COUNCIL APPROVES PUBLIC HEARING ON TAX INCREMENT FINANCING OF GARDEN STREET CONNECTIONS
The City Council approved holding a public hearing on January 19, 2021 beginning at 7:00 PM to gain input from community members regarding proposed Tax Increment Financing (TIF) of Garden Street construction.
Garden Street is planned to connect Dorset Street near Health Living to Midas Drive near the Midas repair facility. Opening up this connection would take traffic off of Dorset Street and Williston Road and ease congestion at the intersection of the two.
Construction of the interior portions of Garden Street have been the responsibility of City Center LLC, the owner of the largest, centrally located portion of land of the overall City Center development. City Center LLC has completed the northerly section of the road that runs alongside the Garden Street Apartments at the corner of Garden and Market to their northerly property line. Additionally, much of the construction of the road base and utilities has been completed on the southerly portion of the road that connects from Market Street to the existing completed portion between Health Living and Trader Joes.
What remains to be done to complete the connection is the City’s responsibility. The project to be discussed on January 19th would be to make utility and sidewalk improvements on the existing portion of the road connecting with Dorset Street as well as build a complete road from the end of the existing northerly portion of the road over to Midas Drive. (see diagram)
The projected total cost for the project including related costs is just over $4 million. This project is 100% “TIF eligible” which means that TIF funds can pay for the entire project with no cost burden falling to the South Burlington property tax payer.
Under Tax Increment Financing, the State allows the City to retain all incremental taxes generated when properties in the TIF District (Generally the area along Market Street and also the area bounded by San Remo Drive) are improved. So, as the building out of City Center continues and properties are improved – built upon – additional taxes are generated from those improvement values. Normally much of that tax would go to the State Education Fund. But under TIF, the State allows South Burlington to keep those incremental tax revenues as long as they are reinvested in our Downtown; City Center.
Here’s an example of how TIFs work, if a property is valued at $100,000 for tax purposes and a building is constructed on that property that raises the total value to $1,000,000, there is a $900,000 increase in taxable value. All of the taxes on the $1,000,000 are paid to the City by the owner of the property but the taxes on the $900,000 of incremental value – both educational taxes and municipal taxes – are retained by the City to invest in City Center infrastructure like completing Garden Street.
By using TIF, there is no additional burden on local property tax payers to finance the completion of Garden Street.
So, what would happen if the buildout of City Center does not happen or does not happen to the extent as envisioned in our build-out analysis? To offset that risk the City created a City Center reserve account a number of years ago into which funding is added each year. These amounts are already included in the General Fund budget and would be available to augment TIF funds, some of which are already being generated, to cover the debt for the project. The City can also tap transportation impact fees available that would also back-up the TIF revenues generated.
The City Center reserve fund serves as an insurance policy of sorts. Staff have been very conservative in financial projections for the TIF district and have high confidence that the amount needed to fund Garden Street and the prior voter approved TIF projects will be adequate to cover debt on construction. Still, the Council, with voter approval, has built up the reserve fund and that will continue each year as necessary.
By State statute, the City’s ability to incur debt for TIF projects approved by the voters will expire in March of 2023. After that no additional debt can be incurred by the City that can be paid for by TIF revenues. If the Council decides to go forward with a vote to approve TIF debt for the Garden Street project at the March Annual Meeting, and voters approve, then the project can be funded 100% by TIF.
However, if the project is not approved by the Council and voters before the deadline by which to incur debt than any future connection of Garden Street would be South Burlington taxpayers’ responsibility.
The Council urges interested South Burlington residents to participate in the public hearing on this matter scheduled for January 19th at 7:00 PM. The hearing will be held electronically as part of the Council’s regular business meeting.
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