On Aug. 20, Aiken County Council converted its motion authorizing participation in North Augusta’s amended Tax Increment Financing District – known as TIF – for some time now , from a resolution to an ordinance. This was a shrewd move.
At one stroke, Council satisfied demand for a public hearing, allowed time for project proponents and opponents to mobilize, gave Council’s swing votes an opportunity for further cogitation and provided a public participation fig leaf for those members whose minds were already made up.
As a refresher, the amended TIF will use potential future incremental property tax revenues from the 457-acre North Augusta TIF District to finance public improvements in the “blighted” 25-acre Project Jackson development. These improvements include a municipal stadium, a conference center and parking facilities.
Private investment in Project Jackson totals $101 million. North Augusta’s investment totals $44 million to be financed with TIF revenue bonds. These bonds will be financed over 30 years at a cost of $112 million. The proposed deal (“Scenario 38”) also includes a $350,000-per-year tax “rebate” to the County.
This amended TIF avoids many of the negative features from previous TIFs. In Project Jackson, TIF revenues will only support the publicly owned portions of Project Jackson, these portions won’t necessarily undercut private competition, and the new development isn’t likely to strain county resources.
In addition, the downside financial risk is entirely on the city’s shoulders. If the growth predictions, property tax revenues and other associated revenues (net stadium income, parking fees, accommodations taxes, etc.) in the financing model don’t materialize, then it’s the city that will be left holding the bag.
A less “bad” TIF, however, doesn’t automatically equate to a worthwhile TIF.
No convincing case supports Aiken County’s subsidization of these public improvements. Whether the property in question will inevitably develop without the TIF hasn’t been addressed.
(In retrospect, the County should have established a massive TIF district to support its new administration complex. But would the City of Aiken and the Aiken County School Board have participated? Not likely.)
Whether Project Jackson’s 25 acres meet the TIF law’s definition of “blight” remains disputed. While ultimately the lawyers may need to hash this out, the statute’s definition of blight is – to put it mildly – somewhat elastic.
A significant casualty in the debate is the erroneous comparison of TIFs to fee in lieu of taxes industrial development agreements. TIFs and fee in lieu of taxes agreements have differing mechanics and are designed to address differing needs. This false comparison in support of Project Jackson could boomerang in the future against legitimate fee in lieu of taxes agreements. This rock can be thrown in both directions.
It appears, however, that a majority on Council is willing to endorse Project Jackson in one form or another.
Unless project opponents step up their game, either the current proposal on the table or an amended version of it will eventually pass. Only three of Council’s nine members are adamantly opposed to Project Jackson. But Council’s options aren’t limited to either passing the ordinance “as is” or voting it down in its entirety. Alternately, Council could drive a harder bargain.
First, Council could insist on a deal similar to the School Board’s.
Instead of participating on the full 457 acres in the amended TIF, the county could limit participation to Project Jackson’s 25 acres. The county could also – like the School Board – agree to participate for only 15 years instead of 30.
Second, Council could insist on annual escalation of the $350,000 tax-revenue rebate.
Simply put, the present value of the rebate will decline – due to inflation – significantly over 30 years. Compounding this value by a 1 or 2 percent increase per year will ensure that it doesn’t dwindle into a token amount.
Third, Council could insist on explicit language that all TIF revenues will be dedicated to bond repayments, and that the TIF terminates the moment the bonds are liquidated. No other projects will be funded with these tax revenues.
What Council can’t prevent is the inevitable wave of additional TIF proposals if it approves Project Jackson. With a precedent set, it will be difficult – if not impossible – to say “no” to other, less-sound proposals. Politically, it’s hard to counter the cry “If they got one, then why not me?”
As I wrote last February, “If this becomes the pattern for large developments within Aiken County, then the growth of the tax base will stagnate as new projects are financed exclusively through TIFs.”
This is Aiken County’s ultimate risk in Project Jackson.
In the meantime, for good or for ill, an “Open for Business” sign is being hung across Aiken County.
Gary Bunker is a former Aiken County Councilman.