(Ed. Note: This post was on the Minutes post but I have posted it separately for better visibility. Mr. Connors is the former Evansville City Administrator, an attorney, and a former TIF specialist for St. Paul, Mn)
Bill Connors has left a new comment on your post "Minutes: Economic Development; Tuesday, July 17, ...":
I think it might be worthwhile to give TIF assistance from TID #6 to bring a motel to the city. But if the city agreed to use tax increment from TID #6 to reimburse D&D Development for the cost of constructing the street, sewer, water main, etc. for the new commercial lot where the motel might be located, there is no guarantee that D&D Development would pass any of that economic benefit on to the developer of the motel. It would be cheaper and more direct to give the incentive directly to the motel developer than to D&D Development with a hope that it will pass through. It also would not establish a damaging precedent of using tax increment to pay for the infrastructure for new commercial lots, and it would be fairer to other developers of commercial lots, such as John Morning.
If the city intends to use tax increment from TID #6 to reimburse D&D Development for the cost of constructing the street, sewer, water main, etc. for the new commercial lot where the motel might be located AND to give a direct incentive to the motel developer to locate on that lot, that would be outragously irresponsible.
Bill Connors
Posted by Bill Connors to Evansville Observer at 4:58 PM
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What would Bill think if D&D decided not to develop their land in TIF #6 at all and instead sit on the land as an ag use for 20+ years if TIF is not used in the district? Would the city be irresponsible for having NO GROWTH in a hugely viable area at all? What if the TIF is paid off in half the time the ditrict would be opened for?
ReplyDeleteDoesn't the "but for" test say that if the development would not occur but for TIF assistance then it passes the "but for" test and TIF assistance is a responsible use?
I think some of the council is struggling with this as well. Right now the issue seems to me more than TIF assistance irresponsibility, but also land use (non-use) irresonsibility. SO the real question for the public is not whether the use of TIF assistance in this area for infrastructure is irresponsible, but instead whether a lack of compromise on behalf of the city is worth having that area not be developed at all. No hotel. No new businesses. No bowling alley. Nothing. How does that help the city?
I understand Bill's concerns completely, but I do not recall seeing Bill at any of these meetings when the city discussed this issue. Both the pros & cons.
Yes I am sick and tired of being strong-armed by big developers, but I have been contacted by many of my constiuents that want these new businesses. To say that the use of TIF assistance would be irresponsible is capricious at best and irresonsible at worst at this point considering that not using TIF (which ofcourse the district that was created is for) WILL result in NO NEW COMMERCIAL DEVELOPMENT. The city is charged with this goal and now Bill wants to tie our hands so that we cannot develop that land which is partially for that type of development. It does not make sense.
Bottom line Evansville: Do you want that land developed or not? This is the issue. I would love to hear from you.
Mason Braunschweig
1st Ditrict Alderperson
City Council President
Bottom line Evansville: The issue is NOT do we want that land to be developed or not. Mason has allowed D&D Development to define the issue to their advantage.
ReplyDeleteIt is sad to see a bright guy like Mason buying into the empty threat that the property will not be developed for 20 years if the city doesn't give D&D Development whatever it wants. The guys who own D&D Development would have to be complete idiots to farm that land for the next 20 years when it is so much more valuable if they develop it or sell it to someone who will develop it (and Don Wahlin is no idiot, I assure you). When I told the city's finacial consultants from Ehlers & Associates that D&D has threatened to farm their land for the next 20 years if they don't get what they want, the consultants laughed out loud.
As for the "but for" test, the "but for" test does not mean that the land won't be developed unless the land owner or developer gets whatever they want. Otherwise, every request by a landowner or developer for TIF assistance would meet the "but for" test, because they always say they won't develop the land without TIF assistance as a negotiating tactic.
The "but for" test means posing the following question: Would a reasonable land owner or developer be willing to invest in developing the property without TIF assistance? Unless D&D Development can show the city that they likely would not make a reasonable profit developing the land without TIF assistance, their request does not meet the "but for" test. I doubt they can show that, because John Morning (I assume) is making a reasonable profit developing and selling new commercial lots right across USH 14 without any TIF assistance.
The city will benefit if elected officials like Mason hold out for a good deal. David Wagner of Ehlers & Associates suggested that if D&D Development would agree to guarantee a certain amount of tax increment from the new industrial lots that will be developed on their property, that would justify the city's paying (or reimbursing) the cost of the infrastructure for the new commercial lots. But the city should not agree to reimburse the cost of the infrastructure for the new commercial lots--at the best commercial location in Evansville--and get nothing in return.
