Good news for taxpayers not good for TIFs

IN CHINESE PHILOSOPHY, IT would be called yin and yang. In physics, it would be one of Newton’s laws of motion. For the city of Plymouth, it’s the unintended consequences of tax cuts by other agencies.

The City Council last week voted to transfer funds from the city’s reserves and the Plymouth Utilities reserves to cover revenue shortfalls in the city’s tax incremental finance districts, a prospect that it faces for probably a few more years. The main culprit is declining property tax revenues within the districts, which are set up to pay for infrastructure and public improvements in those areas by utilizing tax revenues generated by improvements within the district.

State actions led to a sharp decline in the property tax rate for technical college districts across the state, while the city, the school district and the county have held the line on or lowered tax rates for several years now, spurred in part by state-imposed revenue caps.

That’s been good news for local property taxpayers and their bottom line, but it has put a crimp in the bottom line for tax-dependent TIF districts.

It’s a problem not just in Plymouth but for communities throughout the state who utilized the TIF tool to create and spur new development.

In Plymouth alone, it has been a tool for countless new industrial, commercial and residential developments, stretching from Wal Mart, Sartori Foods and the Vintage Neighborhood development to Sargento and Masters Gallery Foods – along with many, many more.

That in turn has created new jobs, homes and opportunities for the city and beyond.

But it can take several years for the impact of new development – such as the several new cheese storage facilities under construction now in the city’s southeast industrial park, aided by a TIF – to show up in tax revenues.

In the meantime, the city has to repay money borrowed for TIF district improvements.

Municipalities have several options for meeting such shortfalls – the least desirable of which is putting that amount on the property tax levy.

So far, the city of Plymouth has been able to avoid that, which has saved the property taxpayers from additional tax burdens.

Timely refinancing to lower annual debt repayments is one way the city has done that. It has also been able to take advantage of healthy reserves, both for itself and Plymouth Utilities, to cover those shortfalls, with repayment becoming part of the TIF obligations.

Economic growth was slow or even non-existent in Plymouth as it was in so many places for many years, but we are starting to slowly see an uptick in the economy which we all hope will continue and get stronger. That would only be good news for the city and help ease the TIF dilemma

In the meantime, there are several proposals in the works in the state Legislature to help ease the TIF crunch Plymouth and so many other municipalities are feeling right now. The sooner those can make their way into law, the better for Plymouth and other communities in their efforts to spur the economic growth we all want to see.

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