Tuesday, March 13, 2007

Harrison Square, what would it take for me to support the project

Dave Corcoran is a friend of mine. He asked me to determine what it would take for me to support the Harrison Square Project. I think this is a great question and I have considered it for almost a week.

Here is what it would take for me to support the Harrison Square project:

1. The City would have to choose a project other then a baseball stadium. I think there are several better choices and I think one of them should be chosen. The more I think about it the worse the idea of a baseball stadium is to me. I am in favor of spending five million dollars and re-furbishing the existing stadium. I do NOT think that IPFW will be able to use the current stadium WITHOUT a public subsidy.

2. The City would have to reveal their entire financing package. To date they have not even determined:
a. The length of the bonds.
b. The actual number of parking spaces in the parking garage.
c. The revenue splits with the Wizards.
d. The parking deal with Lincoln.
Etc. Their financing package will have to be HONEST and include all costs including:
a. The legal costs to seize Belmost Beveverages
b. All overhead expenses incurredby the City
Etc.

3. The City would have to determine benchmarks for the success of the project. I want them to estabish specific and definable benchmarks for the project. What hotel occupancy rate are they projecting? What attendence for the Wizards are they projecting? Etc.

4. How much money will the City be losing in property taxes? The City is WRONG when they say there will not be a general increase in property taxes. THERE WILL BE A VERY, VERY SMALL INCREASE in property taxes. I have explained it repeatedly. This cost must be added into the project and converted into present value over the life of the project...

I am offended that Public Officials feel the need to misrepresent the fact that there will be an increase in proeprty taxes due to the project.

When I talked to Pat Roller (Fort Wayne City Controller) she agreed that there would be a very slight increase in property taxes due to the properties that would be demolished and then absorbed into the TIF.

5. The Parking Garage must not be financed with The Jefferson Pointe TIF unless that revenue is brought into a present value and included in the public financing...

6. The project will HAVE to be shown to be self sustaining financially after the bonds expire. This is extremely important to me.

If all six of the above items were done and if all of the financial information and projections made sense then I think I could support the project...

Mike Sylvester

21 comments:

Robert Enders said...

For me to support it, it would have to be completely privately funded. If the mayor says that the city can pay for this expensive project without raising our taxes, that means our taxes are too high and need to be lowered.

Kevin Knuth said...

Robert,

I think the part you are confused on, and frankly so is most of the public, is that tax dollars generated in this development can only be redirected BACK to this project.

That is what makes the financing attractive.

So, the vast majority of the money to be used on this CANNOT be used anywhere else.

I have said that I support Harrison Square- but I have also said I reserve FINAL judgement for when the entire financing package is presented to council

Andrew Kaduk said...

Ok, so the cash flow is circular. What about once the bonds are paid in full? Where does the money go then?

The right thing to do would be to divert the funds into an account that would specifically be used to ease the local tax burden, but after seeing the Fast Food Tax in action, I am rightfully skeptical about the chances of that happening.

Andrew Kaduk said...

BTW, good call Mr. Enders.

Robert Enders said...

Is it a TIF that you are refering to, Kevin? A TIF is an tax abatement in sheep's clothing.

LP Mike Sylvester said...

Kevin:

WE are not confused by the tax setup; you may be confused by it...

I know exactly how a TIF works...

Do you understand there there WILL BE a lsight increase in property taxes due to buildings being demolished like McMahon Tire?

Mike Sylvester

Jeff Pruitt said...

I think you Libertarians would've got a kick out of Dan Carmody's, president of the downtown improvement district, quote tonight:

There is no such thing as unsubsidized private investment

LP Mike Sylvester said...

Jeff Pruitt:

Are you serious?

I have a feeling you are being serious...

YOu have got to be kidding me...

Mike Sylvester

Jeff Pruitt said...

100% serious.

I just shook my head and kind of chuckled...

Andrew Kaduk said...

Considering the current state of affairs that defines American politics, he may actually be right.

God that's sad.

Kevin Knuth said...

Mike,

In regards to the the "slight" increase in property taxes....I am not sure.

Here is why, and you may know the answer:

I think you are pointing out that we LOSE tax money because the existing buildings are demolished.

Therefore, less taxes are generated from those buildings so the levy is increased on everyone to make it up.