I'm not asking Mason and the Common Council to tie their hands. I am asking them to use their brains instead of being scared into making an extremely unwise decision.
Mason and the elected officials have an obligation to educate themselves about these issues. They have staff and financial consultants to help them. Heck, Mason and the Council members could simply dust off and re-read the memos I wrote to them about this issue in the past. I'm not obligated to show up and give free consulting service as a prerequisite to being entitled to voice my opinion.
Bill Connnors
Former Evansville City Administrator
There is a lot of information available to Mason and anyone else who is interested in TIF concepts.
ReplyDelete(TIF)... was created so that local municipal governments could issue bonds to finance infrastructure improvements, undertake land assembly, and provide incentives to lure private investment to blighted urban neighborhoods that show a pattern of losing value.
http://www.ncbg.org/tifs/tif_pays.htm
This statement above speaks to the 'but for' notion, which does not mean but for developer black mail, which is what a lot of people feel this is. In no small measure due to Mason's going on about feeling 'Strong Armed' over this property.
The standard definition of 'but for' relates to property in devalued areas, such as urban blighted areas like low income Housing Projects etc. The sentance being...but for TIF funds the developer may not earn suffient appreciation/income to warrent development in the area.
The property over by the PIG is certainly not blighted and is ripe for development. I personally don't have a problem with D&D asking for TIF designation, but then Mason, you have a great opportunity to request in return, commerical development of more than minimum wage dead-end jobs, such that a bowling alley or hotel would provide...unless of course the hotel includes an indoor pool along with some kind of contract for senior citizen use or something.
Who knows if my pool idea has any merrit, but I believe my point remains. Don't give away the farm if you intend to grant this unorthodox TIF request.
For now, my agreement goes with Bill Connors. Unconditional TIF to D&D just for the sake of minimum wage commercial development in a naturally desireable area, is a bad precedent to be setting.
'However, the definition of "blighted" and the rules governing TIF are so loose in many states that these subsidies are more often used to underwrite sprawling development in well-to-do suburbs—exactly the opposite of TIF's original purpose. '
http://www.newrules.org/retail/tifreform.html
'Utilizing TIF districts on the urban edge to subsidize development destroys the ability of the tool to work where it was intended - in the truly blighted urban areas. TIF districts on green fields rob jobs and tax base from surrounding communities while increasing sprawl - the exact opposite of the intent of the original legislation.'
http://www.naco.org/Template.cfm?Section=Finance_and_Intergovernmental_Affairs&template=/ContentManagement/ContentDisplay.cfm&ContentID=16780
'Note also the knotty question of whether TIF districts change the rate of development at all. There is evidence that they just shift the location of development within a community. Of course they may shift the costs of development by diverting what would otherwise have been general municipal property tax revenues to pay for the project. '
http://policyeconomist.wordpress.com/2007/05/30/using-tif-to-convert-farmland/
The reports and information goes on and on...but you can google it for yourselves. I sure hope Mason does.
And I respectfully think that the main point is missing. Do we want these businesses/services/commercial entities or not?
ReplyDeleteIf you don't then it is easy. Don't "give in" to the developers' demands.
If you do then the city has to compromise because this developer has made themselves perfectly clear. Without TIF assistance (in a "pay as you go" type TIF) a development agreement will not be entertained. That's it. No deal.
So say what you want, however all that I have heard is that people want this land developed. After the TIF is closed it is all benefit for the city. If development never happens and the land stays agricultural and in Union township how does that benefit anyone?
It is easy to complain about allowing or not allowing TIF assistance for this project or the other project, but the end game is what we must focus on. In this case it is either development or no development.
As for Ehlers I can assure you from being at all the meetings, unlike Bill, they did not laugh. They have advised us to enter in to "pay as you go" TIF assistance with D&D in order to get to the point where we have the benefit of development.
And on the point of empty threats...D&D has already sat on that land for as long as the date of purchase without any movement. I agree that they are making nothing now on the land compared to what they would make if it were developed and in the city, however the track record speaks for itself. Without TIF these developers do not play (see Stoughton trailers).
As for where we are in negotiations; no development agreement has been entered into. The last vote was the council saying that we are willing to discuss the possibility of TIF assistance (pay as you go, not normal) with the developers. If we did not make that move negotiations WERE DONE. End of story.
I appreciate Bill & Karen's opinions on this subject but once again I would like to point out that neither one was at the THREE meetings where this matter was discussed. It is easy as heck to play arm-chair quaterback and say that the council's move was wrong or irrepsonsible or whatever term after the fact.
