The Joplin Globe, Joplin, MO

November 24, 2012

Master developer: Delay could cost projects

By Debby Woodin
news@joplinglobe.com

JOPLIN, Mo. — Not pushing forward this week with work to establish a tax increment financing district for tornado redevelopment could cost Joplin some of the projects proposed for the plan, according to Joplin’s master developer.

David Wallace, CEO of Wallace Bajjali Development Partners of Sugar Land, Texas, said the city cannot extend its deadline to act on the proposal as requested by the Joplin School District without risking a loss of potential revenue. Wallace Bajjali has a contract with the city to guide the town’s redevelopment in the wake of the 2011 tornado as Joplin’s master developer.

“The creation of the TIF and doing it this year is a significant component to the capital structure of these $800 million in projects,” proposed to replace housing and build a new library, performing arts center, and retail and mixed-use districts.

“If it does go into effect by January, I believe all of those $800 million (in projects) will be accomplished,” Wallace said last week. “If not, a number of those projects will fall by the wayside. So a successful conclusion will have a significant conclusion on the redevelopment of Joplin.”

The proposal met a hurdle when the Joplin School District said the existing proposal would freeze its revenue base at the assessed value of properties after the 2011 tornado, $34 million lower than before the storm. The school district said it would lose about $22 million over the 23-year life of the TIF. The city has offered a $12 million lump-sum payment, but the school district wants annual payments that increase 1.5 percent a year for the 23 years.

The city has offered the $12 million lump-sum payment because it could be made from grants the city has obtained. But that requires the money be used for construction of Franklin Technology Center, because of requirements that the federal government puts on the use of grant funds, and not for operational costs of the schools.

Additionally, the school district wants the master developer and city to agree to prioritize the redevelopment projects and to issue callable bonds. Call bonds allow the borrower to refinance if interest rates fall. In that case, the bonds could be paid off earlier or refinanced at less interest, resulting in a savings or surplus that could be passed on to the other tax districts in the TIF, such as the schools.

The district also predicts enrollment growth of potentially 2,630 students as a result of the housing construction proposed in the redevelopment projects.

Wallace said last week his firm was evaluating the school district’s numbers for the purpose of trying to settle on an agreement. He would not disclose what was being offered to the district.

While the city would like to clinch a deal this week, school district officials on Friday did not believe the school board would make such an agreement in that amount of time.

But the city could proceed if it has enough votes from the City Council.

TIF districts struggle

Joplin’s tug of war over a proposal to help fund tornado redevelopment with a tax increment financing district is not uncommon.

Many other cities face similar struggles with TIF districts.

In Joplin’s case, the TIF district would take in most of the center of the city, including much of the tornado zone and all of downtown. It would take the growth in taxes from increases in real estate assessments and a portion of sales taxes beyond a designated date to help pay for a program of housing and business development.

Wallace has said the proposal could take in about $60 million that could be used to help pay for $42 million in bonds plus costs for construction of projects.

School administrators also have voiced concerns about using a tax district to finance nontaxable public projects, such as a library or a performance arts center.

The city could proceed if it has enough votes from the City Council, but officials in other cities say it is best to have agreements with all the other taxing entities involved before proceeding.

‘A dirty word’

Kansas City officials are currently trying to resolve a disagreement with the Raytown School District over a TIF proposal there.

That city wants to take $11 million in leftover money from a TIF district it created to develop a business park to invest in building soccer fields with the professional soccer team Sporting Kansas City, which is intended to attract visitors to the city. That move is opposed by the Raytown School District, which believes it should get the money now that the original purpose of the taxing district has been achieved.

“Soccer fields are a pretty good thing rather to dump a lot of money into another office building; a lot of kids would get a lot of good out of it,” said Danny Rotert, communications director for Kansas City Mayor Sly James. “The trick is we often find ourselves fighting about other things such as past TIFs gone wrong. TIF is always a dirty word to some folks. Some oppose this TIF because it’s a TIF. It’s too bad because it’s not always bad and deals can be worked out.”

Allan Markley, superintendent of the Raytown School District, said the stickler in this case is Kansas City wants to use money collected from a TIF in the Raytown district for soccer fields that are located in another school district. City-owned soccer fields do not produce a tax base for future revenue in the district either, Markley said.

“Obviously with a TIF, the purpose is to stimulate economic development in your area so you’re hoping to see long-term gain,” he said. “You give up some short-term gain hoping there would be payoff at the end of the day.”

Closer to home

Even the districts that get everyone’s nod in the beginning can develop stumbling blocks.

The city of Monett tied its economic development future to two TIF districts, one created in 1996 and another in 2005. The TIFs are used for infrastructure improvements on Highway 60 and new Business Highway 60, said Dennis Pyle, city administrator.

Monett straddles the Barry-Lawrence county line. Both have filed lawsuits since voters enacted new taxes, portions of which went to the TIF districts. Barry County challenged them when a 911 tax was approved by voters. Lawrence County objected when part of its capital improvements taxes for road and bridge construction went to the TIFs, but it has since withdrawn its lawsuit.

“The counties receive the same as they received before (the TIFs) plus 50 percent of the sales taxes on the new development” that takes place, Pyle said.

In the case of the Monett School District, it receives all of the real estate taxes it did when the TIFs were formed, but the increase of tax revenue generated by increased assessments since the TIFs were formed goes to the TIF fund.

“The schools are forfeiting future property taxes from the new development” to help foster economic development in the city, Pyle said. “Our relationship with Monett R-1 School District has been exemplary. They have supported both TIF projects we have done and continue to support the TIF.”

Monett has spent $450,000 in legal fees to defend against the county lawsuits, but has taken in $17.5 million that Pyle said it would not have received had it not put the TIFs in place to build highway, streets, sewer and water systems that allow new businesses to become established.

Timeline

The Joplin School District asked, in a letter Nov. 16 to the TIF Commission expressing its concerns, for an extension of the TIF timetable, which calls for a public hearing Friday with a TIF recommendation to go to the City Council for its consideration in December.

Wallace said last week that delaying action is not a possibility.

“If we wait until after Jan. 1, it has a significant impact on what the TIF revenues will be able to generate,” he said. “It will have to do with the county’s interpretation of what you do use and don’t use as assessed value.”

Wallace said that proceeding as proposed, the TIF has a potential to generate $60 million.

“After Jan. 1, that number drops significantly, down to about $35 million,” he said. “If we do that, some of the projects will not happen,” Wallace said.