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Should tax dollars be spent on helping private Joplin developer? - KOAM TV 7

Should tax dollars be spent on helping private Joplin developer?

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Joplin, MO -

Contrary to what has been said by others, Joplin's Finance Director has asked us to clarify that the project has to be "successful" in order to create the incremental tax increase.  The proposed commercial property tax revenue would also go towards the school district, in addition to the regular property tax amounts the school district is receiving today.  Over the 16-year duration of the proposed TIF, the school district would receive an additional approximate three million dollars.

A copy of what the finance director said to City Council last night is below:

"South Main TIF Item:

In light of information that has been brought up tonight, I would like to present additional information about TIF and specifically, the South Main TIF being proposed.

The TIF Plan includes a blight study. While it seems evident that the area is blighted due to the lack of existing businesses on a main commercial thoroughfare and the condition of many of the properties, the City hired an independent specialist to perform a review of the blight study to ensure the area meets the blight requirements under state statutes. The specialist, Development Initiatives, conducted a site visit as well as an independent analysis of the area. The independent review concluded that the proposed Redevelopment Area does exhibit conditions which qualify as blight based on the following statutory conditions:

  • Defective or Inadequate Street Layout-Vehicular and pedestrian crossings throughout the area are inadequate.
  • Unsanitary or unsafe conditions
  • Deterioration of Site Improvements
  • Improper Subdivision or Obsolete Platting
  • Existence of conditions which endanger life or property by fire and other causes-Pedestrian traffic hazards are definitely a condition which endangers life.
  • As stated in the conclusion of the independent blight study review by Development Initiatives, “It is our opinion that the Redevelopment Area does contain conditions which have been caused by the presence of the 5 statutory conditions. The preponderance of these conditions within the Redevelopment Area has impacted the three secondary conditions; 1) Retards the provision of housing accommodations or 2) Constitutes an economic or social liability; or 3) A menace to the public health, safety, morals or welfare.” As a result, the TIF Commission concluded the area contained in the proposed TIF District is blighted.
  • At the TIF Commission hearing, residents within the proposed district voiced concerns about the use of eminent domain. The proposed TIF Plan states that no eminent domain will occur for the private development itself. The City would only consider eminent domain for public infrastructure improvements, as is the normal course of action taken by the City for any public infrastructure improvements, such as street improvements. Even though eminent domain is allowed under State statute for TIF developments, the City has never utilized 
  • Improper Subdivision or Obsolete Platting
  • Existence of conditions which endanger life or property by fire and other causes-Pedestrian traffic hazards are definitely a condition which endangers life.
  • As stated in the conclusion of the independent blight study review by Development Initiatives, “It is our opinion that the Redevelopment Area does contain conditions which have been caused by the presence of the 5 statutory conditions. The preponderance of these conditions within the Redevelopment Area has impacted the three secondary conditions; 1) Retards the provision of housing accommodations or 2) Constitutes an economic or social liability; or 3) A menace to the public health, safety, morals or welfare.” As a result, the TIF Commission concluded the area contained in the proposed TIF District is blighted.

    At the TIF Commission hearing, residents within the proposed district voiced concerns about the use of eminent domain. The proposed TIF Plan states that no eminent domain will occur for the private development itself. The City would only consider eminent domain for public infrastructure improvements, as is the normal course of action taken by the City for any public infrastructure improvements, such as street improvements. Even though eminent domain is allowed under State statute for TIF developments, the City has never utilized eminent domain for any private development and will not entertain eminent domain for private development for this TIF either.

    The City of Joplin requires certain provisions in any pay-as-you go TIF to protect the taxing jurisdictions and citizens of our community; while helping to ensure that our community is continuing to grow and develop that aren’t necessarily used or required by other cities utilizing this economic development financing tool.  The City limits the TIF reimbursable costs and limits the total amount of interest expense captured by the developer. As evidenced by the Northpark Crossing and 1717 Marketplace Developments, by limiting these two items, the City has been successful in helping to ensure the TIF’s pay off early. This benefits not only the community, but especially the taxing jurisdictions. When the TIF is paid off, the taxing jurisdictions receive the full value of the development, rather than the value of the unimproved or under-developed area prior to the development. If the City did not cap the interest expense, it is much more likely that TIF’s run the entire 23-year period as the interest continues to accumulate and the principal amount is never repaid. The two existing pay-as-you go TIF Districts, as well as the Recovery TIF, are all projected to pay off sooner than the 23-year timeframe. Therefore, we believe the City of Joplin excels at ensuring proper protection for the taxing jurisdictions and citizens, even while utilizing a tax increment financing tool to better our community.

