DDA May Halt Future Incentive Deals

Group holds second special meeting

 ~ by Bob Volpe ~

Last Tuesday, the DDA (Downtown Development Authority) held a second meeting to discuss plans for 2018, at the Historic Ute Inn.

Before planning discussions began, the board was notified by DDA Treasurer Tanner Coy, of a discrepancy with the tax increment financing (TIF) agreement contract reached with Trail Ridge Apartments in 2012-13. These contracts give private companies and developers special tax rebates and financial incentives that currently aren’t allowed by the city government for certain projects that occur within the DDA district. 

It seems when the Trail Ridge contract was drawn up, the wrong numbers were used to calculate the amount of tax reimbursement the apartments would receive. When drawn up, the DDA used the actual value of the property instead of the correct assessed value. The error resulted in the DDA owing an additional $30,000 on the contract.

Fortunately for the DDA, an agreement was reached that would allow the DDA to split the $30,000, 50/50 with the apartments, interest free, leaving the DDA with a $15,000 debt.

DDA Co-chairman Noel Sawyer interjected with a sigh, “We just can’t catch a break.”

To be clear, this error was not the fault of the current DDA Board. The error was during the term of former DDA director Brian Fleer. The current board is reviewing past documents and contracts to try and
clean up the mess left by past DDA officials.

TIF Point System Proposed

 

Once that unpleasant news was aired, the board got down to discussing how to improve TIF agreement contracts.

DDA Co-chairman Noel Sawyer

Each board member was given, in advance of the meeting, several example TIF agreement contracts
from around the country. The board then discussed pros and cons of those contracts, and how they could be used to make their contracts consistent regardless of who is applying for a tax rebate deal. The goal is to make the TIF agreement process into a level playing field.

A particular provision in the contracts that was well received by the board used a point system as criteria for issuing a TIF. The point system works by giving points for certain criteria that enhances the district’s overall goals. For example, points are given to a TIF applicant who brings X amount of new jobs to the district. An applicant must accrue a set number of points to be granted an incentive agreement. 

The board members tossed around several things they thought should be added to their soon to be revised TIF contract system. Coy suggested a limit be placed on the percent of reimbursement any future TIF would allow. He said, “Under no circumstances would the DDA give up more than 75 percent or call in 50 percent, or whatever.”  And. “Under no circumstances will a term of the TIF exceed the statutory life of the DDA.”

Sawyer explained, “The reason I requested we look over our TIF agreements was, number one, to streamline the process; number two, to take the politics out of it; number three, to take some of the lawyer cost out of it.” He pointed to the point system described as a way to both streamline the process and take the politics out of the equation.

Tony Perry, President and CEO of Park State Bank, who recently wrote a letter to the city council, criticizing the DDA was in attendance at the meeting. DDA chairperson Merry Jo Larsen asked Perry for his input. Perry said, “Well I like the direction this conversation is going. The one thing I would suggest is; that’s one component.” He went on to note that DDAs around the country are either being abused or corrupted or being banned completely by their municipalities. California, for instance, has banned the formation of DDAs state-wide, according to the bank president. 

Perry then added, “I would suggest the board step back and take a look at the reality of TIF. Very rarely, a win here and there, but very rarely does it end well. I agree with all the criteria. But I would seriously consider how to unwind this thing. Pay off the debt and move on.”

Board member Jon DeVaux responded, “We haven’t had one TIF fail in 20 years so we’ve done something right. So, you want to unwind something that has a 100 percent success rate? That’s what I hear you saying. I hear this group saying let’s make it better. TIF by itself has generated over $30 million in assets to this community.”

In the end the board agreed that there should be a moratorium on any TIF agreements until the pending lawsuit is resolved with Arden Weatherford, the owner of BierWerks, and until a new TIF agreement contract could be drawn up.