This is an example of how TIF districts can fail and leave the public with a big bill effectively subsidizing development. The stormwater work needed to be done, but unfortunately because of a lack of insistence in smart growth principle citizens will likely end up pay the bills instead of those that profited from the development.
As City Administration and Finance staff have recently been reviewing the status of the various TIF Districts in the City, one thing I want to point out for informational purposes, relates to a likely shortfall of tax increments to be collected to cover the costs associated with the construction of stormwater improvements back in 2002, at the time this area was being developed.
By way of background, back in 2001, when the area was proposed for development and the TIF District was being considered, there were concerns expressed to City staff by both County Board members and neighborhood property owners regarding stormwater runoff issues in the Rose Harbor area. As a result, the City agreed to construct a stormwater facility south of 15th Street SE, and placed it in the 2002 CIP with a proposed cost of $300K. In reality, over $460K was expended for the stormwater improvements. The funding source was an interfund loan from the Flood Control account to the TIF District # 20-1, with collected tax increments used to reimburse the Flood Control account.
TIF District # 20-1 is a housing TIF District, which consists of 21 single family dwellings in Rose Harbor Estates, and the duration of which can be up to 25 years. At that time, staff felt that there may not be enough tax increments collected over the life of the district to cover all the stormwater related costs, but we didn’t have a good grasp as to how much we may be short, because at that time, the Legislature was making some tax class rate changes, and the market values of properties were escalating pretty rapidly.
Subsequently, the market values have flattened out and the city also has 10 years worth of tax increment collection behind us to help give us an idea of how much we may be short. Based upon our most recent amortization schedule calculations, it appears that there will be approximately $230K that the TIF District will be short at the end of its duration in 2028. This is 16 years out, but I wanted to make sure it is “on the radar” so to speak.
At the end of the TIF District duration, the City will likely need to transfer funds from a source such as the Stormwater Management Enterprise Fund to the TIF District, to cover the remaining portion of the interfund loan from the Flood Control account that funded these improvements back in 2002.