bonds at the center of the Rivian project “are sound, feasible and reasonable.”
She also agreed with the seven Morgan County residents who challenged the Rivian incentive deal, that the JDA's land lease with Rivian is subject to property taxes.
Deferral or exemption from property taxes are among typical incentives governments and development authorities use to attract large employers.
Rivian had proposed employing up to 7,000 people at the proposed plant on a 2,000-acre site straddling the line between Walton and Morgan counties on the north side of I-20. Site grading already has begun and the JDA approved a $43 million pact with Plateau Excavation for grading work on the first 500 acres of the site.
The members of the Rivian opposition group, including Jeffery V. McKenzie, Neal S. Fitzgerald, Virginia Mcfaddin, Jennifer V. DeRoche, Valle S. Ashley, JoEllen Artz and Richard M. Haynes, challenged more than $700 million in local property tax incentives offered Rivian.
Trammell wrote that, "The entire premise of the Bonds which are sought to be validated is that the Project will be exempt from ad valorem taxation based upon the structure of the Rental Agreement."
She said the rental agreement "creates an estate for years in the company which is subject to ad valorem taxation."
The judge cited a 1999 Glynn County case in stating, "A usufruct has been referred to as merely a license in real property, which is defined as authority to do a particular act or series of acts on land of another without possessing any estate or interest therein.
"On the other hand, an estate for years carries with it the right to use the property in as absolute a manner as may be done with a greater estate, provided that the property or the person who is entitled to the remainder or reversion is not injured by such use.
"Therefore, an estate for years, unlike a usufruct, constitutes a taxable interest in land. All renting or leasing of real estate for a period of time in excess of five years is presumed to be an estate for years."
The judge wrote that the various provisions of the Rental Agreement between the Joint Development Authority and Rivian — such as a requirement for Rivian to maintain insurance for the property — "taken together ... demonstrate that Rivian would possess an estate for years, rather than a usufruct.
"As such, its interests in the property and the Project would be subject to ad valorem taxation," Trammell wrote in the ruling.
She wrote that the JDA "has put the issue of the Project’s economic feasibility squarely before the Court and therefore it bears the burden of proving the same — a burden which it has not carried."
The startup company has lost millions in recent months amid parts supply delays and other factors. Proponents have noted, however, that companies like Tesla took years to become profitable after beginning operation.
Chas Moore, a leader in the Rivian opposition effort, said the ruling “will bolster and multiply our efforts to protect our precious resources."
"Our goal is to stop this heavy industrial boondoggle, and that is exactly what we are doing. The State, the JDA and Rivian have been deceptive and misleading in best case. They will continue to feel the roar of our strong, vibrant, and tight-knit local communities."
The JDA is likely to appeal the ruling.
Ben Sheidler, spokesman for the JDA, said in a statement, "As the entire country is looking to revitalize and grow domestic manufacturing, protect American jobs and secure the country’s economic independence, we are disappointed and respectfully disagree with Judge Trammell's decision.
"This is a transformational project for the people of this community, the state of Georgia, and the United States of America. We remain undeterred in our efforts to bring high-paying, American manufacturing jobs to Georgia, and are currently assessing all legal options. The Joint Development Authority and the State intend to work with Rivian to move this project forward and see it through to completion."