Herschlag: Exit 17 - The Good, The Bad, The Ugly

It has been a while since I have written about tif (tax increment finance) districts, so a quick refresher. While property owners in tif districts do pay the same property tax rate as you and I do, their taxes - unlike ours - go to pay for improvements that make it affordable for the development of the project to move forward.

Only a small portion of the property tax is the city’s portion, yet the city is allowed to capture (confiscate) all of the new taxes to pay for improvements. In Penacook, only 31% of your taxes pay for city services, while 54% is designated for the MVSD. And unlike our taxes which are used for the common good, tif district taxes are only used to pay off debt, maintenance and operations within the tif district.

The Good

There will be new commercial development at the intersection of Whitney and Hoit Roads. A grocery store (Market Basket) a liquor store and more to come. This is a substantial development that even in its earliest phases will generate significant new property taxes. Doing some rough math and basing that on an average of $600,000 a year property taxes for 23 years (more on that later) that would generate in just the city portion of the tax rate, $186,000 per year or $4,278,000 over 23 years.

While not enough to cover the initial debt, the anticipation is for significant additional development that would boost the total taxes to over $1 million per year. That would leave the city portion with $310,000 per year (based on a $1 million assessment). Even if that was only available for the second half of the payment period it would generate over $5.6 million dollars.

And if the debt payments were spread out over 30 years, using 15 years at $186,000 and 15 years at $310,000 that would yield $7.4 million.

Here’s the really good news. Using this model the school district would receive 54% of the total taxes paid. If total taxes were $600,000 that would mean $324,000 per year for the first 15 years and at $1 million, for years 16 - 30, $540,000 per year. During 30 years the MVSD would receive $12.96 million.

The Bad

This is what the city council will be voting on at their Monday March 8th meeting.

In order to pay for the anticipated $4.78 million dollars on road improvements for the Exit 17 project the city is proposing to expand the Penacook Village tif district from 47 acres to 242 acres. The pro forma for the district shows that the debt won’t be paid off until 2044.

But that isn’t the full story. The city as they have done in the past is proposing to collect all new taxes from the new development. This means that not only will the city portion of your taxes be used to pay for the improvements but taxes that should be going to the MVSD will also be utilized.

And looking at the pro forma, some of the revenues collected from our taxes will be set aside for a working capital fund balance. In 2044 it is projected that there will be $4,586,590 in the fund. This money is not being used for the current project, but is potentially to be used for a new river front park, renovating an existing one and to extend Whitney Road to Sewalls Falls Road.

These are all worthy projects, but should they take precedence over funding our schools? While no revenue is lost, none is gained. School costs (like all costs) increase every year. Without new or additional revenues, those that are already paying will have to pay more.

Or should we not put aside that $4.5 million. Instead waiting for additional development to occur that will generate additional tax revenue from the city’s property tax portion to pay for future projects?

The Ugly

The downtown tif district has increased in size from approximately 12 acres to 21 acres. Will it be expanded to support additional development for Storrs Street? The city has already invested $22,944,840 of which $9,672,000 were tif funds. And the city granted tax relief (RSA 79E) to three projects inside the district.

The Concord Lumber Yard tif has been extended from a 20 year tif to a district with no closing date. While nearly a million dollars is returned to the city and school each year approximately $600,000 is left in the district. This tif district started out as an $850,000 tif and to date the city has invested almost $7.8 million while expanding its size and scope.

Remember that the city is proposing to increase the Penacook Village tif district from the current 47 acres to 242 acres. And remember that the increased assessed value of all new development that occurs on these 242 acres can be confiscated by the city to pay for projects in the tif district. They can use the city portion and the taxes that should be going to our schools.

Is There Hope

This needn’t be framed as an either or proposal. There are options. We can create a tif district using only the city portion of the newly generated taxes. We can look to impact fees that are proportional.

Fees that can be paid over time, not up front. We can explain to developers that the reason we would like to charge impact fees is that it is important for all of us to contribute towards the public good. Impact fees should not be punitive and they should not place an onerous burden on a developer. They should be part of the cost of doing business in our community. Sharing responsibility to make Concord an even better place to live, work and do business.

But even without new impact fees, this project can move forward without taking the school district’s funding.

The state of New Hampshire allows communities to capture all new taxes (RSA 162K) in a tif district to pay for improvements that make it affordable for a project to move forward. But just because you can do something doesn’t mean you should. And with the Exit 17 project, not only shouldn’t the city be confiscating the school portion of our property taxes, they don’t need to.