And, no offense Bill, but this development agreement got absolutely nowhere when you were city administrator. We are making some baby steps now. And what are these babysteps moving towards? The much needed commercial & industrial development that EVERYONE wants.
As for me after discussing this matter (and basically taking Bill's stance verbatim) with Ehlers, the council, our current city administrator, our city attorney and whomever else would listen it has been said over and over that we will get nowhere without this aspect within any development agreement with D&D.
Now if a majority of my constituents do not want this city to allow TIF assistance for this development then I will vote that way. Of course I will also have to hear that we don't have this nice new hotel or bowling alley that everyone seems to want. It is a tough decision and unfortunately we can have it both ways.
As for Bill & Karen it is unfortunate that you both would take this stance when both of you were involved with the decision to give the Berg group 25% (over the regular 20%) TIF assistance to get the Eager building going. Not that there is anything wrong with that necessarily save for the fact that there is no guarentee that the assessment value will not reach the point where it will pay off. I understand that a personal guarentee was agreed to by the developers to cover in such a case that is does not. And basically that is how a "pay as you go" TIF works since it is the developer that procures the financing and not the city at all, putting the finincial risk and burden on the developer.
Question for you Bill & Karen: Does the fact that TIF assistance that would be provided (if any-no decision yet) would be "pay as you go" does that make any difference to you versus normal TIF assistance.
Unfortunately it is my feeling that "holding out for a better deal" is not going to work. Why do I feel this way? Because I have been at the meetings, asked the questions and ultimately received the answers. The truth is we are nowhere near getting that land developed since the day D&D purchased it until the point where the council let D&D no that we would CONSIDER TIF assistance. I do agree with Bill that D&D would be crazy to sit on it, but they are being very convincing with that stance at this point and we have many citizens in this city that do want to wait on much needed commericial entities much longer. Could you imagine what it would have been like if we had a hotel for the 4th of July/ 70's class reunion? Wow.
I sincerely hope that clears up my stance, the current situation and the issues with everyone. If not ask the questions. If I do not have the answers I will do my best to find them.
Mason Braunschweig
1st District Alderperson
City Council President
Mason you need to say NO DEAL.. That property has sat there for years, and we are NO worse off if you let it sit for another 20 years. I can't believe you would even entertain such a 'demand' Someone will eventually want to build there, and will pay for it them selves as they should.
ReplyDeleteI am in your ward and I will be watching.
With the Eager building deal, the Redevlopment Authority required the developers to submit a pro forma financial analysis to Ehlers & Associates to analyze to see if the project would not yield a reasonable return for the investors without TIF assistance. That was one of the conditions on the motion to approve giving TIF assistance. To the best of my knowledge, the Redevelopment Authority held the developers to providing that information.
ReplyDeleteIt is more important to require this information in a bare-ground development situation, because the costs of bare-ground development are much less than redevelopment. Has the city required D&D Development to submit such information to Ehlers & Associates to review before making a binding commitment to give TIF assistance? If not, the city gets an "F" for protecting the interests of the taxpayers.
Again, Mason's assertions that there will be no development on this property unless the city caves in to the property owners is hogwash. Did anyone on the Council ask the folks from Ehlers point blank whether they think that is a credible threat? Did anyone on the Council ask the folks from Ehlers point blank whether they think starting to use tax dollars to pay for infrastructure on bare ground for commercial (as opposed to industrial) development is a good idea? Right now, the Ehlers folks see a majority of the Council is in favor of approving the deal, and they don't want to be the ones to kill it and make the mayor and Council members angry (because the mayor might hire a different company next time). But if someone starts asking them tough questions, they might candidly answer them. Sitting at three meetings where no one knows enough to ask the right questions or is too scared to do so does not lead to much enlightenment.
It is sad to see that Mason has bought into this nonsense and is not willing to apply rigorous analysis to this issue.
Bill Connors
First I would like to be clear that I like the guys from D&D. I had a number of meetings with them before I left office, and I had no issue with them. They are often charactorised as problematic, and I just want to be clear that I did not find them to be anything but cooperative.
