posted by Mike Madison at 3:15 PM /
The school board will hear a TIF presentation from Allegheny County on Monday evening (3/12). If you can make it, please stop by. The meeting begins at 7:30 in the High School Library. Or (and) share your thoughts with the school board at schoolboard@mtlsd.net.
Bill Matthews, who has been tireless in his efforts to explain what the TIF is about and to explain why it's a bad deal for the taxpayers, has circulated a summary of the current proposal. I've copied the main points of Bill's presentation below:
Tax Increment Financing (TIF)
Basics of the Zamagias Properties Final Plan
1) The Washington Park project includes 72 condominiums (projected average sale price of over $550,000), 14,000 square feet of retail space, associated parking and open space along Washington Road.
2) Condominium owners of the Washington Park project will pay their ordinary property taxes to the school district and municipality just like every other property owner in Mt. Lebanon.
3) A significant portion (72%) of their “incremental” taxes will be diverted and used to pay TIF funded project debt, in lieu of being used for education and essential government services. (Incremental taxes are calculated as the difference between taxes payable on the properties today and taxes payable after the development.)
4) No taxes will be diverted from Allegheny County. The project does not meet the County TIF guidelines and therefore the County will not participate in the TIF.
5) The TIF Plan indicates “net” TIF proceeds of approximately $4.6MM for Washington Park. However, to net $4.6MM for the project, approximately $6.1MM will be borrowed. Please see the allocation and use of TIF funds listed on next page.
6) The total tax diversion over the life of the TIF will approach $9,000,000, including principal and interest payments. 82.6% of the diverted funds will be from the school district.
Allocation and Use of TIF Funds
Washington Park Tax Increment Financing Plan
$ 1,651,122 - Parking Improvements
$ 1,301,251 - Public Park (Plaza fronting Washington Rd., outside storefronts)
$ 1,088,329 - Land Acquisition
$349,029 - Utility Improvements
$ 155,801 - Funded Soft Costs
$ 64,138 - Intersection Improvements (Bower Hill & Washington Road)
$ 4,609,670 - Total Project Uses
$568,514 - Debt Service Reserve Fund
$502,514 - Capitalized Interest
$160,000 - Miscellaneous Costs
$140,000 - Legal Fees
$61,000 - Issuer Fee (1% - Redevelopment Authority of Allegheny County)
$57,951 - Underwriter’s Fee (0.95%)
$1,490,330 - Total Issuance Related Uses
$6,100,000 - Total TIF Borrowing
Bill Matthews, who has been tireless in his efforts to explain what the TIF is about and to explain why it's a bad deal for the taxpayers, has circulated a summary of the current proposal. I've copied the main points of Bill's presentation below:
Tax Increment Financing (TIF)
Basics of the Zamagias Properties Final Plan
1) The Washington Park project includes 72 condominiums (projected average sale price of over $550,000), 14,000 square feet of retail space, associated parking and open space along Washington Road.
2) Condominium owners of the Washington Park project will pay their ordinary property taxes to the school district and municipality just like every other property owner in Mt. Lebanon.
3) A significant portion (72%) of their “incremental” taxes will be diverted and used to pay TIF funded project debt, in lieu of being used for education and essential government services. (Incremental taxes are calculated as the difference between taxes payable on the properties today and taxes payable after the development.)
4) No taxes will be diverted from Allegheny County. The project does not meet the County TIF guidelines and therefore the County will not participate in the TIF.
5) The TIF Plan indicates “net” TIF proceeds of approximately $4.6MM for Washington Park. However, to net $4.6MM for the project, approximately $6.1MM will be borrowed. Please see the allocation and use of TIF funds listed on next page.
6) The total tax diversion over the life of the TIF will approach $9,000,000, including principal and interest payments. 82.6% of the diverted funds will be from the school district.