However, is that just a temporary thing, because when the land is developed, with newer properties, we gain more in taxes?

Again, I fully admit I do not know all the answers about Harrison Square. I support the project because I think it is a step in the right direction.

But I have always reserved the right to change my mind based on the final financing package.

LP Mike Sylvester said...

Kevin Knuth:

I talked to Pat Roller (Fort Wayne City Controller) and she verified this for me...

I am EXTREMELY discouraged that so many people are stating "there will be no general property tax increase." It is not true.

I am disappointed that none of our elected officials have pointed this out...

Over and over we hear "There will be no general proeprty tax increase."

The above sentence is not true...

Any existing buildings (McMahan Tire, etc...) that are NOT in the TIF currently pay property taxes. We all know that. These property taxes fund the public schools, the city of Fort Wayne, the public library, etc...

What is going to happen is Fort Wayne is going to expand one of the existing TIF's...

Properties like McMahon Tire will be demolished and the entire property will be REMOVED from the general property tax base of Fort Wayne. Those properties and those buildings will no longer pay property taxes to support the schools, etc...

The new properties and buildings will then become part of a TIF.

The properties in a TIF have their property taxes captured by the TIF and the money is used in the TIF.

IT NO LONGER GOES TO THE SCHOOLS, LIBRARY, CITY ETC...

So this means that exisiting properties that are considered part of the property tax base are REMOVED from the property tax rolls...

The taxing districts (Schools, etc) will be asking for even more money next year then this year AND the property tax base will be SMALLER since properties were removed from it.

It is exactly the OPPOSITE of what happens when the City annexes a new area...

This means that the taxes of existing property owners will increase...

This will be a SMALL increase; however, it is a property tax increase...

If you take some time and analyze the property tax situation in Indianapolis you can see that TIF districts can actually destroy the property tax base of a City...

Does this make sense Kevin Knuth?

I would be happy to explain it to you another way if needed...

This is soemthing poeple need to understand.

Mike Sylvester

Jeff Pruitt said...

Mike,

You are right. All new property will be part of the TIF and that money will be used to support the Harrison Square project. As stated by deputy mayor Becker in the YLNI meeting, 80% of the project will be paid for by the TIF...

Kevin Knuth said...

Mike,

I am still not sure you are correct.

My understanding, and I will check into this further, of how a TIF works is this:

Assume you have a piece of property, in a TIF district, that pays a tax bill of $100 per year.

Redevelopment occurs and the property now pays $300 per year.

The original $100 is still collected and goes to the previous sources (schools, etc.). The additional $200 is used to pay for the project.

The only source I found quickly was the Downtown Improvement District website which says:

"Much of downtown is within a tax increment finance district. Such districts capture the increase in property taxes created when a new investment takes place."

I think the word "INCREASE" is key.

Let me do some checking and get back with more.

LP Mike Sylvester said...

Kevin Knuth:

I actually thought the same thing as you a couple of months ago...

Mike Sylvester

Kevin Knuth said...

Mike,

I have checked- I am right.

Only the INCREASED amount is put back into the TIF.

What leads you to believe otherwise?

Jeff Pruitt said...

But are those properties part of the TIF now?

If not, then won't they demolish them, create the new TIF and simply say that the "original" tax was based on bare land? This would allow them to capture nearly all the taxes into the TIF.

However, I'm not sure if those properties were part of the Jefferson Point TIF or not...

Anonymous said...

TIF and CRED funding will still leave a shortfall which will be made up with property tax increases.

Also not noted is that tax revenues have to meet projections. If they don't then property taxes will go up to make up the difference.

Relying on TIF and CRED for financing can be VERY risky unless the financing of the project is done using low TIF forecasts. You can hope for high expectations but you can't use them to create a financing plan.

David Corcoran said...

Actually what Dan meant to say is that there is no such thing as unsubsidized private investment in a project LIKE THIS ONE. I tend to think he is right on this ....

LP Mike Sylvester said...

Jeff:

Most of the proeprties in question are NOT part of the TIF today.

A few of the proeprties are already part of the TIF...

Mike Sylvester

scott said...

The properties along Jefferson are part of the current TIF. West of Harrison and south of Lewis are not part of the current TIF.

For reference:
TIF map