School district rejects tax increment funding proposal; county seeks hotel, greater benefits
Fillmore City officials twice last week failed to persuade other local governments to sign onto a $2 million tax incremental financing proposal meant to fund infrastructure development inside a new 60-acre community reinvestment area (CRA) on the city’s north side.
County commissioners said they wanted to work toward a better deal for the county before signing an interlocal agreement with Fillmore. Millard School District’s board members—they hired an outside consultant to analyze the city’s proposal— couldn’t even muster a motion to hold a vote on the plan at their regular meeting last Thursday.
Fillmore’s proposal calls for reimbursing as much as $2 million in sewer infrastructure over 20 years to a developer who wishes to build a new travel and fuel center as well as a possible hotel and RV park where a Chevron gas station now sits along I-15 and Cedar Mountain Road.
The developer would install a new sewer line underneath the highway and pay for it up front in exchange for a 75-percent break on property taxes over two decades.
Fillmore offi cials see the op- portunity as a means of spurring economic development and expanding its tax base while costing other local taxing entities—the county, the school district and fire district—little to nothing in exchange. County officials aren’t so sure about the idea. School board members are sure they don’t want any part of it. Only the fire district so far has signed on.
Fillmore Mayor Mike Holt told city council members last Tuesday the developer is already close to pulling out of the project since the county and city don’t seem to be able to quickly come to terms.
Commissioner Dean Draper tried to slice through some of Millard County’s concerns with the project—which are plenty.
Fillmore in better financial shape than county
First, he suggested that Fillmore’s finances are in way better shape than the county’s.
“Millard County is operating on a deficit budget this year. We borrowed $1 million from our capital funds to create and fund our budget this year,” he said, before detailing the impact of falling property tax proceeds from the area’s largest, centrally-assessed taxpayers.
The Intermountain Power Project, long the county’s largest taxpayer, shed $103 million in taxable value this year all by itself, punching a fat hole in the county’s revenues that is likely to get worse before it gets better.
Draper then detailed the riches overflowing from the city’s coffers, fruits of Fillmore’s stoic frugality. The city’s sewer fund has $2.9 million in it; its electric fund has $13 million in it, Draper said.
“You have $14.362 million available that don’t have any restrictions on them. The main feature of this project is to take that sewer line underneath the freeway, so that it can foster development there,” Draper explained in professorial fashion, punctuated at turns with recitations of current state statute. “That estimate is $1.2 million to $1.5 million to torpedo that (sewer line) underneath (the highway). That $2.9 million in your sewer fund says that that’s something to us that can be undertaken by the city itself.”
Then there is the question of benefits.
A county analysis of the proposal showed the county would receive only $2.94 in benefits for every $1 it invested in the tax breaks, Draper said. MSD would get only 33 cents per dollar, though strangely its share of the tax incremental financing represents the lion share of the proposed infrastructure funding, some $1.175 million over the 20-year period, which might explain the cold shoulder from school board members. The fire district would gain a whole 15 cents per dollar invested.
Fillmore, on the other hand, would make out like a bandit, Draper suggested, earning $8.02 per dollar invested—to be fair, though, the impact to city services of the project would also be greater than on the other taxing entities.
Possibly chief among the concerns and questions raised by both county and later school district officials was why Fillmore settled on property tax breaks as a means of financing the sewer project when so many other options are available to them.
TIF as a first option?
Draper said the city could easily charge future developers impact fees that would recoup any investment the city undertook itself. City officials later detailed to the Chronicle Progress the myriad reasons why this would be a bad idea—it would be financially risky, for one, and it would set a terrible precedent, meaning every future developer who approaches the city might expect a similar guarantee of infrastructure assistance.
Holt reminded Draper during the discussion last week the county isn’t in the infrastructure business for similar reasons.
Back to the county’s concerns, Draper also mentioned other alternatives for the sewer line’s financing, including community block grant funding, Community Impact Board loans and grants, or through new bond issues.
He and other officials also noted the state has multiple pots of new funds available thanks to federal COVID relief—$1.4 billion through the American Rescue Plan Act State Fiscal Recovery Fund; $136 million in the Coronavirus Capital Projects Fund; and, $1.1 billion through the ARPA Local Fiscal Recovery Fund, which is specifically earmarked for local governments across the state.
State legislators and officials with the Utah Association of Counties have made clear recently their willingness to entertain applications from municipalities for COVID relief funds specifically targeted toward sewer and water projects. State Sen. Derrin Owens, who represents Millard County in District 24 happened to be at last week’s commission meeting and reiterated the state’s desire to fund big water and sewer projects—he stayed for the Fillmore CRA discussion and said later he enjoyed the exercise in democracy.
A better approach?
Finally, Draper said he believes the best next step is to gather officials from the various taxing entities together to hash out the proposed project financing and come to an agreement more equitable to all.
“This is not a desire on our part to thwart growth. We would love to cooperate, but it’s got to be considered in light of enabling things that come that benefit the county,” Draper said.
The commissioner suggested the county could go along with the financing proposal if the city and developer agreed to certain graduated steps— for example, the county would contribute a lower percentage of property tax funding during the first five years and increase that contribution in the following years if the developer successfully reached agreed-upon benchmarks.
Draper said the county, for example, is more in favor of a hotel development as a first phase, though the initial proposal calls for the fuel center first and hotel possibly later, something Draper referred to as “nebulous” since any hotel development didn’t appear guaranteed by the proposal.
Political pressure
If Fillmore officials were disappointed with how the county commission meeting went last week— and they were—then they were really deflated after their proposal was shot down by the school district.
Ironically, the consultant hired to report to the school board, D. Burke Jolley of Park City, warned school district officials last week that among the less than desirable outcomes of voting for or against such a project was the political pressure officials might encounter as a result.
“One of the most difficult aspects of any tax increment financing proposal are the political consequences of supporting or not supporting the project and the relationships you have with other elected officials,” Jolley said. “I’ve been involved with a lot of projects and there’s a lot of pressure that can be brought on school board members by those involved who want to see that project happen.”
Jolley said school board members are in an unenviable position and that money spent on tax breaks can easily go toward higher priority items.
The district has debts of about $8 million, for example. And education funding per pupil in Utah is bottom of the barrel— the state ranks 50th in the country, beating only Idaho in a ranking of all states and Washington, D.C. Jolley wondered whether board members would ever find themselves in a position to ask Fillmore City to help out with construction of a new elementary school or some other costly project. Not likely, meaning such tax increment proposals are often a one-way street when it comes to school districts.
Asked for his reaction Monday, Holt said he thinks school board members made up their minds before the meeting and that generally the officials “don’t know how these things work.”
One MSD board member who represents Fillmore, Adam Britt, said he contacted several businesses who could be impacted by the project, including existing RV parks in the city. Owners told him they hadn’t even heard of the project until it was in the newspaper, Britt said. They also wondered where the city was when they needed help financing their own business plans.
Holt said he’s heard from those business owners, who he described as “stirred up.” Still, the mayor says he is just trying to do his job, expand his city’s tax base, spur growth and assist the other taxing entities with new revenue at a time when it seems property tax streams the area has long relied upon are shriveling.
“All I am trying to do is get some growth into town, get some tax base built up so when we start losing IPP we have something in place to help out,” he said.
