Commentary. TIF
COMMENTARY by William Kohler
Mayor Forthofer sent information in response to my September 20th open letter requesting information about public financing for the Sunnyside PUD. There’s some good news: The city has taken a pass on financing the project with Tax Increment Financing. This is good news because the city will not be directly burdened by debt for the project.
But the Sunnyside PUD developer is chasing tens of millions of dollars of public financing from Lorain County, in the form of multiple TIFs. Of course, public financing for private business violates basic principles of good government that many hold dear.
In addition, there would be bad news if the development fails and Lorain County’s credit rating, and the city’s financial reputation, are damaged. Of course, if the development succeeds, then bad news could also come if the city and the school district are unable to financially meet the Sunnyside PUD’s demand for school district and city services. And that bad news would probably come in the form of increased property or income taxes. Given the developer’s reputation for playing hard ball, it’s not surprising that he is demanding the moon and offering little in return.
What, specifically, does that mean? First, he’s demanding diversion of 100% of the property taxes from the development to pay off the TIFs. Second, he’s offering to share with the school district just 45% (capped at $1.2 million) of the amount in millage dollars that the school district would ordinarily get from the development’s property taxes. Third, he’s offering the city exactly nothing.
These are important deal-making variables, around which the developer, the school district and the city must craft a deal. Literally, the developer, the school district and the city must enter into a formal revenue-sharing agreement, and the city council must approve that agreement.
The ultimate TIF arrangement can:
· give the developer less than 100% of the property taxes from the development;
· give the school district more than 45% (capped at $1.2 million) of the usual millage dollars; and
· require that the character of the development better suit Vermilion’s culture.
Calculations generated by the city’s public finance counsel and shared with the developer indicate that, based on a project valuation of $300 million, the developer could share almost $80 million with Firelands School District over 30 years, rather than the $36 million he has offered. Even if fewer homes and less commercial development were less valuable, the development would:
· generate plenty of profits for the developer;
· leave plenty more for the school district; and
· help maintain Vermilion’s rural countryside character.
As someone, maybe like you, who is opposed to public financing for private gain, I feel the TIFs should not be offered by Lorain County.
If the project nonetheless goes forward, then as someone who is not anti-development, but instead in favor of responsible-development, I feel that it is incumbent on the school district and the city to require more. Vermilion’s City Council should not authorize a deal until more of the wealth is spread around and the developer offers a development plan that promises to preserve Vermilion’s character.
