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.

12 comments:

  1. Looks like another fee / tax/ tax shift coming with more TIF Spending by the City for a RESIDENTIAL development and I wonder who benefits from this?

    Now it was reported that board members were at the lastest Committe meeting addressing this catastrophe of a decision.

    There is a meeting August 23rd according to the paper, which we know is hardly ever correct, but anyone who is concerned about their taxes, safety force coverage, schools, should be at this meeting. The best response in the paper is that it is the schools fault because they dont control what Columbus does. Duh, the board does not control any of this, simply can make their opinion known.

    Call your council people, show up at council and simply say you dont want another tax increase for the benefit of well heeled political donors.

    There are hundreds of homes available for purchases due to current economic conditions.

    Perhaps the HEA leadership could get off their duff and be there and show some support for the district as well as some of you other naysayers who are "worried about the kids"

    If nothing else send an email today that you oppose this to council NOW.

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  2. I do not see mention of the $3,000,000 state of Ohio grant for the road improvements that is at stake here which is time sensitive. It is my understanding that there is not enough time available for any kind of vote. Without the grant, the improvements do not happen under anytime soon under any circumstances...and our community collectively could have this extra $3,000,000 burden to carry in the future. Seems to me this fact is not being given much consideration in this whole deal. It's a $3,000,000 "present" from our state funds towards something most everybody...school district & city of Hilliard included.... believes is a needed improvement in the area. It appears to me the school district would benefit greatly by this improvement as it is nearly adjacent to the new Bradley High School. As a Hilliard citizen I feel the state grant for community improvements hanging in the balance here us a VERY significant consideration.

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  3. M. Smith: thanks for commenting.

    You are correct that neither the Mayor nor the Council has made mention of such a grant. I certainly didn't know it existed.

    But that doesn't change the fact that in the end, this form of financing shifts the burden of funding a road improvement over to the school district, and will eventually cause the school district to ask for more tax money.

    By your logic, it would be reasonable for the school district to ask the City to help fund the construction of a new school, or to help pay teacher salaries. However, Ohio Law gives the City the power to just take this money from the school district - it doesn't even have to ask.

    If the City needs the school district to play banker to secure financing quickly, then I'm sure a deal could have been worked out to repay the school district over time. Or the City could have crafted a deal directly with the developer and left the school district and township out of it.

    The deeper question is why the City of Hilliard annexed more land for residential development in the first place. Just as the school district needs there to be more commercial development that generates revenue, but no kids, the City needs commercial development to generate jobs and income taxes.

    However, new residential development creates a new cost stream for everyone, City, township and school district alike.

    So this question would have never arisen had the City not made the choice to do this annexation.

    To have one political entity grab money from another to in order to fulfil its duties is a zero-sum game.

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  4. I wonder if M Smith could point us to any further information on the grant money, as I find it odd that the Council did not mention it - quite odd, actually. I am aware that a lot of so-called "stimulus money" is available for road construction but to not have the City use that as a selling point is strange.
    As far as residential development, the City obviously has some ulterior motive in playing nice with the developers, since they don't stand to gain much income from this. It is still a mystery to me how the school districts get no say in TIF's which cost them funds - just doesn't seem right but it IS nice to see that the Board was at the meeting to let their feelings be known (Interesting that the NW News mentioned that school district folks attended but did not expand on WHY they were there or what they said - nice reporting!) I agree with Mr Buck that residential development should never be the beneficiary of a TIF anyway - businesses, which will contribute jobs and payroll taxes are one thing, but residential? Makes me wonder if someones palm is being greased, either now or in the future?????

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  5. Hillirdite:

    Excellent point - why indeed would the City not bother to mention that they have $3 million in grant money riding on being able to the rest of the funding from other sources?

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  6. From todays This Week article on the meeting:

    "Paul Coppel of Schottenstein Homes said he approved of some of the TIF options but needed council's approval soon to qualify for a state grant."

    Would we assume he is talking about the $3 million?

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  7. That would be my assumption.

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  8. Paul,
    There is a TIF in my community and school district which has led to a number of discussions on the topic. It's been my understanding that the '75%' number you refer to applies only to the increase in assessed value above and beyond the pre TIF assessed value. So all gov't entities will still collect property taxes on the pre TIF assessed values as if the TIF never existed. Then for any increase in assessed value, 75% of taxes collected on it will go to pay for the improvements and 25% will go to the gov't entities just like the other property taxes.

    It sounds to me that while the school district won't get the full amount of taxes had the development been done without a TIF, it would get some amount more than it does now. (Current taxes + taxes on 25% of increase in value)

    It doesn't change things with respect to your main point that the city is diverting tax revenue away from the schools with little to no say in the matter.