    To address the financial impact to the various taxing jurisdictions, the proposed TIF District basically proposes taking mostly residential property and 

    developing it into commercial property. By taking residential property and turning it into commercial property in a TIF District, taxing jurisdictions can actually see an increase in property tax received. Commercial Surtax is an additional property tax on commercial property. Commercial Surtax is not captured by the TIF District and continues to be distributed to each taxing jurisdiction. As such, rather than seeing a small increase in residential property tax, the entity can see a larger increase in the newly added commercial surtax value. Taxing jurisdictions currently receiving property tax in this proposed district are various Newton County Departments, the Joplin Special Road District, the Joplin School District, SB-40 Sheltered Workshop, and the City of Joplin. The impact with TIF and without TIF to the various taxing jurisdictions is illustrated quantitatively in Exhibit 8 of the proposed TIF Plan. For property tax, the projected impact is as follows:

    16 years of Projected Property Tax Collections Without TIF:

    Various Newton County Departments                         $38,019

    Joplin Special Road District                                              $59,123

    Joplin R-VIII School District                                             $976,493

    SB 40 Sheltered Workshop                                             $16,008

    City of Joplin                                                                        $113,737

    16 years of Projected Property Tax Collections (including commercial surtax impact With TIF: 

    Various Newton County Departments                         $152,908-Increase of $114,889

    Joplin Special Road District                                              $237,755-Increase of $178,632

    Joplin R-VIII School District                                             $3,927,320-Increase of $2,950,827

    City of Joplin                                                                        $457,436-Increase of $343,699

    By adding new businesses, there is obviously also an increase to sales tax collections. While the impact of the incremental increase in half of the sales taxes is quantifiable, a certain amount is redistributed from a non-TIF District to a TIF District, so it is more difficult to quantify the true increase in sales tax collections captured by the taxing jurisdictions. However, certainly, the taxing jurisdictions have benefitted from increased overall sales taxes with the current TIF Districts and will when the full value of the development is recognized.

    Therefore, this issue can be summarized as to whether council desires to have a full blown, 83-acre comprehensively planned total development, much like Northpark Crossing and 1717 Marketplace or piecemeal commercial businesses along the frontage of Main Street that may or may not develop over time, to-date development like this has not occurred in this area. The benefit of increasing the tax base for the taxing jurisdictions during the development and after the development with TIF versus the financial impact of development over a given time period without TIF should be considered. Additionally, the

    benefit of using tax increment financing to make public improvements to the streets, utilities, sidewalks, and stormwater that would otherwise be funded by existing sales tax dollars should be determined. As shown in the independent “But For” Analysis, due to the extraordinary costs associated with the public improvements and mitigation of the streams; as well as assembling 83 acres by one developer, a comprehensive and cohesive development would be very difficult to achieve. When the City utilizes tax increment financing, the City expects and requires a development that is above and beyond any development that would happen without this assistance. While this agenda item would approve this financing tool, it does not activate the TIF. As you will see in the next agenda items, activation of the TIF would come later after additional provisions occur by the Developer, requiring further council action, and there would be no redirection of any taxes until the TIF would be activated by council at a later date. 

    Staff’s role in this process is to evaluate all aspects of proposed redevelopment plans like this including performing due diligence on behalf of the City regarding key elements of the plan. As has been discussed, we have done that. Based on this evaluation, it is our conclusion that the proposed redevelopment would be a positive benefit to the community overall including the taxing jurisdictions and for these reasons, staff’s recommendation is that the plan be approved. "

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Joplin's City Council votes tonight on whether tax money should be used to develop land.  Using tax dollars for this proposed project on South Main Street (Hearnes Boulevard) would mean other public entities, like the Joplin School District, would not see, until a TIF expires, an increase in property tax revenue from this area.

How important is it to develop an 80-acre stretch of land near the new Mercy Hospital in order to increase tax revenue?

"Would the increase ever happen if the development didn't happen?  Mostly the answer is no," says Joplin Finance Director Leslie Haase.

"I would much rather see individual developers go in there and develop at its own pace, rather than the city subsidizing new development," says Joplin resident Bruce Smith.

Smith lives a few blocks away from where a developer wants to turn residential-zone land into commercial-zoned land, turning parts of South Main Street into an area with fast food restaurants, business offices, and stores.

The developer is asking for a 37.7 million dollar TIF to help with the proposed project's 230 million dollar cost.  The city's finance director says it would be a financial win-win for the city.

"'The developer has all of the risk.  The developer foots the bill.  They do all of the development themselves.  They pay for it all on their own," says Haase.

Once the project starts generating tax revenue, the city would give 37.5 million dollars to the developer.

"I would much rather see the school district getting its tax revenue as it is due, rather than differing that to benefit a developer," says Smith.

The school district would only receive property tax revenue based on assessments before this land was developed.  The increased property tax revenue after the land was developed would go to the city, to pay the developer.  

There are three active TIF's in Joplin, meaning the Joplin School District has missed out on 1.4 million dollars in property tax revenue.

Joplin's school district is opposed to this current TIF proposal, but not because of concerns of revenue.  School officials say the land would be developed with time without any TIF.

Smith believes a TIF passed by City Council would mean only one thing...

"It seems like there would be favoritism involved somewhere," says Smith.

The proposed TIF would operate for 16 years, after which the school district would get possible increase property tax revenue.  If approved tonight by City Council, the measure then goes to second and third readings at another council meeting.

Councilman Mike Woolston is involved in the proposed project by buying land from land owners in the area.  Woolston is expected to abstain from tonight's vote, but Councilman Bill Scearce told us he still thinks a city official involved with the project is a conflict of interest.

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