OUR VIEW: County should tread lightly with Wild Oak TIF extensionThe commission hasn’t yet decided, but it’s apparent some members are apprehensive, including Denny Kiner, who said “a deal is a deal.” At this stage of the discussion, we agree with Kiner.
By: Editorial board, The Daily Republic
A local developer is asking for an extension of a deal made nearly a decade ago, and we find ourselves among those who are skeptical and have questions.
The Davison County Commission, at its regularly scheduled meeting Tuesday, discussed a request by developer Wayne Puetz and his attorney, Don Petersen, to extend a tax increment financing district on the city’s east side.
Such districts, generally known as TIFs, often are used to help defray costs of development. In a TIF district, financing is issued for infrastructure improvements, such as road paving, curb and gutter, and water and sewer mains. That infrastructure aids development in the district, such as business or home construction.
New taxes — or higher taxes, in some cases — are then captured for an agreed-upon period of years to pay off the initial financing. A frequent point of contention with TIFs is that, for those agreed-upon years, the new and higher property taxes flow to the debt rather than taxing entities such as cities and counties. Once the debt is paid or the TIF period ends, whichever comes first, those taxes are redirected to the local taxing entities. Some say TIFs spark development and grow the tax base; others say TIFs amount to corporate welfare for projects that might have been built even without the extra help.
Tuesday, members of the County Commission were asked for an extension on a TIF district that was created in 2004 and which is due to expire in 2014. The project was formed to aid a housing development around Wild Oak Golf Course.
Although the agreement was for 10 years, the commissioners are being asked for an extension of at least another year or two by Puetz and David Backlund. The developers say they were blindsided by a poor economy, which kept them from meeting development goals and generating enough new and higher property taxes to pay off the initial financing.
An extension would mean the county would have to wait even longer before it could begin collecting taxes on the development within that district. At stake is the nearly $500,000 that remains to be paid off from initial financing said to have totaled $1.015 million.
The commission hasn’t yet decided, but it’s apparent some members are apprehensive, including Denny Kiner, who said “a deal is a deal.”
At this stage of the discussion, we agree with Kiner.
According to the wording of the TIF contract itself, “the county has made no representation that the proceeds from such fund shall be sufficient to retire the indebtedness incurred by the developer. … In addition, the developer specifically agrees to hold the county harmless and indemnify the county regarding any indebtedness incurred herein.”
Our interpretation: The developers agreed to take on the risk if the new and higher property taxes weren’t enough to pay off the debt. That’s a promise that is commonly made and touted when developers are trying to convince local governments to create a TIF district.
We understand that TIFs can be good for the tax base over the long term, yet we also feel taxpayers shouldn’t be expected to shoulder the burden of TIF deals that don’t turn out as planned. After all, the Wild Oak developers were given 10 years and have diverted nearly $600,000 in property taxes to aid their project. It could be argued that the taxpayers of Davison County have done more than enough already.
If the county grants this extension, it’ll be hard not to do it for others who ask the same favor.
We suggest the county tread lightly in this case, and truly think about the repercussions that could arise with an extension of the Wild Oak TIF.