Shouldn’t the City spend $28 million dollars on other community priorities like education, parks, public safety, and not this development?
The City does not have $28 million in a bank waiting to be spent. The property owner is responsible to pay up to $52.5 million in property taxes over 20 years depending on the final assessed value of the project. Depending on what is received in the area each year, up to $28 million will be reimbursed back to the property owner from their own property-taxes. Therefore, this reimbursement is not actually from Salt Lake City general tax-payers. The portion that the City retains from this growth, which is estimated between $9-$13 million over the 20-year period, could be used for any City purposes like streets, parks, public safety, etc. Additionally, 7% is set aside for affordable housing, which could generate $3-4 million over the 20-year period.
Will City Council Members personally profit from the development?
No, they will not. The City’s Conflict of Interest ordinance is more robust in its limitations than other conflict of interest statutes throughout the State. The ordinance prohibits Council Members from profiting from how they conduct City business and requires Council Members to disclose any business entity relationships. No Council Member has a business relationship with the property owner. The City takes its ethics standards and requirements very seriously. The City has a Fraud, Waste, and Abuse hotline available to the public and City employees should they suspect a violation. Allegations shared with this hotline are investigated by an independent third party.
Could development move forward without the tax increment reimbursement?
The property owner is entitled to develop the property according to the zoning regulations. There is a cost savings to City taxpayers for the developer to put in the streets and utilities at the same time they are developing their project. There is also value to the taxpayers due to the developer paying the cost for those facilities up front. Essentially, by allocating tax increment funds through this agreement, the City would end up paying for public infrastructure over time without interest. Absent the City executing this agreement, the City would not achieve the cost savings of having the improvements put in during the development process.
Why does the city encourage property owners to develop streets, utilities, etc.?
Individual developers would likely not build streets and utilities to the extent that it would benefit the broader area without the reimbursement agreement. It is less expensive for the larger size pipes and utilities in the street to be placed with initial construction than for the City to come back later and build a bigger road and put in greater capacity utilities. The CRA (previously RDA) is a tool established by Utah Statute to allow government to share future revenue with the property owner that generates the revenue. Governments typically require that the property owner dedicate the funds to public improvements or on-site improvements that enhance the development. Tax-Increment Reimbursement may also be allocated to help property owners address unique circumstances associated with a property.
How does the City pay the developer for infrastructure such as streets?
If the Board approves the tax increment reimbursement application, the developer will construct infrastructure and the RDA will pay the developer back over time for that infrastructure. This will be a post-performance agreement, meaning that the developer will only get paid if the improvements are constructed and the value of the property increases to generate more property tax revenue.
Why doesn’t the property owner pay all the costs of the project?
The City’s adopted Northwest Quadrant Master Plan establishes a policy vision for economic growth to provide the overall City with opportunity, revenue and jobs. In order to incentivize this growth to occur, and in a sustainable, environmentally responsible way, the City created a Community Reinvestment Area (CRA) to help facilitate development. CRAs are a commonly used tool to help the City achieve a particular policy goal for development.
What kind of oversight will the City have to ensure the reimbursement is for the right expenses, and the City isn’t overpaying?
If the Board approves the tax increment reimbursement, the property owner will be required to submit final invoices for the agreed-upon “reimbursable expenses” to City staff for verification of costs. Additionally, the property owner will only get a portion of the property taxes actually generated each year. If the tax receipts are lower than expected, then the property owner will receive a lower amount. The property owner and the RDA will also execute a tax increment reimbursement agreement which will also contractually require the developer to construct the improvements in order to be paid the reimbursement.
Will this development encounter the same overrun costs as the prison? (factors like high water table, etc.)
Like any development, project costs are difficult to finalize, however the City is only responsible for reimbursing up to $28 million to the developer regardless of the final project costs. If the project costs more than originally expected, the difference would be paid by the developer not the tax-payers.