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TIF from afar

Geraldine Haldner

On second look, however, the similarities become more apparent. The average home in Chesterfield sells for about $300,000, not quite as much as Vail’s average of $480,000, but still up there in the affluent category. Given their wealthy populations, neither town seems to be a likely candidate for a financing technique originally used to renew slums.

In Chesterfield, hard times hit in 1993 when the Missouri River breached the 100-year Monarch Levee and flooded the town’s business district.

“The entire valley was flooded and millions of dollars in investment in businesses were under 14 feet of water. Since sales tax and property tax was a big part of the tax base, the fact that businesses were leaving Chesterfield led us to the question was “What now?'” says Chesterfield resident Mike Flavin, who has been coming to Vail since 1979 to ski.

Despite its affluence – it is St. Louis’ third wealthiest suburb – Chesterfield couldn’t come up with the money needed to turn over its flooded economic engine.

“We knew we had to build a 500-year levee or no businesses would return to Chesterfield,” says Flavin, who sat on a commission charged with jump-starting Chesterfield’s stalled economy. “We looked at a million different mechanisms to try to build the levee, and one of the mechanisms we looked at was “TIF.'”

A national phenomenon

TIF, or tax increment financing, has been used across the nation to renew economically depressed cities, neighborhoods and business districts without raising or instituting new taxes. It allows government entities to borrow money for redevelopment and pay it back with future income that wouldn’t be collected without redevelopment.

Depending on how Vail, specifically Lionshead, residents react to a plan to overhaul Lionshead’s streets and pedestrian mall for $43 million, Vail and Chesterfield could have one more thing in common.

Like Chesterfield 10 years ago, Vail is struggling with sagging sales tax revenues and is looking to come up with money to rebuild the town’s western commercial area, which was identified as “tired” in the 1999 Lionshead Master Plan.

Sales taxes at this time won’t pay for the town’s estimated $9 million share of the public improvements, and tax revenues expected from $500 million in new projects planned by Vail Resorts will accumulate too late to re-do Lionshead’s plazas, pedestrian corridors and streets as private development gets going over the next four years.

Vail Town Councilman Chuck Ogilby, an advocate of using TIF to widen South Frontage Road, fix cracks on the mall and build pocket parks, says the next four years present a “once in a lifetime opportunity” for Vail.

“We can’t afford to miss this chance,” he said back in November when voters were asked to improve a property-tax increase to relieve the town’s cash-starved day-to-day operation budget and restock the dwindling stash of cash for capital projects.

Voters rejected the proposal, sending town leaders back to the budget books to balance the 2003 budget.

No TIF, no growth

Because it is not a new tax, TIF has been recommended by the Lionshead Redevelopment Task Force as one of the most viable financial instruments to redevelop Lionshead. Other options still being investigated include a “use tax” on building materials, as well as hike in property taxes.

Last week, Vail Town Council members agreed to begin the TIF process with the goal of having the district in place – and ready to sell bonds – by early 2004.

“The growth won’t not happen without TIF in place,” explains Vail Director of Community Development Russell Forrest. “It is a good investment for Vail because it will get the economic engine going again.”

That is exactly what TIF did for Chesterfield, says Flavin, who incidentally purchased a condominium in Lionshead a year ago and admits he made the investment because he heard about the redevelopment plans.

“Our city council looked like heros,” he says of Chesterfield’s $75 million renewal project that rebuilt the levee and attracted new private developments, including a two-mile-long retail center. Property prices have have gone from 50 cents per square foot after the flood to an average price of $18 now.

Education key

Finding enough support for TIF in Chesterfield took patience, however, Flavin says.

“Public hearings became educational seminars,” he says. “People said “you are using our tax dollars to subsidize private development.'”

Education was the only way to ensure the success of a ballot question that asked voters to approve an industrial development authority, or IDA, and authorize the governing board to borrow money for the tax against future income.

Explaining it isn’t easy, Flavin, but it’s necessary to make those affected comfortable.

“If every resident and business owner affected fully understands the concept, there will be very little objection,” Flavin says.

Chesterfield’s TIF also had the full cooperation from other taxing districts, whose revenues will remain at a pre-redevelopment tax level until the TIF dept is paid off.

For a redevelopment in Lionshead, the town will have to make nice with as many as nine taxing districts, from the school district to the water district to the local recreation district – and most of all Eagle County.

“Having these other districts on board is key,” says Flavin.

Though they don’t have veto power and have been sent home losers in two Colorado court challenges involving urban renewal authorities, Vail has been careful to communicate with them.

“So far the feedback is encouraging,” Forrest says.

If Lionshead turns record sales, the districts could gain additional income before the debt is retired. A governing board – either an urban renewal authority, or URA, or a downtown development authority, DDA – could set up a payment structure that would allow these districts to collect gradually more taxes as the debt is paid down.

Without TIF, Flavin predicts, redevelopment will be “marginal” and of “lower quality” in Lionshead. Likewise, tax gains will likely not be noticeable.

“TIF worked for Chesterfield and I think it would work really well for Vail,” says Flavin. “If people take the time to understand how it works, the majority of the population will support it.”

How does TIF work?

– Tax incremental financing captures future revenues from redevelopment to finance the redevelopment, the overriding principle being an area that is not utilized to its highest potential can be redeveloped with loans paid back with extra taxes collected when the same area is redeveloped and economically viable again.

– TIF is not a new tax, rather a way to leverage future projected income against debt. In order to get the state’s blessing, a town has to meet four of 11 criteria that constitute “blight” – reasons why redevelopment needs to occur.

– To employ TIF, district boundaries have to be identified and an Urban Renewal District, or URA, created by ordinance. The district board drafts a list of improvements and admits conditions of “blight” exist. Bonds only can be issued when developments are approved. A URA requires a “no” vote by the town or the district’s property owners. It gives the district’s board power to condemn and purchase private property if it is shown it would be for the benefit of the entire town.

– A second underlying district to use TIF is created by a vote by property owners within a district. A Downtown Development Authority, or DDA, allows property owners to form a board and come up with a plan that acknowledges that blight is imminent and specifies project that will avert blight. A DDA has no condemnation powers. The autonomous board could issue bonds based on TIF.

– Before TIF is instituted, the district’s tax base is frozen. Other taxing entities – school districts, counties, recreation districts, etc. – receive tax revenues at the frozen level for the life of the TIF, typically 25 to 30 years, or until the debt is paid off.

– In Lionshead’s case, TIF, under a URA or a DDA, could generate $14 million if sales and property taxes are captured. If sales tax is left out, TIF would generate between $7 and $9 million. The Lionshead Master Plan, adopted in 1999, has identified a list of $43 million in needed public improvements.

Geraldine Haldner can be reached at 949-0555, ext. 602, or at ghaldner@vaildaily.com.

Editor’s note: With private property owners promising to reinvest more than half a billion dollars in the redevelopment of Vail over the next four years, this story is part of the Vail Daily’s ongoing coverage of the many issues surrounding Vail’s “Renaissance.”


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