Archive for Thursday, January 25, 2007

Pittsburg uses tax increment financing district for commercial growth

January 25, 2007

Eudora isn't alone when it comes to finding ways to entice commercial growth.

The city also isn't the only one in the state to use a tax increment financing district as a potential lure.

For the past six months, Eudora City Administrator Cheryl Beatty and Scott Michie of Bucher, Willis and Ratliff have labored to make the presentations and reports necessary to establish a TIF district in Eudora.

The target for the district runs from the eastern edge of the city to Kansas Highway 10.

If established, the TIF district allows the city to bond money needed to create specific pieces of infrastructure necessary for development. Once built, taxes generated from businesses within the district would be frozen at a base year. Any additional taxes brought in by the businesses after that year beyond the frozen mark will be used to pay off the bond.

Beatty gave a brief update on the project Monday to the Eudora City Council.

In February, Beatty will present a final blight study to the council for them to consider.

By accepting and deeming the selected land blighted, Beatty could go ahead and start the necessary bonding mechanisms to officially establish the district.

Beatty told the council the bonding agency required the certified blight study before proceeding.

Gary Anderson of Gilmore and Bell is the city's bond attorney for the project.

"We've just had some preliminary discussion. We haven't gotten very specific," he said.

Anderson's company helped draft the legislature necessary to establish a TIF district.

With the blight report pending, Beatty assured the council the project is on the fast track.

"It's happening faster than normal for processing," Beatty said.

While Eudora looks to make use of TIF money, the city of Pittsburg has already established a district.

Pittsburg City Manager Allen Gill called it a success for his city, but it didn't always come smoothly.

TIF in action

When Pittsburg began the TIF process in 2003, it was relatively unknown and little used within the state, Gill said.

"One of the reasons we did it was because it was totally new to Pittsburg," Gill said.

Throughout the process, the city tried to educate the public because the process was so new, Gill said.

"We think it's been successful," he said.

The city originally wanted to develop a 10-acre plot near the city's entrance to spur growth.

"We targeted the site we did because it was prime location at the entrance to Pittsburg," Gill said.

Early into the process, plans changed, Gill said.

"We started looking for a 10-acre site for a major retailer," Gill said. "We ended up with a 28-acre site with an anchor and a strip center and free standing stores and junior anchors."

The "anchor" refers to one major business around which the rest of the site developed.

In Pittsburg's case, the anchor was Home Depot.

The route Pittsburg took in establishing the district differs from the route Eudora is taking. Pittsburg didn't need to draft a blight study because the district fell into a state enterprise zone.

"We skated by on that one," Gill said.

Even without the study, the developers knew the area was contaminated. Early in construction they found out just how bad it was.

Workers found the remnants of an old lead smelter. The remains, including waste pits abandoned by the operators of the smelter, meant much more hazardous environmental material than the developers had planned on.

"I wasn't entirely sure those people realized what they were sitting on top of," Gill said.

Environmental issues aside, the project hit a different stumbling block because property owners couldn't agree on a price, Gill said.

The difficulties forced the city to reconsider the project midway through construction.

"We did amend the TIF late in the process to recoup that extra cost," Gill said.

Pittsburg officials supplemented the TIF funds with a Transportation Development District Grant to build a road that expanded beyond the TIF district.

"We wanted it to be a public street so that we have unquestioned access to 40 more acres that lie next door," Gill said.

Even with the difficulties during its creation, Gill classifies the district as an ongoing boon for Pittsburg.

"The project has certainly become an asset to the city," Gill said.

The project officially finished in 2005 and Gill has watched two years worth of revenue flow in.

"The amount of sales tax being produced was just about 10 times what we had before," Gill said.

Gill said he used 2003 as a base year.

The district has also spurred development elsewhere in town, he said.

"It would appear everyone was afraid the new shopping mall would pull businesses from the older part of own," Gill said. "It appears we've drawn enough new business that there's enough to go around for everybody."

Given current numbers, Gill anticipates the city's bond to be paid off within 14 years.

Despite Pittsburg's apparent success, TIF districts aren't for everyone, Gill said.

The districts should be used as a development tool for blighted areas to provide much-needed infrastructure, he said.

"It helps level the playing field for older blighted sites, and helps pay back those extra costs," Gill said.

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