The city council's decision on Monday to expand an existing TIF district is the final step in bringing a market basket to Penacook near exit 17. However, the question often arises: what is a TIF district and why does Concord use it?
While we wait for Arthur T. to show up and cut the ribbon on the new business, here's a basic TIF statement with help from Matt Walsh, Director of Redevelopment for the city.
TIF stands for …?
Tax increase financing. Unlike the graphic format known as GIF, there is no debate about how the acronym is pronounced. it's "tiff".
TIFs have been legal in New Hampshire since 1979 thanks to RSA 162-K. Concord had five TIF districts, two of which were paid out.
This district was established in 2010 to cover 47 acres around the former Allied leather tannery in Penacook. On Monday, the council expanded it to 242 acres extending north to the Canterbury Line and exit 17 of I-93.
And what does a TIF do?
It's basically a way to save additional property tax payments from development that are attracted by the construction of infrastructure like roads, aqueducts, or parks. In this way, the debt incurred to build this infrastructure plus the associated costs can be paid off.
In this case, the TIF district includes transforming the intersection of Whitney Road and Hoit Road, also known as State Route 4, into a roundabout, and widening or upgrading the associated roads to allow traffic to move into an expanded Concord Crossing development can Penacook.
Safe passage of more cars through this intersection has been part of the city's capital improvement plan and state transportation plan for almost as long since 2004, "but never climbed to levels that are actually funded," Walsh said.
The planned development, which could open a liquor store next year and a long-awaited grocery store in early 2023, provided the impetus. "But for the TIF, you'd never get to the market basket, liquor store, and anything else that comes into the district over time," Walsh said.
Why not just pay as usual?
Converting the intersection into a roundabout with improvements will cost approximately $ 4.78 million. That's a lot to put on everyone's taxes, even if they're spread out over a 20-year bond.
The goal of a TIF is to use additional taxes that arise from private improvements due to the TIF development to pay off the debt, rather than taxes from everyone else.
It works like this: The currently determined value is calculated for a certain property and the property tax on this value continues to flow into the city and school coffers as before.
An increase in the estimated value due to the development is also calculated, but the property taxes associated with this additional value do not flow into the general fund. They are kept separate and used to repay the bonds and operating costs for the additional development.
What are the numbers in this case?
According to city officials, converting the intersection into a roundabout with the associated improvements to Hoit Road and Whitney Road leading to the new development will cost $ 4.78 million.
Of this, the city's stake is $ 4.33 million, funded with $ 4.24 million in TIF bonds and $ 90,750 in impact fees related to other recent developments in Penacook. The remaining $ 449,250 will be provided by Interchange Development LLC. Covered and used to pay for the portion of road improvements to be built by the city in Canterbury as the TIF district ends at the city limits.
Both the city and the developers can get out of business if the actual costs exceed their respective budgets. The bids are due on May 10th.
Although the state owns Hoit Road, it is not contributing to its widening and other improvements, or to the work required to straighten Exit 17 north. They will continue to plow the state road, but the city will need to maintain the sidewalk, landscaping at the Hoit / Whitney roundabout, and other components of the road improvements, Walsh said. The estimated annual cost of this is $ 24,000.
Separately, Interchange Development will maintain landscaping at a smaller roundabout on Whitney Road at the entrance to its development, as well as on some sidewalks.
The current estimated value of the package that the Market Basket and state liquor store go into is $ 2.72 million. The property currently pays property tax of $ 84,649 annually, which continues to flow into the city, Merrimack Valley School District, county, and state.
Once the shops are built, the property's estimated value will rise to $ 12.145 million. Property taxes associated with this $ 9.43 million increase in value are estimated at $ 293,500 which will be withheld by the TIF district and used to pay debt servicing and operating costs for road improvements.
The $ 4.24 million debt for the road works, likely split between 5-year and 20-year bonds, costs an estimated $ 320,000 per year in debt payments, although the number is uncertain until the bonds are actually sold . Including the operating cost of $ 24,000, the total annual cost of road improvements is approximately $ 345,000, which is about $ 50,000 per year more than the estimated taxes from the new development.
This shortfall is covered by money accumulated in the TIF district in recent years.
"After debt servicing and running costs, the Penacook TIF district has had a small annual surplus in recent years that the city has saved," said Walsh. "By the end of the city's current fiscal year, the TIF will have around $ 190,000 in the bank."
This is an example of how TIF districts can drive development because without these funds to cover the deficit this project might not have been approved, but also a reason why they are causing some people's problems. Without the TIF district, that $ 190,000 would have flowed into the city coffers all along. Without the TIF district, the taxable appraisal might not have existed.
Are TIF Districts Forever?
According to state law, the debt is settled as soon as it has been paid and its purpose has been fulfilled. The lifespan depends in part on whether a new taxable development is created, which is the goal. Walsh said this TIF "could exist until 2044, but a new development could pay it off by 2037."
(David Brooks can be reached at 369-3313 or [email protected] or on Twitter @GraniteGeek.)