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COMO YOU KNOW: Tax-increment financing

Thursday, April 26, 2012 | 12:01 p.m. CDT; updated 7:45 p.m. CDT, Friday, May 9, 2014

CoMo You Know, a community wiki, adds context to stories of local interest and serves as a reference tool for readers.

Summary

Tax-increment financing was authorized by the Columbia City Council in March 2008 as an incentive for development or improvement projects that eliminate blight and create jobs. TIF allows the additional taxes the added property value from improvements would incur to be funneled back into the project itself. However, this also means that the city, county, school district or other taxing entity do not benefit from the increased tax revenue.

Full text

Authorized by the Columbia City Council in March 2008, tax-increment financing, commonly known as TIF, is intended as an incentive for projects that eliminate blight and create jobs. The council has approved two TIF applications, one for the Tiger Hotel and another for a mixed-used development on Tenth and Locust streets.

Here’s how tax-increment financing works: When developers fix up buildings, their property values – and the resulting tax bills – normally go up. But with TIF, the extra taxes those owners would pay are instead pumped back into the development project, sometimes to pay for streets, parking, utilities or other infrastructure needs. The flip side is that the city, the county, the school district and any other taxing entities must forgo the extra property tax revenue they would otherwise receive as a result of the higher property value on improved properties.

The city of Columbia once strongly opposed the use of tax-increment financing, saying it was unfair to give developers tax advantages that others don’t receive. Public sentiment against tax-increment financing came to a head in Ashland in 2002, when a Jefferson City developer hoped to use the tool to defray the cost of infrastructure surrounding his proposed Ashland Crossings retail center, which would have included a grocery store. Residents and representatives of public taxing entities cried foul.

The process

Winning approval for tax-increment financing is a lengthy and expensive process. Applicants must pay a $10,000 fee, which is returned if the project is rejected. The TIF Commission receives the applications and after review with the city’s attorneys and the applicants, the commission schedules a public hearing. It then recommends whether the City Council should approve or deny the application.

The Commission is made up of 11 members, six of whom are appointed by the mayor, with consent of the City Council. Two members are appointed by the Columbia School District’s Board of Education, and another two by the Boone County Presiding Commissioner. One member is appointed to represent all other tax-levying districts affected by the redevelopment.

By law, tax-increment financing requires that projects meet at least three criteria. Applicants must demonstrate that their projects:

  • Would not be feasible without public assistance.
  • Are proposed in areas that are either blighted or in need of conservation.
  • Would create substantial public benefit.

The Tiger Hotel

Tiger Columns LLC, the company that owns the Tiger hotel, has received $1.7 million worth of TIF assistance for its proposed $8.9 million renovation of the historic skyscraper hotel on Eighth Street. The owners – John Ott, Al Germond and Dave Baugher – want to covert the eight-story building to a boutique hotel. Only two floors of the structure are in use now.

The Tiger Hotel TIF application argues that there would be a “catalyst effect” from such a high-caliber project downtown. They believe The Tiger Hotel would become a destination in and of itself and that it would bring more people and revenue to downtown.

Tenth and Locust Property

Trittenbach Development, owned and operated by Columbia residents Nathan and John Odle, have proposed another Columbia high-rise that would rival The Tiger Hotel in height. The eight-story structure would feature a grocery store, a restaurant and a rooftop swimming pool. It would include five floors of apartments that would rent for about $1,200 per month; 11 indoor parking spots and 15,000 square feet of office space.

The Odles were given a $3.3 million tax break over 23 years to accomplish their dream, which would cost an estimated $17.1 million in total. Their application states that construction of the building alone would see 100 workers a day on site, with the goal of completing the project by late summer 2010. Once the building is complete, they said, it would create an additional 25 permanent jobs.

This development plan was called off in November 2009, with the developers citing a decline in demand for commercial real estate. A new plan for a four-story apartment building was filed with the city in January 2010, but did not reapply for tax-increment financing.

Links and sources:

A development project slated for Tenth and Locust streets that had requested tax-increement financing is now off the table.

New apartment complex at Tenth and Locust could use tax increment financing.

Updated: April 26, 2012


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