Middlebury studies Tax Increment Financing option: Revenues could fund parking garage

MIDDLEBURY — Now that the state of Vermont has authorized the creation of six new Tax Increment Financing (TIF) districts, Middlebury officials are intently studying the program as a possible vehicle for funding a new parking garage in the downtown area.
To that end, the Middlebury selectboard on July 11 met with Fred Kenney, executive director of the Vermont Economic Progress Council (VEPC), which manages the TIF program. Kenney gave board members an overview of the program, including how to file an application in what is likely to be a very competitive process to snap up one of the coveted TIF slots.
TIF gives communities the ability to capture and use most of the increased local property tax revenues from new development in a specific geographic area to pay back investments on the infrastructure (such as water and sewer connections) to help make that new development possible. State law previously limited use of TIF programs to a combined total of 11 specific districts in Burlington, Milton, Newport, Winooski, Colchester, Hartford, St. Albans and Barre.
Other communities have been trying to get on the TIF list, seeing it as a potential catalyst for economic development and local infrastructure improvements. David White of the Burlington real estate company White & Burke successfully lobbied the 2017 Legislature on behalf of several towns interested in TIF — including Newport, St. Johnsbury and Middlebury.
Kinney highlighted, during a 40-minute presentation, several aspects of the TIF program, including:
• In order to be considered, the community and VEPC must determine that the proposed TIF activity would stimulate private-sector development or redevelopment, thus creating jobs, a broader tax base and an enhanced economy for the town, region or state.
• The program is intended to provide revenue — beyond normal municipal budgets and existing debt capacity — to develop public infrastructure.
• The community must demonstrate that it could not afford to install the new infrastructure without the TIF program.
Here’s how the district works, according to VEPC officials:
A municipality identifies an area requiring re-development, draws the TIF District around the area, and freezes the base tax of that district. All taxes on the frozen base value continue to go to the taxing authorities. Private developers, enticed by the improved infrastructure, build within the district. Seventy percent of the new tax increment is captured and set aside to help retire the debt that funded the infrastructure improvements, for a specified length of time. The remaining 30 percent would go to the state’s education fund.
Local residents would need to endorse a bond issue of up to 20 years for the infrastructure improvements.
“Once the debt is paid off, the TIF life ends,” Kenney said.
Taxpayers benefit from added value to the grand list once the debt is retired and may receive more wage taxes if the development project creates new jobs, according to VEPC officials. Taxpayers benefit from improvements to blighted areas and infrastructure improvements, and they may see lower taxes in the long run because of the project.
A consortium of local businesspeople called “Nexbridge” has submitted preliminary plans for a mixed-use development on Middlebury town-owned land off Bakery Lane, behind the Ilsley Public Library. Some selectboard members believe development of that parcel cold dovetail with a TIF application for a downtown parking garage. Town officials have long lamented the lack of convenient parking in the downtown.
A town must pay a $5,000 TIF application fee, which compensates VEPC for research and administrative time. The town can eventually pay off the debt through TIF revenues.
“The (application) process can be done in eight to 12 months, but I would budget 18 months, from conception to a public bond vote,” Kenney said.
He added he’s thus far spoken to representatives of 15 communities that have been considering one of the newly created six TIF slots.
“Nobody I spoken with yet has started the process of preparing an application,” he said.
Middlebury officials must soon decide whether to take that step.
“I think it’s worth exploring,” selectboard Vice Chair Susan Shashok said. “Parking is that one issue that grabs my attention.”
Selectman Victor Nuovo agreed.
“A downtown parking garage has been on everyone’s mind for a long time,” he said. “I suspect if (a parking garage) were put to a public vote, it would win.”
Reporter John Flowers is at [email protected].
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