At the June 1 Fountain meeting, the city council held a public hearing regarding the proposed creation of a Tax Increment Financing (TIF) District for B&I Properties for Valley Design. The purpose and terms of the plan were detailed by financial consultant Mike Bubany, of David Drown Associates.
Due to continued growth, the business has acquired an adjacent parcel of land for expansion, including a “substandard home requiring demolition.” Coupled with a facility in need of updates, the developer is planning to demolish the home and construct a facility roughly 12,500 square feet in size. “Due to the extraneous costs associated with the substandard nature of the properties involved along with the market uncertainties caused by the COVID-19 pandemic and international upheaval overseas, the developer has requested tax increment assistance for the project. Without the use of TIF to assist in this regard, the project could not move forward,” noted the plan.
There are two types of TIF districts and Bubany indicated this will be a redevelopment district. “Once assured it qualified, it’s more advantageous,” he said. Following inspection of the current building, it was deemed substandard meaning that the cost to bring the buildings up to code today would be astronomical. “Almost anything over 10 years old doesn’t meet the criteria under the tight standards,” added Bubany. By using a redevelopment district rather than an economic district, the city has more flexibility.
B&I Properties will be required to deposit $8,500 to pay for financial consult and preparatory work for creation of the district. Per the terms, the city intends to “use tax increments to reimburse eligible redevelopment costs for the developer.” Ninety percent of whatever tax is collected will be given back to the developer, for the purpose of correcting conditions, which may include demolition, clearing of the land, and installation of utilities, roads, sidewalks, and parking facilities. The contract is 15 years or until the developer is given back a not-to-exceed amount of $149,999. “Over $150,000 would throw it into business subsidy law with onerous provisions,” explained Bubany. “If the tax increment financing comes in faster, the deal is done. When that happens, get rid of the TIF district.”
Looking at projections, the plan assumes $8,500 per year, but that amount is subject to change, as it is automatically calculated by the county. “Based on what we know today, the expectation is this will go the full 15 years and you won’t fully repay them. They’re less interested in the dollar value than they are the tax relief,” added Bubany.
B&I Properties will need to submit $149,999 in value of work to the city and an annual report compiled. “We can do anything in the TIF plan or less,” noted Bubany. “I always make it big and flexible so there aren’t issues. With the value that’s on the plant today and on the house today, it will continue to generate and collect taxes as normal. You don’t lose anything there.”
Construction on the project is scheduled to start by August 21 of this year and be substantially completed by 2023. “Tax increment might not be that much if they push it off to 2023, but they’re supposed to start this year,” clarified Bubany. While the contract is in place, B&I Properties is not allowed to challenge their market valuation, transfer or sell the property without the city’s permission, and if anything goes wrong on the project, the city isn’t liable.
There were no public comments during the hearing and, after closing the hearing, the city council voted unanimously to approve the creation of the TIF district and the development agreement. Councilor Colleen Fohrenbacher was absent due to travel issues.
In other news, the city has received a report from KLM Engineering regarding the state of the water tower following inspection. Several areas were noted as failures including pinhole corrosion along the welded roof seams, on roof manways and handrail, and on upper ladder rungs above the high water line and corrosion below the bowl to cone transition ring below the line. Interior dry coating failures are limited to areas susceptible to condensation and other areas show visible coating failures such as peeling paint, surface corrosion and widespread pinhole corrosion.
“Structure modifications and repairs serve to bring the tank into compliance with Occupational Safety and Health Administration (OSHA) regulations, American Water Works Association standards, and Department of Health regulations,” noted the report. The work would also remove areas that are subject to premature corrosion, repair surface defects from construction, remove unnecessary equipment, and improve capabilities.
The estimated cost of the work is $25,000-35,000, up to $40,000 with engineering and inspection. “If we wait 5-7 years, it will be a complete reconditioning of the tower at an estimated $330,000-350,000,” cautioned City Clerk Mary Tjepkes. If approved the work would likely be done this fall. The council tabled the item until the next council meeting.
The next regularly scheduled council meeting is Wednesday, July 6, at 7 p.m., at city hall. The public is encouraged to attend.
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