02-13-17 Community Investment - Laserfiche WebLink

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full tax bill to come in after the last year of the abatement. Instead of the partial incremental piece that the traditional nine (9) year abatement does,the full tax bill comes in right after the last year of abatement. Why is that important? It's important because it enables us to look at TIFs (Tax-Incremental Financing) as a different way. For example,take a$13.5 million project looking for incentives. Traditionally,the Council and members of the Redevelopment Commission would give a deal that gave an abatement for nine (9) years and some type of TIF to that. In the case of a$13.5 million investment it would look something like, `Here's a nine (9) year abatement that nets X dollars, and in addition to that we'll contribute somewhere between $600-$800 thousand in TIF to build a road or a building or whatever we would help do.' What if we could have that same deal with a five (5) year one-hundred percent(100%) abatement and no TIF? We looked at it and ran the numbers, if you take that nine (9) year span juxtaposed to the five (5) year abatement, you actually come out ahead $200-$300 thousand depending on how you calculate it at the end of that nine (9) year period. If we can do that, it does a couple things: it's a full tax bill on year six (6) and it frees up that TIF. So the opportunity cost of expending that$800 thousand in TIF that was traditionally spent is now free to be used for other things. It's a different way to think about how we do abatements, not to say that's what we need to do all the time but it's just another way to think about it and how to do it. In conversations with some projects and developers, we found an openness to that. Obviously some people prefer to have cash in their project which we understand but if you don't need to do that, then you can have a farther reaching plan for TIF expenditures. I wanted to share this and entertain questions on the hopes that if we were to come to you over the course of the next years, you know not to be caught off guard if it's a five (5) year one-hundred percent (100%). Quick note,this Council did adopt an application that is still in full affect. We wouldn't do anything more aggressive than what the project qualifies for. The traditional style of abatement is still doable and feasible, but a more aggressive style is now possible. Committeemember Oliver Davis asked, Would there be some sort of timeline for projects or developers and would there be rationale given to which way a project decides to go? Mr. Pawlowski answered, Absolutely. That makes sense and we can do that, that largely comes from the application. We typically don't look at these aggressive tax abatements unless the project is pretty sizable. Specific criteria need to be met to qualify for these aggressive abatement options. Councilmember John Voorde stated, Under the old formula, it was spelled out that the repay would go back into the TIF fund. We have to be mindful that there's no more money coming in until it's all over. Mr. Pawlowski replied, Correct. The TIF assumptions for those years related to that project would stay static. But again, in the current case, you see a percentage creeping into the TIF each year. In this case, it would be empty for three (3), five (5) or however many years but in year six (6) you'd have the full amount in right away. That actually ends up being a better deal for us than if in the first year, $800 thousand or so goes out of the fund right away. It's clear we wouldn't want to fund every new project like this, but it offers an option for larger projects with better criteria. 2