When Re-Thinking Main Street, It's All About the Money

At last night's Complete Streets Committee meeting, the talk was all about how 20 percent of the project can be financed through grants, donations and assessments on downtown properties.

Matt Walsh, the city’s assistant for special projects did an excellent job in his presentation.

I’ve put together some of my ideas on how the financing for this project can come together. So without further ado here are my thoughts on financing the Complete Streets Improvement Project. 

As stated in the grant the city will be responsible for 40 percent of the total cost, $3.14 million. That amount has been divided into two parts, 20 percent or $1.57 million to be paid through a general obligation bond and 20 percent to be paid through various means, such as impact fees, a special assessment district, donations, and a tax increment finance (TIF) district.

Many of you know my feelings regarding the current method the city uses to extract funding for projects utilizing TIF districts. If not, let me reiterate them here. 

Our city takes the increases in assessed value of a project and sequesters all the taxes generated by that new value and uses it to pay for costs associated with the project for up to 20 years. The way Concord structures their TIF districts it is possible that a new project will not yield any new tax revenue for the city, schools or county for the duration of the TIF, 20 years.

So let’s take a look at a project that starts with a value of $1 million dollars and at its completion has a value of $10 million. The assessed value of $1 million will continue to pay the city, school and county portions of the taxes assessed against the property and will continue to do so after the project is completed and assessed at the higher value. It is the additional $9 million in assessed value that diverts tax receipts to costs associated with the project. 

All added value, in this case $9 million, is used for project costs and maintenance. So using 2011 tax rates that would mean that the city portion taxed at $8.72 per thousand would yield $78,480, the county portion taxed at $2.90 per thousand would generate $26,000 and the school portion at $10.39 would be $93,500 to pay for the costs associated with the project. A total of $197,990. 

This is where I have difficulty supporting the city’s use of tax increment financing.

Almost $198,000 generated in new taxes and not one penny goes to support city services our property taxes are paying for. Not one penny to stabilize or reduce the taxes we pay. Not one penny to pay for the tens of millions of dollars in deferred maintenance costs our city has accumulated.

My bottom line has been that taxes generated by an enhanced assessment by the new value of the project be divided so school and county taxes continue to fund those entities and that the city portion can then be divided in half. Fifty percent to be directed to the general fund to support city services and 50 percent to pay down the debt service for the new project.

In the example above, that would mean that $39,240 would be used to pay for city services and $39,240 would be diverted to pay for costs associated with the new project.

So here’s my proposal for funding the Complete Streets Project:

First, I think it is only fair to split the remainder of the costs of the project after impact fees, donations, and outside financing evenly between a general obligation bond and the downtown buildings impacted by this project. 

So if $2 million remains to be funded after grants and donations, the general obligation bond would be for $1 million. The remaining $1 million would be paid by establishing a special downtown assessment district. That means that those identified in the grant as receiving the greatest financial gain from this project would be responsible for more then city property owners as a whole.

Here’s what I think is an interesting catch to my funding formula. Because I would not be establishing or expanding a tif district I would suggest the following: 

As building values increase, I would take half the increase in the city portion’s of the taxes and use them for services the general fund supports. The other half of the increase of the city’s portion I would use to mitigate the fees the special downtown assessment district pays. So as assessments increase and greater tax revenue is generated the special downtown assessment district would have their payments mitigated

I think this is fair for a number of reasons. 

First the creation of the special downtown assessment district would recognize that those who we are told would derive the greatest benefit in the Main Street project would also carry the larger financial responsibility in relation to the community as a whole. 

Second, it would be a motiving factor to encourage landlords to redevelop empty space in their buildings. By enhancing the value of their buildings and attracting new tenants, their special assessment diminishes.

And third, by attracting new tenants and collecting rents on previously empty space they are able to increase their revenue. 

This is a way to avoid another tif district. It allows new tax revenues to continue paying for city, school and county services and obligations. It is a way to fairly share the costs associated with this project. It allows an infrastructure and street beautification project to truly have a positive economic impact on our community and to move forward without financially over burdening our community.

And here’s where the rubber meets the road.

If the Complete Streets Program is truly an economic generator, as stated in the grant and the Re-Thinking Main Street report, then the new taxes that we are told will be generated by the increase in the value of the properties on Main Street should to go to help pay for the tens of millions of dollars in defrayed costs for road maintenance and city services. New taxes generated as a result from the improvements to Main Street should not be rolled over for building improvements or be allowed to be deferred for five to nine years.

The only way I believe my proposal for financing doesn’t make sense is if the downtown landlords, merchants, city council and administration are not confident the Complete Streets Project will meet the economic goals outlined in the grant application. And if that is the case then we really need to consider whether we should be moving forward with this project.