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Thread: ED without funding

  1. #1
    moderator in moderation Suburb Repairman's avatar
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    ED without funding

    OK folks, here's my problem:

    Our city wants to take steps toward encouraging economic development by creating an economic development corporation, but we have serious problems with funding. Our city is to affluent to qualify for Enterprise funds or CDBG. Also, our sales taxing ability is tapped-out at 8.5 between the county sales tax, city sales tax and a special library district sales tax. Normally, an EDC is funded by a half-cent sales tax here in Texas. I've considered TIFs, but I'm not sure how flexible those are and how receptive the council would be to them (TIFs around San Antonio have had some bad publicity). I would really love some ideas for encouraging economic development with limited funding. Thanks.

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

  2. #2
    Cyburbian Emeritus Chet's avatar
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    You just described our problem too! We cant levy sales taxes in WIsconsin.

    Our Council has agreed that short term they need to levy funds to seed the ED program, but they have yet to decide whether or not to hire staff to do the work (or re-assign current staff duties). To date all of their funding has been going into strategic planning which IMHO really is the first thing every community should do.

    TIF can fund administration costs as well as developer incentives, but its too area specific to do our 36 square mile community much good over the long run.

  3. #3
    Cyburbian SGB's avatar
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    Do your state laws allow EDC's to be funded via property tax? Would the electorate revolt at the thought?

    Throw a couple of cents on the mil rate and see what you might get to work with.....
    All these years the people said he’s actin’ like a kid.
    He did not know he could not fly, so he did.
    - - Guy Clark, "The Cape"

  4. #4
    Do you have any hotels or car rental places? You could consider implementing or increasing hotel taxes and a car rental tax to help with ED programs.

    These are usually easier to pass since they are usually paid by non-resident visitors to your city.
    "I'm a white male, age 18 to 49. Everyone listens to me, no matter how dumb my suggestions are."

    - Homer Simpson

  5. #5
    moderator in moderation Suburb Repairman's avatar
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    Our community has a very small business base; we're mainly a bedroom community right now, but it looks like our Comprehensive Plan steering committee is leaning away from that mentality (hence the need for economic development). We don't have hotels or car rental, yet. This is a beautiful area that will probably end up with resorts. I hadn't thought much about the property tax. Even though we're only at $0.16 per hundred dollar valuation, the council is extremely resistant to tax increases. The county appraisal district keeps raising property values, so the citizens are already pissed about all the taxes they pay. With enough community education about increased sales tax revenues leading to less reliance on property taxes, we might be able to sell that.

    "Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy. All you have to do is tell them they are being attacked and denounce the pacifists for lack of patriotism and exposing the country to danger. It works the same way in any country."

    - Herman Göring at the Nuremburg trials (thoughts on democracy)

  6. #6
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    Use of TIFs

    legal beagle, here...so anything i say that's not law-related (even things i say that are law-related) should be taken with a melon-sized grain of salt.

    tif projects have done very well elsewhere; check michigan for a few examples, and it can be a great way to generate a development incentive with less money out-of-pocket.

    one of the biggest complaints about tif's, however, is that they generate additional costs without providing any money into the public coffers to pay for those added expenses. there are some articles that discuss this problem in pittsburgh.

    imagine, if you will, if an individual could use a tif to make improvements (sorry for the sexism, it's just easier) on his house. the increase in the values would eventually make its way into the public coffers, but not much incremental expense is added to the city in the meantime. or you could offer such a program for retailers.

    i don't know...i'm just sort of making this up on the fly, but i suppose i could work. you might have a minimum amount of an investment--say $10,000--to qualify for have your own tif, and then you could agglomerate the individual tifs within the city and securitize them through a bond issuance.

    please feel free to critique this thought with full force; they give everyone a good set of thick skin on the first day of law school...

  7. #7
    Cyburbian Cardinal's avatar
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    My organization is twenty years old, and covers a community of about 14,000 people. We have an annual operations budget of around $150,000, and capital budgets from a few tens of thousands to over two million dollars, depending on what we are doing that year. We also have assets with a market value in excess of $6 million. For some reason, other communities keep asking us how we did it.

    Our funding is derived from a combination of general fund, TIF, administrative draws on CDBG programs (very small), leases, and investment income.

    Operations are funded half through the general fund and half through TIF. The percentage was determined by an analysis of the amount of resources dedicated to promoting development within the TIF districts vs. elsewhere in the city. It has not been too hard a sell (although I expect the school board would object to future TIFs). Not long ago I profiled a particular project for my board, the plan board, and the council. It began with the purchase of 40 acres for $250,000, its subdivision, and the sale of 17 of those acres for $470,000. Not a bad start. We had projected $13 million of value increment, which we have reached, with three of four project components unfinished. The new projection is $19 million, which will generate $450,000 in taxes. Land sales will return about 60% of all of the costs that went into developing the site. TIF paid for about $600,000. Most of our TIFs will retire about the same time. There is some thought that when that happens, the school district would receive enough of an increase to build a new school without having to raise its levy.

    We fund our development projects through a combination of TIF, our own funds, the general fund, sewer and water utilities (not much), and grants. Our projects are typically set up to break even when our own funds are invested, or to build our cash reserves when TIF is used. For example, we may use our funds to purchase land at $5000 per acre. We would then use TIF to install infrastructure, as a grant from the city to the ED organization. We then sell the land for $10,000 an acre and pocket the difference.

    Hope those ideas help.

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