The Jefferson City Public Schools Board of Education met Tuesday to discuss the city’s plan to develop using a tax increment financing (TIF) district but came away with more questions than answers.
City attorney Drew Hilpert explained to the board what the TIF was and how it would be used.
He began by explaining something called a “But For Test.”
Before creating a TIF district, the local government must find that, in its opinion, the proposed development would not have happened “but for” the use of TIF.
The city hired financial analysts to go over whether or not the development could go forward without taxpayer assistance and came to the conclusion that it could not.
Hilpert said while it is possible something else can be built without the use of a TIF, he emphasized that this particular project would not be.
This type of TIF, Hilpert explained, is a pay as you go TIF. In a nutshell, the developer will pay for the entire project up front and the city will not put up the money.
A baseline is established for the property to be development. In this case, it will be the land where the Truman Hotel used to thrive.
The city said the developer hopes to build two new hotels there as well as a restaurant in the space.
The baseline is what is brought in a year before the TIF through sales and property tax.
When the project is complete, the property will be reassessed and the values increased.
The additional sales and property taxes on the new development will reimburse the developer.
Fifty percent of additional sales and 100 percent of the property tax revenue will go to reimburse the developer.
The TIF lasts for 23 years. If, at the end of 23 years, the tax revenue is NOT enough to reimburse the developer, they do not get reimbursed the full amount the project cost.
“The developer is really at risk initially,” said city administrator Steve Crowell.
If the revenue is much more than expected, the developer can be reimbursed quickly and the city can then take on the additional tax revenue.
Crowell and Hilpert believe it would pay off in the long term for the city.
Jefferson City Public Schools would not see the property tax from the TIF for the next 23 years.
It would stand to miss out on an extra $11.7 million in the estimated revenue that would be redirected to the TIF.
It would receive about $1.7 million in new tax revenue from the TIF.
According to superintendent Larry Linthacum, the school district is not receiving the full amount of the education money the state is supposed to provide, laid out in its formula, and the district’s tax levy is in the lower third of the state.
So the board said it would have to weigh the pros and cons of missing out on that revenue.
The group is looking at its three areas of focus in JCPS. They are learning, partnerships, and stewardship.
The board members said they have to work out a way to be good economic partners to the city while also being good stewards of their patron’s money and justifying their spending.
“We don’t want to abate some things that then we’re going to ask the voters to off set that when we gave a potential business some incentives there,” Linthacum said. “It’s a fine line because you want to provide jobs. That’s good for the economy, that’s good for the community and we recognize that.”
They’ll request an extra 30 days to go over the plan from the TIF commission and if it is granted, they’ll look at what options are available within the TIF plan and if they can commit to it.
“It’s a bigger hit on us,” said Linthacum. “So we want to make sure we slow and steady do it right.”