ReplyDeleteHaving said that, when I left office, unlike Mason's declaration of the developers agreement getting absolutely nowhere, we had a written pledge to construct the drive-by at J. Lindemann. It's been nearly 2 years and no action has been taken on that. We had verbal approval from the DOT for a 4-way intersection (not a roundabout), a little nearer to the petshop. I had arranged a meeting with the DOT for the week after the election to meet with the DOT along with R. Berg and J. Ringhand, and staff of John Erpenbach's office. It was our intent to point out the dangerous topography of the petshop intersection as it sits just below the crest of a hill, and we felt in a strong position to sway the DOT to approve the J. Lindemann spot. The stage was set, we had the attention of the Governors office of Economic Development as well as the Head of the DOT watching and we felt as good as possible for a favorable outcome. I understand Mayor Decker attended the meeting with her husband, and did not include J. Ringhand or R. Berg. People who were well versed in the negotiations and familiar with the other people negotiating for the DOT.
Additionaly in the "absolutely nothing" that occured while Bill and I had influence, D&D presented a plan for a major housing development for that property. It made no sense at that time for the city to bring in additional housing at that exact location, so close to industry, that their request was denied. We heard too that we would then be enjoying more corn. Our response was "OK."
By the time I left office, D&D was working on a commercial plan, no doubt the beginnings of the plan before you today. That plan was continent upon the approval of the DOT for the 4-way intersection, which as I explained we felt was nearly negotiated.
Finally, while I was on the RDA, I approved the "concept" of providing 25% TIF for Berg if it was found to be financially sound to do so. I left office. If the approval went through without it being a sound investment for the city, I am not responsible. I have a history of saying "no" and would have done so again.
If anyone took my advise and googled TIF, you will have learned that projects such as the Berg Ace building are tailor made for TIF. It's a run down delapidated building in a developmentally forgotten part of town. The TIF for the downtown appears to be working in that it has indeed generated facade improvment. Time will tell if the RDA was prudent with the managing of the funds. I suspect they have been.
Finally, I find it extremely offensive for an elected official to declare a voice of a citizen is only heard if in attendance at some meeting. While I agree that attending meetings in Evansville is the surest way to get some flicker of insight into what goes on around here, it is by no means the only meathod of being heard. In fact my departing effort was to get an ordinance allowing for public comment on agenda items. The prior standard was the public could only comment on non-agenda items. I asked for 5 minutes.
You, Mason, spoke out that such an allowance would prolong meetings and was unecessary given the alternative ways of contacting aldermen to be heard. Unfortunately those meathods are not open to the rest of the public, so we are only left with trust that aldermen are being lobbied as they claim. As it was, I remember that the ordinance did get approved for a 3 minute comment, but it has not been adequately announced, and I believe the agenda's still contain the old language of non-agenda items only, though I could be wrong on that.
It has been my consistant belief that the nameless faceless contributors of these blogs do add value and insight and balance to the goings on of city government. While you and the other elected officials are not required to read these blogs, to imply only those who contact you directly will be considered, is willful ignorance.
This comment has been removed by the author.
ReplyDelete(Ed.note: I have reposted this for review: The "million dollar question" was one I posed to Mr. Wagner. It was two part. The first question was; " Is it correct that traditionally build up from farmland has NEVER been considered appropriate or legal use of TIF funding? Answer: (Dave Wagner: Yes. That is correct.
ReplyDeleteFollow up question: Is the structure of this industrial TIF of 51/49 just a way to subsidize commerical and get around the traditional law?
I have reprinted the comments from that post of over a year ago.
(Orig Post--6-7-2006) Planning Commission: Evansville Observer asks the million dollar question---Is TIF #6 about subsidy of Commerical
(Update: The recent Evansville Common Council approved in closed session the expenses for Ehlers and Associates to revise TIF #6 from an "industrial" TIF to a "mixed use" TIF.
In an industrial TIF, at least 51% of the development must be industrial. The discussion in the planning commission and on the audio, was whether the "industrial" designation was realistic since it seemed that the developers wanted more commercial than industrial possibly.
Anyway, there will be an open public hearing in Sept for Evansville citizens to hear the details on TIF #6 and the mix of commercial and industrial that is proposed. Remember that this is not for the biodiesel===that is TIF #7.)
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( Click on the audio to hear the question on TIF #6. Adjust the tone for poor quality. It is a million dollar question since the assessments to commercial amount to almost a million dollars. )
Normally it is not the purpose of TIF financing to subsidize development that would normally occur. My question to Mr. Wagner of Ehlers and Associates, the financial advisors to the city of Evansville, was whether the 51/49 split of industrial/commerical was just a way of getting around the intent of the law.
His response was that there was language in the proposed TIF that provided for special assessments to the commercial so that it would not amount to a subsidy. He admitted that he recommended that the city use flexible language in the TIF so they had some options on these assessments---however the intent of the TIF was not to subsidize commerical but the other way around---to provide a stream of increment during the first ten years of the build up where the increment from the commercial would come first and the build up of the industrial would come over twenty years.
