Cape considers the possibilities of Tax Increment Financing.
By Scott Moyers ~ Southeast Missourian
The road to Cape Girardeau's first Tax Increment Financing project looks to be complex and anything but certain as city leaders determine whether a 600-acre subdivision of homes, condominiums and cottages fits the bill.
"There are a lot of questions and a lot of information that has to be gathered," said Chamber of Commerce president John Mehner, who also serves on the city's new TIF Commission, a group charged with making a recommendation to the city council. "For anybody to say it's good or bad right now would just be conjecture."
But the formation of such a committee is the first step in considering TIF status for the Prestwick Plantation development group, which wants to develop the large subdivision along Bloomfield Road next to its newly built Dalhousie Golf Course.
"All the city has said is that it is willing to look at it," said Mark Grimm, a lawyer hired by the city to help with the process. "No decision has been made other than forming a TIF commission and pretty much everything is up for negotiation."
Developers of the project say they hope that such a status would provide them with $12 million to $15 million to pay for infrastructure such as streets, sewer and similar items for the development that over the next 15 years plans to construct 500 homes, 200 condominiums and 10 to 20 cottages.
They say once the project -- in which undeveloped lots will sell for between $29,000 and $100,000 -- is complete, it will generate between $5 million and $6 million a year in new property taxes.
A TIF designation would allow new property taxes collected as a result of development of the property to be redirected back into the development. That means that as houses are built and homeowners begin to pay property tax, that new revenue would go into a special fund to pay off bonds that were issued at the outset to pay for the work.
The developer would have to guarantee the bonds. State statutes say TIF status can be in effect up to 23 years.
No enterprise zone
Some may find themselves confusing TIF districts with enterprise zones, but they're nothing alike.
Although criteria for what constitutes an enterprise zone have changed over time, in essence they define areas in which residents are relatively poor and have an unemployment rate higher than the statewide average. Developers within these 62 designated areas are awarded tax credits based on the amount of the project's investment when they undertake capital ventures that provide either direct or indirect services to residents within the area.
Questions the commission and its consultant -- the Regional Planning and Economic Development Commission -- will be considering are whether the property qualifies under state guidelines, whether the project is financially viable and what impact the status would have on other local tax-collecting entities like the school district.
They also must determine whether the project would work without the TIF help.
Cord Dombrowski, a Cape Girardeau businessman and developer of the project, said his group has studied the matter in extreme detail with the group's engineering staff and construction management team. He believes they qualify for TIF.
"We weren't going to just wait and hope that it happens," he said.
As far as economic viability, the development already has 72 real estate reservations on file, he said. "We'll have the business to keep us busy for the next several years," Dombrowski said.
In addition, Dombrowski also wanted to emphasize that none of the money from the TIF status would go toward the golf course.
"It would have nothing to do with that," he said. "I don't want people to be confused and think that TIF bonds are paying for the golf course. That's already paid for."
TIFs, used statewide for economic development, sometimes create an adverse reaction to those tax entities who use property tax, who sometimes see TIFs as a way of draining new money that should be going to them. Most property tax money goes to local school districts.
But Dombrowski pointed out that the property was only recently annexed into the city limits and if it hadn't been, it wouldn't generate any tax money for the city. In that sense, no one's losing any money, he said.
But it has also been suggested that the new development might create a burden on already strapped city coffers, considering that the city would suddenly have to provide police and fire protection to a new subdivision on the outskirts of town.
Dombrowski said the development group has been trying to alleviate that perceived burden by negotiating with the city and the school district to provide them financial peace of mind. He said the group is willing to buy new vehicles and equipment for the city, such as a police car, garbage truck or fire truck as well as give money to the school district to pay for anything it might need.
"It's all been up for discussion," Dombrowski said. "If it helps for us to make a financial commitment to them, then we're more than willing to do that. If they are extending those services out to us, we're willing to help pay for them."
Dombrowski said that they would come up with the money to give to city and school officials by requesting a higher bond amount, which they would have to pay back. He said no final figures have been reached and it's still in discussions.
Cape Girardeau school superintendant Dan Steska said the Board of Education has discussed it and is possibly in favor of it, depending on the details. Months ago, a figure of $4 million being paid to the school board was mentioned, Steska said, but nothing has been put on paper.
"If that stays the case, I think it would be beneficial," he said. "We would maybe have the addition of the auditorium at the new high school, which wasn't affordable, and we have a number of roofs in the district in need of significant repair, things like that."
But Al Spradling III, who is the chairman of the TIF Commission, said the commission and the city have to make those determinations for themselves.
"We'll be looking at all these things and making a recommendation," he said. "We'll be looking at the overall project, what they're asking for, their financial viability. These are all factors."
335-6611, extension 137