County mulls joining city's tax increment financing plan for project
Fillmore City Council members passed a new ordinance last week designating 60 acres on the north end of town near the on-and off-ramps of nearby Interstate 15 as a new community reinvestment area (CRA).
The city’s redevelopment agency kicked off public plans for the CRA in February, though Mayor Mike Holt said officials have been working for about 15 months on the project.
The city hopes to utilize tax incentives in the form of a 20-year, 75-percent tax increment financing (TIF) deal to spur infrastructure improvements needed before any real redevelopment can start, the mayor said.
The plan, discussed with the county commission last week, calls for public financing of at least $1.2 million for a sewer line extension into the CRA. The TIF financing would end after 20 years—75 percent of various taxes normally collected by participating taxing entities, such as the city, the county, the school district and the fire district would go to the developer—or when the developer collects $2,014,181 in such TIF funds, whichever comes first.
Taxing entities could choose not to participate.
Holt told commissioners a developer identified the location—the CRA centers on the Chevron gas station and surrounding parcels—as a place for a fuel service center during a first phase and possibly a 100-room hotel or 55-space RV center during a second phase. Fillmore has two other similar CRAs in place on the south end of the city, also near the interstate.
According to a presentation made to county commissioners, the total assessed valuation once the sewer infrastructure is in place and at least two phases of the project are built was projected to exceed $13 million.
After completion, the first phase is projected to be valued at $6.1 million. The second phase could come in valued at $8.5 million.
The 60-acre area today only contributes about $11,070 in property taxes on a base value of about $963,000. With significant development, taxing entities should more than recoup their costs and expand their tax base at the same time.
Ryan Lancaster, a consultant with Lewis Young Robertson & Burningham, Inc., a municipal financial advisory and consulting firm working with Fillmore and State Bank of Southern Utah, told commissioners that the county would see no budgetary impact to participating with Fillmore in the TIF financing.
“All the funds from the project come from the development itself,” he said. “And other residents of the county don’t have to worry about their tax rates being increased.
“This isn’t taking the pie that already exists for the county. It is expanding the pie and asking for a portion of that expanded pie….really it’s just a reimbursement of the property tax they are already going to be paying to make their bottom line work,” Lancaster added.
According to the presentation made, the development as planned is projected to bring in $53,000 in new transient room tax money, $904,000 in sales taxes, and $53,000 in property tax during the first 20-year period— that’s ostensibly after the 75-percent tax discount.
The developer expects to spend about $12 million in total during the first phase, investing $2.8 million of their own capital and borrowing $9.2 million from State Bank of Southern Utah. The cost of construction is expected to be about $6 million. About $4.8 million would be used to finance existing debt and $1.2 million would go toward the sewer infrastructure.
Holt said Fillmore has yet to approach the school district with its TIF financing proposal. He said fire district officials are on board with the idea. The county commission only held a discussion with plans to vote on the matter in the future.
Commissioner Dean Draper had some tough questions for Holt and Lancaster at the commission meeting.
Mentioning multi-million dollar budget surpluses reported in the city’s various enterprise funds, Draper asked, “Why would the county want to fund a sewer extension in a municipality?”
Holt said the county wouldn’t be funding it, just merely offering a tax break.
Draper also noted that Fillmore has yet to attract significant development in its two southern CRAs. Holt said the city was making progress and had three years to find suitable projects for those areas.
County Treasurer Sheri Dearden was asked to go over the financing details—she noted that Fillmore, according to projections, would receive far more monetary benefit than any other taxing entity.
“Everyone comes out ahead, but Fillmore City comes out significantly further ahead than all of the other entities,” she told commissioners.
She said Fillmore’s contribution of the TIF was 8 percent, but their revenue from that investment represented 42 percent of total revenues.
Lancaster said the disparity was because the other entities don’t levy the number of taxes the city does. For example, the city’s sales tax isn’t levied by the school district. The city also gets a larger share of transient room tax than the county for hotel rooms inside the city, he said. He added that the city and the county would capture the lion share of the tax revenues from the project.
Draper eventually said he saw why a hotel development and more food options would be attractive to all involved— Pizza Hut and Sonic were mentioned as possible retail tenants. But he said the county had a lot more due diligence to do before a decision could be made.
Commissioner Bill Wright, noting that a similar project is slated for Fillmore’s south side—Love’s plans to build a travel stop—asked why the movement to do a north side project so quickly when the other isn’t even under construction.
Lancaster said the city’s project model provides about a two-year timeframe for completion of the first phase. He added that the low interest rate environment and inflation in the cost of construction materials are making most developers quick to bring projects to market.
Commissioner Evelyn Warnick urged Fillmore to meet with the county’s economic development team to hammer out details, particularly on whether the developer can take advantage of the county’s opportunity zone tax breaks.
Holt later told the Chronicle Progress that the city does plan to meet with the county’s economic development team, but noted the county’s opportunity zone doesn’t provide the sort of financing needed to build the sewer infrastructure—without it up front, the mayor said, the project would not be economically viable.
Holt told commissioners that without the TIF agreement in place—all taxing entities would enter into an interlocal agreement where many of the financing details would be hammered out— the developer may choose to build someplace else. The mayor said the developer owns sites in New Mexico and Las Vegas, but prefers the Fillmore location.
“They can see the potential here, with all the traffic and being in the center of the state. They feel it’s a perfect place,” he said.
The developer in question already owns both the existing Chevron and Texaco stations in the project area. A new fuel center and new retail space would replace the existing Chevron, which has a Subway sandwich shop inside now.
Holt said investing in the sewer infrastructure now to spur this fuel center and possible hotel development could prove lucrative for the city when it comes to attracting more economic development longer term to that side of the city. With the infrastructure in place, developers might see opportunities where none now exists, he said.
