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TIF proposal could have boosted county revenues, TIF Advisory chairman says

Zach Vance • Mar 2, 2019 at 9:00 PM

Last week, the Washington County Commission rejected a tax increment financing, or TIF, plan that would have allowed the Johnson City Development Authority to buy and redevelop the John Sevier Center for $4.6 million.

But it was the commission’s rejection of a preceding resolution, also related to TIFs, that still baffles JCDA board member and TIF Advisory Committee Chairman Craig Torbett.

“The first one that they voted down is the one that truly should have been an absolute no-brainer for them,” Torbett said.

That resolution contained two parts and was meant to “clean up” parts of the JCDA’s Redevelopment and Urban Renewal Plan. Johnson City was the first in the state to have a district-based TIF, Torbett said.

First, it would have raised the debt limit for the downtown TIF district so the JCDA could borrow the necessary funds to buy the John Sevier Center. Torbett said the debt service payment on that loan could have been repaid with existing TIF revenues, without taking into account the incremental TIF funds generated once the John Sevier Center was redeveloped and its value increased.

Increasing the debt ceiling is what prompted many of the commissioners to cast opposing votes.

However, according to Torbett and the attorneys who’ve worked with JCDA, Johnson City’s TIF District is the only one in the state that operates with a debt ceiling.

“The reason for that is because (a debt ceiling) is kind of pointless. You’ve got a city and county that can, at any time, with one single vote say, ‘We want to stop participation.’ Well, that becomes your debt ceiling,” Torbett said.

“Give (the debt ceiling) whatever astronomical number you want, the county has to approve each one of our requests, and at any point they stop approving it, there is your debt ceiling.”

The second part of the resolution would “modernize” how the increment, or growth of property taxes, is calculated from an assessment-base model to a tax-base model, to match current state law.

Torbett said the tax-base model would give the county more of the TIF funds during reappraisal years that is otherwise being used for redevelopment of the district.

“The absolute most conservative amount I can possibly come up with is $20,000,” Torbett said.

“We didn’t do it intentionally. That was the way the law was written at that time. Several other communities figured that out so they changed the state law. So, as Washington County is getting ready to go through a reassessment this year, we recognize there is a pretty high likelihood there is going to be an additional increment paid to us that quite honestly we don’t expect.

“The goal here is to never take anything away from the county that they wouldn’t have had before.”

A TIF does not raise property taxes, or any type of taxes for that matter. Once created, it freezes the amount of tax revenue coming from the district for the length of the TIF, which can last between seven and 30 years.

Once development begins to occur in the district, the value of the properties within the district begin to grow and the additional tax revenue collected in excess of the baseline, or tax increment, is redirected to a special account.

The funds in the special account are divided based on percentages authorized by the state, with roughly 46 percent going to the county for debt service and general use. The remainder is then be used for improving or further incentivizing development within the TIF district.

In 2008, the total value of property in the TIF district was just over $166 million. In December 2018, the total value of property in the TIF district has grown more than $87 million to $253.9 million, a nearly 53 percent increase.

For comparison, growth outside of the TIF district during the same period went from $8.7 billion in 2008 to $9.7 billion in 2018, a 10.3-percent increase.

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