Allocation and Use of TIF Funds
Washington Park Tax Increment Financing Plan
$ 1,651,122 - Parking Improvements
$ 1,301,251 - Public Park (Plaza fronting Washington Rd., outside storefronts)
$ 1,088,329 - Land Acquisition
$349,029 - Utility Improvements
$ 155,801 - Funded Soft Costs
$ 64,138 - Intersection Improvements (Bower Hill & Washington Road)
$ 4,609,670 - Total Project Uses
$568,514 - Debt Service Reserve Fund
$502,514 - Capitalized Interest
$160,000 - Miscellaneous Costs
$140,000 - Legal Fees
$61,000 - Issuer Fee (1% - Redevelopment Authority of Allegheny County)
$57,951 - Underwriter’s Fee (0.95%)
$1,490,330 - Total Issuance Related Uses
$6,100,000 - Total TIF Borrowing
Labels: school district, TIF, washington park
11 Comments:
Bill, You continue to talk about the future tax revenue diversion of the TIF, but there is no future tax revenue without the development. What's the alternative... another CVS or Rite Aid? No thank you.
[If I read this correctly...]
Anonymous, can you talk about the present taxes being diverted from the education system? What's the alternative to that? One might be lead to believe the alternative is to use the income to the benefit of students.
A concerned soon-to-be resident arriving in mid-April,
I would be glad to talk about the alternatives, but first it is important to note that the Municipality controls the permitted uses of the site via the Zoning Ordinance. The property is zoned R-7. The R-7 Zoning District is intended to be primarily high-rise, high-density housing. CVS, Rite Aid or another “Big Box” retailer would not be permitted on the site.
Further and more importantly, the Municipality controls to whom and when the Parking Authority sells the property. This is the very reason the land has been idle for ‘oh these many years. It has absolutely nothing to do with the inability of the free market to work or the insidious “blight” conditions. Years ago, the Municipality directed the Parking Authority to purchase the property for future development. It has been a government project from the get go. It is that simple and to argue anything else is insincere.
To your question, here are a couple options:
A) Washington Park can be developed without a TIF.
B) Washington Park can be developed without a TIF and the Parking Authority, which is pocketing $520,000 in the deal, can use these funds and their anticipated revenues to finance their own parking spaces. Currently, the Parking Authority is contributing “$0.00”.
C) Another developer could develop the site. If you believe in the Community, as I do, you cannot dismiss the possibility both the site and Community are desirable and an appropriate development can be a reality - without TIF.
The Municipality had an “excellent” (their words) alternative proposal that did not require a TIF and over a 20 year period would return 3-4 million dollars more in tax revenues (on a present value basis). Of course the Municipality did not know this minor detail because it failed to perform any quantitative analysis to determine which proposal financially bettered the Community. In addition to passing over this alternative project, the Municipality has repeatedly attempted to convince the Community that a TIF was required by this alternative project.
We should remember the Municipality brought the “TIF” word up in the very beginning. The TIF possibility was mentioned in the Municipality’s Request for Qualifications (RFQ) document to develop the site. I have little issue with a developer pursuing a public subsidy; however in the end it must be justified, warranted and considered financing of last resort (not first as in this case). Interesting enough, if you have seen the Municipality’s PowerPoint on this subject, it declares a $6.1MM loan paid off with diverted tax dollars is NOT a “subsidy.”
Back to our story … The competing project ultimately said they would not require a TIF (in writing and in person at a public meeting I attended). But the Municipality refused to accept this truth, hanging its contention on a letter from a perspective lender that used the “TIF” word. For months folks waived this letter as validation of the Municipality’s position.
I had a copy of this letter and argued (to many deaf ears) the letter did NOT specify the project required a TIF. Back and forth we went, until I finally called the Senior Vice President of Citizens Bank who wrote the letter. My position was affirmed. Citizens Bank was not requiring a TIF; in fact they were very clear to me that this was not their place. The bank was only acknowledging that the “TIF” word was used early in the process and IF TIF was part of the financing package the bank would require copies of the terms in appraising its participation in the financing, a very reasonable and prudent request.
Nevertheless, the Municipality would not be deterred.
As they say … you can’t make this stuff up!
More later …
The School Board passed a resolution to issue $69 million of debt - the max without a referendum.
Will the $6 million of TIF debt lower our high school referendum debt limit to $63 million or will the board obligate us to pay debt service on $69 million for the high school and, without referendum, another $6 million for TIF?
