Wednesday, August 18, 2010

Anderson Meadows TIF – What I Really Said

The Board of Education and Administration of Hilliard City Schools has been paying a great deal of attention to a residential development in the City of Hilliard called Anderson Meadows, which is being planned for the northeast corner of Roberts Rd and Alton-Darby Rd. Part of this development would be single family homes and the rest would be multi-family housing, similar to the Tremont Club on Davidson Rd.

The Hilliard Northwest News covered the City Council meeting this week during which this development was discussed. However, their story didn't adequately describe the situation, in my opinion.

It's not that the development itself is of particular concern; it's that the City of Hilliard is asking the developer to front the cost of the realignment of the Roberts/Alton-Darby intersection, with the promise that the developer will be reimbursed through the redirection of property taxes that will be collected on this property.

Such an arrangement is called Tax Increment Financing, or a "TIF."

That may sound like a reasonable way to finance this road project, until one takes note that the property tax revenue the City would be redirecting is not the City's revenue in the first place. While the City of Hilliard does collect a small amount of property taxes – about $50 per year for each $100,000 in market value – the City's primary revenue source is the income taxes paid by people who work in the city limits.

However, property taxes are the key source of income for the school district, which receives about 64% of our property tax dollars. The townships and county agencies, who collectively receive about 30% of our property tax dollars, also receive most of their funding from property taxes.

So if this piece of property were appraised at a market value of $10 million (I don't know exactly what the post-development value will be – this is a guess for illustration purposes only), if 75% of its property taxes are redirected via a TIF, the City loses $5,000/yr of property tax revenue, but gets a significant new piece of infrastructure (the road realignment) for free.

However, the school district would lose out on $150,000/yr in property taxes – money that should go towards the operation of the school district, but would instead be applied to the cost of this road construction project.

The first draft I saw of the proposed TIF for Anderson Meadows would have redirected 75% of the property taxes to the TIF. This 75% is a magic number. The Ohio Revised Code 5709.40(B) requires a municipality to gain approval of the School Board if the TIF is for a residential development and the amount is more than 75%. But up to that limit, the City is allowed to redirect however much it wants regardless of the wishes of the School Board.

After hearing objections from both the Norwich Township trustees and the Hilliard School Board, a second version of the TIF was drafted: one that would keep the school district whole – a so-called "Non-School TIF," but which still would have redirected funding away from the township and county agencies.

But at its recent retreat, the City Council members came up with other variations. One that seems to be of interest to them is to create two TIFs, one for the single-family home portion of the development, and one for the multi-family home portion. The single-family portion would get a non-school TIF (no redirection of school taxes), while the multi-family portion would have a TIF applied that redirects 75% the funding for the schools, the township and other agencies.

The logic of this is that the single-family homes are likely to house school age kids, so the property taxes should be allowed to flow to the school district to help fund the cost of educating those kids. And since there will not likely be any school age kids in the multi-family section, a redirection of school taxes for this section is apparently seen by the Council members to cause no harm.

But this is flawed logic.

It doesn't matter whether or not a new piece of real estate generates school age kids. The point is that it generates revenue that should be used to ease the property tax burden on the rest of us. In fact, the best kind of new real estate development is the kind that generates property taxes but no kids – such as commercial developments or retirement communities.

Let's make it clear: This road realignment project, if it goes forward, is going to be paid for with taxpayer money. The only question is which elected officials are going to get the blame for raising your taxes. The use of a TIF allows the Mayor and City Council to shift the burden to the School Board and the Township Trustees.

Norwich Township Trustee Chuck Buck told the City Council that he and the other Norwich Township Trustees feel that TIFs are bad public policy, and don't think they should be used in this way. Instead, he suggested that if the City wants this road project, they should put a bond levy on the ballot and let the Hilliard taxpayers decide if they were willing to pay for it.

I think this is a wise suggestion, and I completely agree with Mr. Buck.

Council President Brett Sciotto replied that it was the Ohio General Assembly which granted municipalities the right to use TIFs. Mr. Sciotto is technically correct, but that doesn't mean the City should use one in this manner.

So, bottom line:
  1. Do I personally oppose the development of Anderson Meadows? No.

    I am a real estate investor myself, and do not wish to impede the ability of a developer to make an honest buck in this horrible economy. But that development project cannot profit the developer at the expense of the taxpayers of this community, at least not without their consent.
  2. Do I think this road alignment project is a good thing? Yes.

    I've lived west of this intersection for more than 20 years. It will be nice to see the 'jog' finally taken out. Too bad it won't be a roundabout – it's a great place for one.
  3. Do I think it should be paid for by redirecting money away from the school district, the township, and other county agencies, forcing those political entities to be the 'bad guys' by asking voters for more tax money? Absolutely not.

    Each of these political entities has its role in our community, and depends on the funding sources created by law to carry them out. It is not the role of the school district to fund road improvements.
If you agree with me, please let Mayor Schonhardt and the City Council know as soon as possible, as they will bringing this resolution back before the council at their meeting next Monday, August 23 at 7pm. Better yet, come to their committee meeting at 5:30pm, prior to the full Council meeting, and let them know in person how you feel.