    Here are a few links on TIFs. The first one has a good explanation of how the 75% number works, but is currently down.
    1. http://ohioline.osu.edu/cd-fact/1559.html (view using google cache)
    2. http://www.development.ohio.gov/cms/uploadedfiles/EDD/OTI/TIFSummary.pdf

    On a side note, our TIF was for 100% which required school board approval. The other TIF entities (two cities and a township) agreed to give the schools just over $2M to 'make them whole' and be sure the TIF would get approved. However, it is two years later and the money has yet to materialize.

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  9. Eric:

    Thanks for the comment:

    As I mentioned in the main article, the workings of a TIF is described in section 5709.40 of the Ohio Revised Code.

    I think it's interesting that paragraph B of this section says:

    The legislative authority of a municipal corporation, by ordinance, may declare improvements to certain parcels of real property located in the municipal corporation to be a public purpose. Improvements with respect to a parcel that is used or to be used for residential purposes may be declared a public purpose under this division only if the parcel is located in a blighted area of an impacted city.

    I'm sure most of us would associate the term "blighted" with an area of a city which has deteriorated into a slum full of crack houses and rats. However, the law (ORC 1.08) opens a big wide door that allows a neglected farm homestead - which is what this parcel is - to be defined as a blighted area as well.

    As I think about it, it would be a sly maneuver for a developer to make sure that when he buys land for future development that it has structures on it that could be allowed to deteriorate into a condition that allows it eventually to be called "blighted." I expect the late Glenn Anderson would be incensed that the farm he spent a lifetime building and loved has come to be called this.

    On your other point that only the increase in assessed value is subject to a TIF: Because this parcel was farmland, it was taxed under the Constant Agricultural Use Valuation program, which reduces the value recognized for taxation to 3.75% of the appraised value. In our neck of the woods, raw farmland generates about $17/ac in property taxes. I don't have a problem with this, but we should recognize that Ohio's school funding system is also a farm subsidy program.

    So because the current valuation is so low, and the taxes collected so small, nearly all of the new value of the property will be counted within the TIF.

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  10. Was not able to go to the council meeting Monday at 7pm but did attend committee mtg. No none there except Twnshp trustees and developer. Developer was all smiles, I wont speak for the twnship

    Looks like schools and twn ship, and other entities will not remain whole with 10 75 split proposal
    I believe the ducks got run in a row ahead of time, not suprising.

    Paul, if you have any updates can you let us know

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  11. Was listening to a little of MSNBC's "Morning Joe" this morning and it dawned on me how the teaching profession has experienced a "perfect storm" over the past few decades.

    First, as Lawrence O'Donnell pointed out, forty or fifty years ago women didn't have a lot of options in the workplace. So instead of becoming lawyers or physicians you'd have these ridiculously overqualified teachers. Second, on the parochial front you had all these dedicated religious sisters teaching. Third, there was the breakdown of the family resulting in kids not having parental pressure to do their homework. Fourth you had the unionization of teachers in the '40s and '50s, which were designed to look after themselves and not the children.

    Put all those together and voila, it's no wonder we're in the fix we're in today.

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  12. I understand why young people want to go into teaching - our eldest daughter is a teacher. There's a noble purpose in teaching, and it's easy to develop romantic visions of a bucolic classroom with smiling eager kids. I've often thought that I'd like to be a teacher myself.

    I volunteer a couple of afternoons each week to work with 3rd graders. One afternoon is at an elementary school in the Hilliard School district, and one in one of the poorest, least educated neighborhoods in Columbus Schools.

    It can be heartbreaking. Yesterday, I worked one on one with a young man who had reached the 3rd grade in our school district, but couldn't read. I have no training in education or child development, but I can't see how it's a good thing for this kid to have been advanced to the third grade without being able to read.

    Or how it is fair to the other 20+ kids in the room that a highly skilled and dedicated teacher must give extraordinary attention to this one child who is falling further and further behind.

    It's not the kid's fault. In both classrooms where I work, there are kids have just never been read to by their parents, probably because the parents themselves cannot read very well, if at all. I had a kid come up to me yesterday to brag about how many levels he had reached in some video game. Meanwhile, he could neither read fluently, write legibly, nor do simple arithmetic.

    The labor issue is something very different. Do teachers work hard and under incredible stress? Spend a couple of afternoons in classroom with me, and I think you agree that it's a tough job. Are teachers overpaid? As my friend Marc Schare says, some are overpaid and some are underpaid, and the current system gives us no tools to fix either problem.

    My concern is simply sustainability. I think most of would agree that as the economic tide rises in our country, we would like teacher compensation to rise with it. There may have indeed been times in the past when teachers were being left behind economically.

    But we're in different times right now. The tide may not rise again for a while, and indeed it may still have some going out to do. Until we know for sure which way things are headed, we need to go into a holding pattern and protect both the great school system we have, and the economic health of the people of our community.

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