Members of the city’s Redevelopment Commission are pursuing the establishment of a residential Tax Increment Finance Zone.
It’s been months since the RDC first began talks of establishing one — or several — residential TIFs as it looks to incentivize developers to build homes, bolstering a rather lackluster housing stock.
It’s a complicated process, one only recently allowed by state law, and while it’s likely to take months to complete, RDC president Tim Smith said with so many potential housing developments on the way, it’s time the organization took action.
“It all comes down to the need for more housing,” Smith said following the brief meeting at City Hall, 201 Vigo St.
The RDC first began discussions of establishing a residential TIF a year ago; those conversations took a more serious turn when Butch, Eric and David Niehaus, co-owners of Niehaus Companies, proposed a subdivision called Lincoln Heights off Quail Run Road.
The brothers’ plan was to work with builders by providing inexpensive lots to construct as many as 129 homes. Niehaus Companies would then profit from selling those builders the necessary materials.
The Niehauses initially asked the RDC to put up the cost of necessary infrastructure, or about $2.3 million.
So RDC members directed financial consultants with Reedy Financial Group, Seymour, to investigate the possibility of drawing a residential TIF in order to generate the funds necessary to fund their request.
According to Reedy’s numbers — and assuming the Niehauses could build 125 homes in four years, each of them selling for at least $200,000 — the RDC could potentially collect $175,000 in revenue each year over the course of the TIF’s 25-year life span, for a total of $3.8 million.
That amount of funding didn’t blow RDC members away, nor was it enough to incentivize the Niehauses to move forward with their project.
Regardless of where the residential TIF lines are drawn, the deal would like something like this: the RDC would set up the residential TIF around the proposed development then capture any increase in property tax revenue as a result of construction.
The RDC would need to set up both an allocation area (the area in which it would collect a portion of property tax revenue) and a separate Economic Development Area (the area in which the RDC would look to spend that revenue making improvements). They do not have to be one in the same.
The goal would be to find a way to encourage developers to build, perhaps by the installation of infrastructure like new roads and utilities. And once the housing developments are up and established, the RDC would continue capturing the property tax revenue to spend elsewhere, perhaps on other, mid-range homes.
But generating any substantial amount of revenue will be tough, the RDC learned months ago.
Just a handful of homes here and there won’t cut it, largely due to existing property tax caps.
For instance, if the RDC captured all the property tax revenue from a $100,000 house, that one house would only generate about $950 per year for the RDC.
It would take 100 such houses, likely more, to generate any real funding to incentivize developers to continue building more in other places.
So the RDC, at least for right now, is looking to establish several, small TIF zones, targeting any area that has the potential for a new housing development.
The RDC is first having Reedy — as well as Indianapolis-based legal counsel Ice Miller — look to TIF existing housing developments on Hillcrest and Old Bruceville roads, areas recently annexed by the city to help spur the developments on by allowing them to tap into existing water infrastructure.
But they will also look to draw lines around an area on the northeast side of Bierhaus Boulevard as well as Broadway Place, a development being taken on by Sure Clean to build more than a dozen homes along Hart Street.
The RDC will also look to areas along Thompson Drive as well as the old paper mill site at 11th and Barnett streets as a developer is looking to build about 10 new homes in that area as well.
And they will look to TIF the area proposed by the Niehauses earlier this year just to make sure those conversations remain active.
Up next, according to city attorney Dave Roellgen, who has already been working alongside Reedy and Ice Miller on the early steps of establishing the residential TIFs, will be a specific timeline for publication requirements, public hearings, proposed maps of the Economic Development Area and allocation areas, etc.
Board members with the Vincennes Community School Corp. will need to be brought on board, too, as state law mandates the largest affected taxing entity be included in conversations.
The school board will have to cooperate if the TIF lines are to be drawn, but given that their existing tax draw wouldn’t be affected — any revenue generated by the land without the improvements will continue flowing through to the taxing entities — they’re likely to be enticed by the possibility of more students moving into the district.
The RDC has already used revenue from their existing, commercial TIF zones to incentivize Sure Clean in its development, approving more than $200,000 a year ago to help with infrastructure costs.
The RDC, too, has agreed to help the members of REM Development Group, a trio of local families, as they look to develop the Oliphant building downtown as well as the adjacent Gimbel Corner at the corner of Second and Main streets into a residential space.
But there’s only so much the RDC can do with its existing funding source, Smith said, and even if the residential TIFs don’t bring in a lot of money, it could bring in enough.
“We want to be able to offer incentives,” Smith said. “Many of those are yet to be determined, but I’ve even seen reports of some communities offering financial incentives to families willing to move there. We could look at doing that, too.
“There will be more infrastructure needs, too. We can help developers meet our Complete Streets Ordinance,” he said, pointing to a piece of city legislation that mandates any new streets include the proper sidewalks, lighting, bike lanes, etc.
“I don’t know if any of this is the answer or not,” he said. “But we want to be ready.”
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