Successful tax increment finance districts can be effective devices for cities to spark development, experts say. Used unwisely, though, they hold the risk of wasting taxpayer money and depleting a city's general fund.
Consultants, urban planners and Bryan city staff and council members reviewed with The Eagle the town's current and proposed tax increment finance districts. While all said that such financial instruments can be effective in the development of a city, there was disagreement on what type of projects should qualify for a TIF designation.
How a TIF is formed
A TIF district may be initiated by a petition of more than 50 percent of the affected property owners or by the city council.
Once the TIF is initiated, the following must be completed:
• A preliminary financing plan.
• Public hearings.
• Appointment of a nine-member advisory board to oversee spending and construction within the TIF zone. The advisory board's proposed plans are presented to the City Council, along with a recommendation, and the council has the ultimate authority to implement the plan.
According to city documents, the TIF plan prepared by the advisory board must include the following criteria:
• A map showing existing uses of real property within the zone and any proposed improvements.
• Any proposed changes to zoning ordinances, the master plan of the city, building codes or other municipal ordinances.
• A list of estimated project costs.
• A statement detailing the method for relocating persons who will be displaced as a result of implementation of the plan.
• A reinvestment zone financing plan.
What the candidates think about TIFs
SMD 2 candidates
Mike Flores: Favors anything that will help Bryan move forward instead of standing still.
• Supports developer disclosure.
Annette Stephney: Supports a TIF if it would benefit the city financially and aesthetically.
• Supports developer disclosure.
SMD 5 candidates
Kim Casey: Approves of TIF concept depending how many jobs the project would generate and what the salary base would be.
• Supports developer disclosure.
Ben Hardeman: Depends on merits of each individual TIF and what it would do for city's tax base and how it will affect the revenue of the city in the short term.
• Voted to approved the Burton Creek TIF. Said it is not necessary to know the identity of the developers.
At-Large Place 6 candidates
Russell Bradley: Supports TIFs if they can make enough money to repay the debt issued.
• Approved Traditions and Burton Creek TIFs, says its not necessary to know the identity of the developers.
Mike Southerland: Approves of TIF concept if used in areas that aren't going to develop on their own.
• Supports developer disclosure.
The city of Bryan, which has three TIFs in place, has been approached about the formation of two others: One is on the city's east side, the other for downtown Bryan. It's the latter that is creating heightened discussion about whether it should qualify for a TIF.
Business groups involved in the redevelopment of downtown say the area is a prime candidate, but at least one member of the City Council has questioned the project.
Tax increment financing is generally used in areas where development or redevelopment would not occur solely through private investment, experts say.
Elise Bright, a professor of urban planning and landscape architecture at Texas A&M University, said tax increment financing can be useful in redirecting property tax revenues for development of a community.
"It provides a mechanism for channeling funds for physical improvements to a specific part of town," she said. "If the area revives, that helps other nearby areas and the city as a whole.
"In Texas, [TIFs] are supposed to be used in 'blighted areas.' There are more specific criteria the area must meet to be considered blighted. [A] TIF works best in areas that are declining but have a lot of promise for the near future.
"It does not work well in the most devastated parts of town because those areas are not likely to see an upturn after a few infrastructure improvements - they need more than a TIF alone can provide."
A TIF district's success is generally measured by whether it is profitable, said Paul Goebel, a professor of finance at Texas Tech University.
"In an era of strained municipal budgets, public investment is not always feasible," Goebel said. "Using TIF to allow the private sector to undertake community redevelopment projects is often the best alternative."
Goebel added that risk should be considered before a project is approved.
"The more controversial the project, the less likely it is to succeed," he said. "A healthy economy may be a strong predictor of success, although an undertaking can be successful in a weak economy if it has wide-based support.
"Ultimately, a TIF project needs to be a win-win situation for the public and private sectors."
Bryan has two active TIF districts - the Traditions golf and residential development and the Park Hudson office park - and another was recently approved in an area west of the Bryan main post office.
David Storrie, Bryan's special projects manager, said the active TIFs have performed well. His conclusion is based on the amount of tax revenue the districts have generated to repay the city's debt for that area, he said.
Bryan invested about $3.6 million in Park Hudson when the TIF was initiated in 1998. Its appraised value today is about $75 million, and Storrie said that because of its success, the TIF could dissolve in 2010 rather than its projected end date of 2018.
The Traditions project is still under development. Bryan issued $17 million in debt and spent $8 million on land acquisition. The taxable value on Traditions today is about $27 million.
The Bryan City Council voted in December to create a third TIF district, the Burton Creek TIF. Attorney Chris Peterson, who represents Burton Creek Development Ltd., has requested about $5 million from the City Council for walking trails, utility relocation and construction of a new roadway. No city funds have been committed thus far.
The developers plan to build senior citizen housing and some office space in the 122-acre zone near William Joel Bryan Parkway and Villa Maria Road. The developer has projected that the Burton Creek TIF could generate $100 million in added property value.
Mark Conlee is the only councilman who voted against the TIF. He said the area is already undergoing development, and he questioned the need for extensive public financial support for the project. Ten homes in the first phase of the Briar Meadows senior-restricted community off Broadmoor Street were already under construction when the council approved the TIF.
Two TIF proposals expected to be presented to the city council later this year would cover two strikingly different geographical sections of the community.