I wonder why Academy Ave wasn't the sight for parking garage with a high rise above it? Or is thisin the plans for the future? Does anyone know if this is zoned R7?
Casey, There will be no present taxes diverted as a result of this development. The school district currently collects $10,466 in taxes for this site. After Phase II of this development is complete, the school district will net an additional $222,000 annually. This is new revenue that can be used by the school district to help pay for that new school being discussed in the community. Without the development, it only delays new revenue and a first rate project coming to our community.
Bill talks about zoning as an obstacle for a future CVS or Rite Aid... zoning can always be changed. It was changed for this project, no?
He contines to criticize the Municipality for trying to control the site. I applaude them for holding out for a first rate project. This development will help expand our business district and will be a future asset in the community.
Bill mentions that an alternate proposal didn't require a TIF. It is clear that the alternate proposal did require a TIF. The Economic Development Council who evaluated and interviewed the alternate developer continue to state that the alternate development did require a TIF too. The Citizens Bank memo that Bill mentions in his blog clearly states that a TIF was in play.
Casey, welcome to the neighborhood. You'll find a lot of passionate people here who care about the community. It's a great place to raise a family. Good luck with your move!
To answer your question about the $63 million debt obligation... Neither taxing body has any responsibility to pay this TIF debt should it not produce the anticipated increment. The only group on the hook is the investor.
The Academy Avenue lot is zoned: R-5 Multi-Family, Multi-Story. The R-5 District is intended to provide residential areas that accommodate multi-Story, higher density housing while enhancing existing residential character (MTL Zoning Code).
The current Washington Park site was re-zoned by ordinance on December 14, 1964 when the R-7 District was created. The Municipality takes a long term approach to Planning and Zoning and does not change the Zoning Code willy-nilly --- this is a good thing.
Back to the TIF:
Certainly, any developer is interested in talking about a TIF, it can be very low hanging fruit, but the alternate developer did NOT require a TIF. Their position was the project could be financially viable without a TIF and was very much prepared to move forward without a TIF. Interesting though - the Economic Development Council did NOT say the developer required a TIF. What the EDC said was:
"While both teams said they may pursue a TIF to justify the developer’s risks, we believe that both projects with their extensive parking facilities and other public improvements would clearly require a TIF or a Neighborhood Improvement District designation, no matter which developer were selected." (EDC 07/07/05)
So it was the EDC’s opinion, not the developers’ assertion, that both “required” a TIF or Neighborhood Improvement District (NID). The NID option was never explored or even understood by the EDC, as demonstrated by describing these as “Equivalent Financing Requirements.” It just ain’t so. NID is a totally different animal. Unlike TIF, it would have had no financial implications outside the four walls of the development. And for the record, the competing developer did not say it "required" a NID either.
Regarding the bank letters, I am the only person to seek independent clarification of the Citizens letter and confirmed it said, what I said, it said! The author of the letter indicated anyone was welcome to call for additional clarification, but there has been no such initiative by the Municipality. It was simple more convenient to use the letter out of context.
When Zamagias Properties was asked to submit a similar letter indicating “probable funding sources,” at the request of the Municipality, their letter from Sky Bank read, in part, “In the bank’s opinion, Zamagias Properties has the financial capacity to develop additional real estate projects in excess of $50 Million …” There was nothing said about a TIF. In fact, TIF was no where to be found in their initial RFP response. It was not in their financing letter or project schedule. The idea was introduced at a later date.
Anonymous 9:46 - Municipality, ML EDC, Parking Authority, Houston Harbough.
Which one do you work for?
Anonymous 12:34
I am a citizen of Mt. Lebanon and don't work for any of the entities you listed. Beleive it or not there are a lot of people in the community that don't agree with your philosophy on TIF (or lack there of) and development. Bill Mathews isn't the only educated person in the community on the subject.
Anonymous 5:38, you may be educated, but your earlier statement that the alternative proposal REQUIRED a TIF is not correct, and neither are claims by the ML EDC that this requirement was part of the second proposal. And just to clear one thing up, I am not aware of any of those who are opposed to the TIF being opposed to the development - these are two different issues.
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