St. Roberts grants TIF

City grants TIF

By DawnDee Bostwick  Waynesville Daily Guide

Tue Feb 24, 2009

Burnt-out and abandoned, the Village Inn Motel outside Fort Leonard Wood’s north gates will soon be torn down, with demolition work possibly starting as early as mid-March.  The 120-acre property, once owned by Majorie and Norman Fields, was bought by Fort Wood Investments, LLC. The purchase not only settled a long-standing lawsuit between St. Robert and the Field’s family, but opened the doors for new development on the land that will hopefully attract consumers and businesses.   The company’s redevelopment plan currently calls for a new hotel and convention center, although other commercial development has been discussed in addition to the proposed hotel and convention center.  Cost wise, the venture will reach into the millions. To help the developer reclaim some of the capital it will take to make the property a viable part of the city again, the Woodland Hills project will be a tax increment financing district.

Tax increment financing (TIF) is a public financing method that allows sales tax generated in a particular area to be redirected to the developer for a certain period of time. The theory behind TIF is it helps create funding for projects that otherwise might not have ever happened because of costs involved.  “This is a perfect case of what this statute is designed to do,” St. Robert City Attorney Kevin Hillman said. “That property isn’t producing anything for us. Without this, I don’t think that property would ever be cleaned up.”

Under the agreement approved by the St. Robert Board of Alderman and signed by both the city and the developers Thursday, 75 percent of the sales tax produced from the property will go back to Fort Wood Investments, LLC for a period of 24 years or until the return hits the cap of $19 million for the total project. The city would receive the other 25 percent of the sales tax until the TIF is closed out. Then, 100 percent of the sales tax revenue would go to the city.  Because the city did not guarantee the debt, St. Robert won’t be liable if the developer defaults.  “The real risk is on the developer because, if in 24 years, it doesn’t pay off, it doesn’t pay off,” Hillman said.   

This is not the only time the city has created a TIF to help development. One such project, scheduled to last 20 years, closed out 12 years early because the cap had already been reached.  In 1998, the tract of property the TIF was created for on St. Robert Boulevard was assessed at $43,270 and generated no sales tax.  Ten years later, the same property, now developed, was assessed at $1.72 million and generated $180,000 in sales tax revenue. Now that the TIF is done — it was closed out in 2008 — all the sales tax goes to the city.  While an extraordinary example, Hillman said, it shows what TIFs are intended to do —  improve underdeveloped areas to create economic activity that helps cities and their citizens have a better quality of life. 

In addition to the TIF, the Woodland Hills development will include a Community Improvement District (CID), which could levy an additional one cent sales tax, with 1/2 cent going back to the developers. The city would have three representatives on the five-member CID board. Representatives from the developer would make up the other two seats. Having the CID in place means more funds could be generated for community improvements that extend beyond building roads.  “The CID is like a mini city,” Hillman said. “It’s broader than what a transportation district can do.”

The TIF is capped at $15 million and the CID at $4 million. Once those totals are reached — even if it’s earlier than the 24 year term — the financing ends and the total revenues brought in go to the city.  Fort Wood Investments, LLC has paid the cost of bond counsel and put a lot of money into the project already, Hillman said.   “These guys have already invested a significant amount of money in the city,” he said, adding that just clearing the property will probably cost between $1 million and $2 million.  Additionally, of the 120 acres, 5.1 acres have been donated back to the city to create a recreation area.