The Bryan Business Council wants to use tax increment financing for a 254-acre mixed-use development on the east side of North Earl Rudder Freeway between Briarcrest Drive and University Drive.
Mitch Morehead, president of the business council, estimated that the TIF would be in the neighborhood of $10 million to $12 million and provide infrastructure for the project. He said the site would be ideal for the development of high-end retail, office space, hotels, restaurants and housing.
City Council members have not formally reviewed the proposal and have said they'll need to do so before they comment on whether it's a viable plan.
An agreement to purchase the land has not been finalized. Morehead said Friday he hopes to have a proposal ready to take before the City Council this summer.
"It's premature to discuss it at this point, but we hope to have the mechanics put together as the development fleshes out," he said.
Once a developer is selected and the land is purchased, the developer would work with the city on a master plan. Morehead said tax increment financing is "the only responsible way" to develop the land because without the funding mechanism, it would probably remain vacant.
In a separate planned proposal, the Downtown Bryan Economic Development Association is considering asking the City Council to approve a TIF that would provide infrastructure in the northern part of Bryan and pay for the second phase of the downtown master plan.
Katie Blanchard, a former Bryan planner and now a project coordinator with Astin Redevelopment LP, has discussed the concept of a downtown Bryan TIF with The Eagle but said she's not ready to release financial projections for the project because they're subject to change.
Blanchard said that if enough revenue could be captured from new development, the funds could pay not only for the downtown master plan but also the redevelopment of the South College corridor. The South College plan includes infrastructure improvements and street repair.
The Bryan City Council has approved plans for the second phase of the downtown revitalization project, but hasn't come up with a financing mechanism. The downtown master plan, which can be viewed under the Planning Department Web page at www.bryantx.gov, is an effort to improve intersections, gateways, and streetscape, restore facades and create residential neighborhoods. The phase is projected to cost at least $7 million.
Bryan Mayor Ernie Wentrcek said a downtown TIF could be an example of "what TIFs were created for."
"Historically, TIFs have been used to develop raw land, but TIFs were created with the idea that they would be used to revitalize older areas of the community," he said. "If the numbers appeared that the TIF would pay for itself and not present a liability for the general fund, I would be willing to support that.
"When you have to rely on the general fund to support the TIF, I would not be in favor of that."
But Councilman Russell Bradley said in a recent meeting with The Eagle Editorial Board that a downtown TIF could backfire and cause the city to have to dip into its general fund to pay for the debt issued.
"The downtown area's already developed," Bradley said. "I think the citizens of Bryan deserve some kind of return."
Bradley later clarified that he's concerned about implementing a TIF district in the south end of the downtown area, but not necessarily the north end.
"If you look at the south end of downtown, we've basically done the infrastructure," he said. "The assessment valuations have tripled over the last few years. There's some question of whether you can get the revenue in the south end, but there's potential in the north end."
Wentrcek said the council will look at the business council plan and the downtown plan individually.
"I guess there could be some competition among them, but I don't know whether we'll have to choose one or the other," the mayor said.
A&M's Bright said that TIF districts should be used in areas that wouldn't likely improve without the funding mechanism.
"TIF funds should be used for projects that will enhance the marketability and value of the area's property," she said. "If values don't rise, the district may have to default on its bonds because there will not be any [increase in] taxes with which to make the payment. Thus, TIF funds would probably not be good to use for advertising and employment, but they are often used for street improvements, facade work and sidewalks."
In looking at TIFs in general, Councilman Ben Hardeman said, "You have to evaluate each TIF on its own merits and what it's going to do for our tax base and how it will impact the revenue of the city in the short term.
"There are several valid ways to use a TIF. One is to develop an area that wouldn't be developed otherwise. Another is to add features that would improve the quality of the development, features that the developer may not choose to do himself. A developer could go in and meet all city requirements and do a development, but the city would be better off if some changes were made in the plan."
The proposed downtown TIF boundaries are north to 18th Street, south to 30th Street, east to Texas Avenue and west to Sims Street. The zone includes about 300 properties, excluding churches and governmental agencies. Eight of the properties are owned by Blanchard's employer, Astin Redevelopment LP.
An independent study produced by PLUS Planning consultants showed that a downtown TIF could produce "favorable numbers," Blanchard said. PLUS, which stands for Planning and Land Use Solutions, is operated by former College Station planner Jessica Guidry and former Bryan planner Missy Pollard.
The Bryan-based business offers ordinance review, comprehensive planning and project management. PLUS also is doing consulting work on a TIF proposal that the College Station City Council is considering for the Northgate area. If approved by the College Station City Council later this month, TIF funds could partially fund construction of a convention center.
"If you have an older area like Northgate or downtown Bryan, who's going to come in and put in a new restaurant and retail development when they have to upgrade the street system and sidewalks? That's usually a function of the city," Guidry said.
The Downtown Bryan Economic Development Association is proposing that the improvements be paid for with TIF funds to protect the city's investment and bring more development to the urban area, Guidry said.
"The association wants to make sure the improvements continue through the northern section of downtown," she said. "If you're in the development world, you talk to developers and you know what they're looking at. So the city goes ahead and builds the street and water line. Is there a guarantee [that development will follow]? No, but in downtown Bryan it's pretty obvious that things have started to move in a positive direction, and [the association] wants to be the protector of that."
• April Avison's e-mail address is firstname.lastname@example.org.