Several of the planning commission members including Hammann and Braunschweig indicated that they did not support subsidy of the commercial and it was not their intent in voting for the TIF to do so.
What is the answer to the question of whether this will be a subsidy. The current answer is "Maybe." Stay tuned.
Posted by Evansville Observer at 2:09 PM
2 comments:
billconnors said...
The draft project plan provides that special assessements will be levied on the new commercial lots for the full cost of the infrastructure that benefits only the new commercial lots, so they will not be subsidized. However, the draft project plan give the city the flexibility to provide TIF assistance directly to a commercial business (rather than the landowner or developer) that is considering locating in TID No. 6 in Evansville if there is a particularly good reason for doing so, such as serving as an "anchor tenant" that would attract people to visit Evansville.
Ald. Hammann said one of his concerns about providing a blanket subsidy to commercial development in TID No. 6 is that the city would be potentially giving a subsidy for a business to locate in TID No. 6 rather than in the downtown (TID No. 5), which would not be good. David Wagner of Ehlers & Associates and I share this concern. That is why we drafted the project plan for TID No. 6 to call for levying special assessments on the new commercial lots and to provide for the possibility of additional TIF assistance to offset the special assessments. That way, the city will know the identity of the commercial business, and can evaluate its impact on the downtown, before deciding to give a subsidy.
Bill Connors
Evansville City Administrator
9:02 AM
billconnors said...
I stand by my previous comments above posted a couple of months ago. My guess is that the recent change from an industrial TID to a mixed use TID will allow the Common Council to create TID No. 6 before any part of the district is rezoned to industrial use. TID No. 6 can be created as a mixed use TID as long as the Council can find that some of its territory would be suitable for industrial, but actual rezoning to industrial before creation of the TID is not required. Prior rezoning to industrial is required for an industrial TID.
Bill Connors
Former City Administrator
10:33 PM
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I admittedly have not been following this one, other than online, but it seems to me a good analogy would be buying a car.
ReplyDeleteD&D is the carbuyer and they are probably pretty comfortable making the empty threat give me this or I'm gonna walk, knowing full well they can always come back to the negotiating table and make a new offer to "purchase."
I think I might not have made myself clear enough about the "pro forma" concept. The purpose of requiring the developer to submit a pro forma is not to make sure the project is financially feasible. The purpose is to show that the project is NOT financially feasible (i.e., the investors likely would not make a reasonable profit, so there is no reason for them or anyone else to invest in the project when there are other projects that provide a reasonable reture) without TIF assistance. If the pro forma shows the developers can make a reasonable profit without TIF assistance, it is foolish for the city to give TIF assistance, even if the developers threaten to hold their breath and not do the project without TIF assistance.
ReplyDeleteI like Mark's analogy, but I would turn it around. D&D is doing what a high-pressure car salesman does--"If you leave the car lot, you won't get this good deal tomorrow or the next day." The salesman wants to create fear so you don't think rationally about your options and make the purchase. The best advice to a shopper in this situation is to walk away, clear your head, and come back ready for more negotiations. The city should politely tell D&D "no" and restart negotiations with them when things cool down a little.
Observer, thanks for finding your old post about the advice from David Wagner of Ehlers & Associates at an an open meeting that it giving TIF assistance for commercial (as opposed to industrial) development on farmland is unwise and generally is not done.
Bill Connors
Let me make sure I have this correct.......
ReplyDeleteD&D would be responsible for the financing not the city.The city currently get's ZERO dollars from this land as it sits in Union.
So we annex the land and put it on our property tax payroll as is. That's new money for the city.
The city would freeze property taxes for a period of time lets say 10-12 years. After that period of time the property taxes generated would be much much greater.
I don't understand what the issue is here. The city has nothing to lose. We NEED commercial development or the average tax payer will not be able to afford live here.
What we forget about in these discussions are the residule effects developments such as this have.
This hotel could bring in a banquet hall as there is currently no place to hold a wedding reception.
People will also be able to stay in Evansville thus spending more time and money in our town.
We need to look at the big picture here commercial development breeds more commercial development.
Jeff misses the point. Under the proposal, the city WILL pay for the infrastructure by reimbursing the property owner for its initial expenditures. Furthermore, development WILL occur at that corner, and the city will get the tax base growth, even if the city holds out for a better deal. And the city's taxpayers will be better off if the city holds out for a better deal. All the city needs is leaders with guts and intelligence to achieve a much better result than is being proposed.
ReplyDeleteBill Connors