NEWS

TIFs aided development, but added debt for city

Kent Mallett
Reporter
  • The city spent almost $3.6 million more than it has received for the Longaberger and Deo Drive TIFs.
  • In a TIF, property taxes from new developments help pay for area road and utility improvements.

NEWARK – The city’s tax increment financing districts haven’t exactly developed as envisioned, leading city officials to ponder their effectiveness.

The Longaberger TIF, created in 1996, and the Deo Drive TIF, created in 1999, have not fully compensated the city for infrastructure improvements made in the areas.

The city has spent almost $3.6 million more than it has received for the Longaberger and Deo Drive TIFs. Property taxes from the new developments are used to pay for road and utility improvements in the area.

City Councilman Doug Marmie, R-6th Ward, said the city needs to be more conservative when estimating revenue from new developments.

“My concerns have always been if we allow a TIF and future development does not occur as anticipated, infrastructure changes aren’t warranted,” Marmie said. “Then, we’ve set up a TIF for an area where it’s not needed.”

Stephen Johnson, city auditor, said he opposes any TIF that includes creating city debt.

City Councilman Marc Guthrie, D-at large, said just because TIF payments have not matched expenditures does not mean the TIFs were a failure.

“You have to ask if the development there would have occurred without the TIF,” Guthrie said. “My guess is the city might not have had the resources without the TIF.

“You don’t want to overuse them, and I don’t think the city has. I think they’ve acted in good faith.”

The city spent $6.8 million for road and utility improvements on East Main Street and Dayton Road for the Longaberger corporate headquarters, but has received $4.1 million from the company to pay for the city investment.

The Deo Drive extension to Goosepond Road and North 21st Street improvements to the Wal-Mart area and later Home Depot, Bob Evans and Aldi, cost the city $2.6 million. Payments from the developments to the city have totaled $1.7 million.

In 2006, the city created the Mount Vernon Road TIF, created to pay for the Deo Drive extension across Mount Vernon Road, and closing of the Waterworks Road-Mount Vernon Road intersection. The payments received and money spent match at $1.2 million.

Longaberger

The TIF payments are based on property valuation, but Longaberger successfully sought to reduce the value of the basket building from $28 million in 1998 to $13 million in 2007, and now seeks a further reduction to $8 million.

A 2007 agreement with the city, following a reappraisal of Longaberger’s property, reduced its TIF payments from $367,308 in 2006 to $170,622 in 2007.

Longaberger met its reduced obligations until 2013, when it failed to pay the lesser amount, City Auditor Steve Johnson said.

“The new (2007) agreement allows Longaberger to pay the difference from the TIF payments and our debt requirements,” Johnson said. “In return, we reissued the debt and wrote new bonds to lower the principal and interest payments.”

The 2007 agreement stated Longaberger would also supplement its TIF payments with a share of its income taxes and net profit taxes, but that has not happened, Johnson said.

“I don’t think they ever achieved the levels spelled out in the agreement,” Johnson said.

County Auditor Mike Smith said the company owes about $250,000 now and will owe about $350,000 at the end of the year.

Marmie said, “Longaberger did not generate what was anticipated. All the improvements we did make, it’s not repaying that. That money is just dedicated to that area, and we can’t use it for other areas in the city.”

Longaberger declined from a $1 billion company with 8,200 employees in 2000 to 230 employees, including 68 at basket building, today.

“At the time that TIF was done, the sky was the limit for Longaberger,” Guthrie said. “Nobody acted improperly when they approved the TIF. They thought they’d recoup their investment and it’d be a good thing.”

Old, new TIFs

The Deo Drive TIF, like Longaberger, was created during an exciting time for the city, when the economy was producing numerous potential developments.

North 21st Street exploded more than a decade ago with retail developments such as Wal-Mart, Log Pond Plaza, Home Depot, Bob Evans and Aldi. Road and utility improvements were needed.

Marmie said there was more of a need for the Deo Drive and Mount Vernon Road TIFs than for Longaberger.

“Those improvements were needed whether we had a TIF or not,” Marmie said. “With 21st and with Mount Vernon Road, it created huge traffic jams. There was also a safety concern.

“The (former North Elementary School) school property could be developed, so it’s not a complete failure, but a work in progress.”

Newark Economic Development Coordinator Stu Moynihan said TIFs can be set up in various ways.

The traditional approach is for the city to borrow to make needed infrastructure improvements, then get reimbursed from businesses’ TIF payments.

“The legislation allows you to borrow against future tax revenues, but you could have a TIF that creates a savings account to make improvements for a time in the future.”

Or, with a TIF that has multiple parcels, part of improvements could happen immediately, and others could come later, Moynihan said.

The city is considering a 30-year TIF on River Road, where 6.1 acres would be rezoned from agricultural to multifamily residence to build 44 apartments next to another 66-apartment development underway on 14.6 acres.

The TIF would collect money from the River Trails development, but funds could be used in the surrounding area, where future development is anticipated.

“I feel the one set up now, we have a greater handle on it and not taking money out of the general fund to set it up,” Marmie said. “It will recoup its own money.”

The TIF would set aside about $52,000 in payments in each of the first four years of the 30-year agreement.

“Let’s hope it works out the way the administration hopes it does,” Guthrie said. “(No debt,) that’s why I’m willing to give it the benefit of the doubt.”

kmallett@newarkadvocate.com

740-328-8545

Twitter: @kmallett1958

Newark TIFs

TIF details

Longaberger

Deo Drive

MV Road

Created

1996

1999

2006

First payment

1998

2004

2011

Term

30 years

15 years

30 years

Service payments

$4.1 million

$1.7 million

$1.2 million

Expenditures

$6.8 million

$2.6 million

$1.2 million

Investment

$28 million

$26.4 million

$9.3 million

Source: City of Newark