October 17, 2013 9:59:12 AM
Tax increment financing plans -- otherwise known as TIFs -- have been used as a funding mechanism for large-scale infrastructure projects for decades, but the concept is gaining popularity with potential developments around the Golden Triangle.
TIFs are used to pay off the cost of improvements to properties that will ultimately generate more revenue for the city and county through higher tax assessments when those improvements have been completed.
Repayment of the bonds is the increment increase of ad valorem tax and sales tax as a result of development. It's the decision of local governments whether or not to pledge the sales tax, the ad valorem tax, or both. It's also the city and county's choice as to how much they are willing to pledge.
On Tuesday, Columbus councilmen and Lowndes County supervisors set public hearings for next month on issuing TIF bonds for a retail development on the University Mall site on Wilkins-Wise Road and the Moore's Creek project on 18th Avenue which will consist of three hotels there when completed. Starkville aldermen have previously allowed that to be the way The Mill at MSU will be funded.
Columbus developer Mark Castleberry is involved with the latter of those two projects plus another in Starkville at the site of the old Coca Cola bottling plant for which TIF bonds have already been issued. There is a risk to developers associated with TIF agreements because they have to fund infrastructure improvements up front, he said, but it's a fairly simple process that can be handled at both the city and county levels.
"They're relatively simple compared to some of the other incentives out there," Castleberry said. "The Moore's Creek Project, we have far more money in infrastructure than the land is worth. You can go out and buy sites in Columbus cheaper than the developed value of that site. Unless we had incentives, that site would never be developed. Therefore, it would never be maximized on the city/county tax roll. They're not giving away money. They're getting money they would have never gotten before."
Mississippi State University professor of economics Meghan J. Millea said TIFs are employed nationwide.
"This is not uncharted territory," Millea said. "Typically TIFs are used when you otherwise wouldn't be able to secure bond funding. You're taking the marginal increase in property tax values to pay off the bond that issued to finance whatever the public sector project is. This is a funding mechanism that is well researched in the literature of public finance."
One of the criticisms of this method, Millea said, is that if an individual TIF bond issue does not cover all the expenses of infrastructure upgrades, other revenues would be needed to make up the difference.
"You have the development of the property itself but you also are going to have public infrastructure needs that support the additional activity on that site, so the degree to which the initial bond covers that," she said. "The criticisms would be if that is not included it puts a bit more of an expenditure burden on the local public sector. It has to either come from a substitution away from something they've already spent funds on, or higher tax rates."
Thinking they could face that scenario, councilmen and supervisors amended the $3 million TIF agreement in place for the Moore's Creek project in August 2012 to $3.845 million. That's the amount that will be considered for issuance Nov. 4 during public hearings. The city and county will each pledge 50 percent of the ad valorem property values. The other development to be considered at that time involves two major retail chains locating at a 50,000-square-foot facility to replace the abandoned University Mall building. They will then approve a $1.25 million TIF bond issue. For that, the city and county would pledge 100 percent of ad valorem revenue with 65 percent to be utilized to service debt, while the city would pledge 65 percent of sales tax revenue generated from the site.
Both of those developments would be in full operation by next fall.
Nathan Gregory covers city and county government for The Dispatch.
1. Starkville man dies in Hwy. 45 crash COLUMBUS & LOWNDES COUNTY
2. Man killed in University Hills Mobile Home Park shooting STARKVILLE & OKTIBBEHA COUNTY
3. Imagination Library begins in Columbus COLUMBUS & LOWNDES COUNTY
4. Sanderson Plumbing seeks buyer COLUMBUS & LOWNDES COUNTY