Herschlag: Bill Pulled To Amend TIF District Rules

As many of you know I have concerns with how tax increment financing (TIF) is used, particularly here in Concord. RSA 162-K allows a municipality to create TIF districts and capture (take) all the new taxes generated from additional development and use it exclusively for the benefit of the TIF district.

After more than 20 years of concerns, the tipping point for me was the city of Concord’s expansion of the Penacook Village TIF district (PVTIF) from 47 acres to 243 acres. The taking of all new tax revenues, not only for infrastructure improvements at the Exit 17 site, but also to fund a city park and to subsidize a $4.5 million capital fund for future development in the PVTIF.

It is important to remember that the captured taxes from the PVTIF are not only from the city portion of your tax bill, but also taxes that would be used to fund school and county services.

It occurred to me, the only way to provide school districts and counties the opportunity to have a say in how their tax revenue is being spent is to amend the state law that governs TIF districts, RSA 162-K.

After speaking with a number of state representatives and senators, discussing my concerns and making suggestions on how the statute could be amended, a bill to amend the state law was submitted. The proposed amended statute would have given school districts and counties the authority to negotiate with a municipality. In order for the municipality to use (capture) school and county taxes for a development project in a TIF district, the school and county would be able to determine the percentage of their funding — from the increased assessed value in a TIF district - they would be willing to share with the municipality.

Not being entirely naive, I anticipated there would be strong opposition. The ability of a municipality to capture all school and county taxes in a TIF district without the school or county having a voice to determine how their funding is spent, is a power granted by the state to municipalities that they would be unwilling to cede without a fight.

I had hoped the proposed amended bill would make it to a committee where it would receive a public hearing. Unfortunately it was pulled before it could be assigned to a committee. The reason that was given, there was too much opposition from groups that benefit the most from using your school and county tax dollars for municipal projects. So now there isn’t even an opportunity for a discussion.

The amended statute would have provided schools and counties the authority to determine what (if any) portion of new tax revenue generated by a TIF district, would be allowed to fund municipal projects in the TIF district.

The argument against the amendment is it could stifle economic development. Schools and counties would be allowed to control how much of their tax revenue they would be willing to share from a TIF district.

My argument for; should the school and county see a return on their contribution to a TIF district after the project is completed (and not twenty years after the completion of the project), they would be willing to ensure the necessary funding for the project to move forward.

If a project did not receive additional funding from the school and county and the project could not move forward due to insufficient funding, I would expect the school and county would be willing to share their funding. Why, because a percentage of something is better than 100% of nothing.

I believe the only time schools and counties would be unwilling to enter into an agreement with the municipality is a situation similar to what we have in the PVTIF District. A situation where the pro forma shows no increase in revenue from the development project for the school and county for twenty years. Where in addition to funding infrastructure improvements, school and county revenues are being used for a city park. A park that has no connection to the school or county. A park that will not generate any additional revenue for them. And it has the school and county funding over 60% of a $4.5 million working capital fund for future projects, with no timeline for when additional tax revenue will be available.

This is the amended version of RSA 162K:9(III) I had proposed. Items that are underlined would have been struck from the statute and items that are in bold would have been added.

RSA 162-K:9(III) Before formation of a development district, the municipality shall provide a reasonable opportunity to the county commissioners of any county in which any portion of the development district is located and to the members of the school board of any school district in which any portion of the development district is located to a meeting with the governing body. The governing body shall fully inform the county commissioners and the school boards of the fiscal and economic implications of the proposed development district. The county commissioners and the school boards may present their recommendations at the public hearing.

When a municipality's tax increment financing plan may include agreements with the county commissioners and the school boards in which the district is located to share a portion of the captured tax increments of the district, the county and/or school district shall determine the percentage of their share of the increment that can be captured by the municipality.

During the 20 years Concord anticipates paying back the bonds for Exit 17, the construction of a city park, and a $4.5 million working capital fund, the city will capture over $7.5 million of Merrimack Valley School District funding. That’s funding that won’t be available for education.

With no change to the current TIF district statute, school districts and counties will continue to have no control over how the taxes from TIF districts that are designated for school and county services are spent.