ST. ALBANS CITY — The St. Albans City Council Monday night led a public hearing to discuss proposed parking garage and street intersection improvements. The session also provided an explanation of how tax-increment financing (TIF) will work for the proposed $13 million project.Voters will have the opportunity to authorize the city council to take out a bond to fund the project on Tuesday, Sept. 10. The bond will be repaid from TIF revenues.
“The key with TIF is that it allows a municipality to fund infrastructure without going to current taxpayers for a tax increase,” said David White of White + Burke. White is a real estate consultant who has been assisting the city with its TIF district.
There are six TIF districts in Vermont. The city was one of the last eligible municipalities to get approval for one. Municipalities with TIF districts are allowed to divert 75 percent of new property tax revenue from the municipality’s general fund and the state education fund to pay for public infrastructure within the TIF district.
The new tax revenue comes from the increased value of properties as a result of new private investment. It does not come from increased tax rates or new taxes.
Currently in Vermont, out of every $1 paid in property taxes, 60 cents goes to the education fund and 40 cents to the municipality’s general fund, explained White.
When new development or redevelopment occurs within a TIF district, that new tax dollar is divided differently. The education fund gets 15 cents and the municipality’s general fund receives 10 cents. The remaining 75 cents goes to a TIF fund where it is used to repay borrowing for the construction of public infrastructure, explained White.
Taxes on the original value of the property continue to go to the education fund and general fund. “You’re not taking any money away from where it’s currently going,” said White.
As an example, the Ace Hardware store set for construction on the corner of Main and Congress streets will have an assessed value of at least $1.5 million. The previous properties had an assessed value of roughly half that. Thus, approximately half of the property taxes paid by Ace will be split between the education fund and the city’s general fund just as they were before.
However, taxes on the additional value created by the construction of the store will be divided between the education fund, the city’s general fund and the TIF fund.
The city is allowed to transfer tax revenues to the TIF fund for 20 years. After that date all of the property tax revenues will go to the education fund and the municipal general fund.
The city’s fund was created just before new construction at Mylan Technologies, Inc. and the St. Albans Cooperative Creamery. As a result, the city is already collecting TIF revenues, explained Chad Spooner, Ward 6 alderman.
The current project was triggered by Mylan’s desire to continue to grow in St. Albans City, explained city manager Dominic Cloud.
Mylan, the third largest manufacturer of generic drugs in the world, wants to continue to expand in St. Albans City, but because of the type of product it manufactures, regulators insist the work take place in one location. In other words, Mylan cannot have multiple buildings around the city, all of its facilities must be concentrated in a single area.
The most obvious location for Mylan’s expansion was the 40,000-square-foot state office building on Houghton Street.
The state was willing to sell the building to Mylan and relocate to a new building to be built on Federal Street. “There’s one big missing piece and that’s where’s everybody going to park,” said Cloud with the parking garage in mind.
The proposed five-level parking garage will connect directly to the new state office building. It will have 370 spaces, 170 of which will be sold to ReArch Company, the developer of the new state office building.
ReArch and the state also will pay for a share of the maintenance and operating costs of the garage.
When the city first proposed its TIF district, the Vermont Economic Policy Council (VEPC) closely examined the economic feasibility of the project, said Cloud. VEPC approves new TIF districts. That study found the project would generate $735 million in new economic output over 20 years.
“We sit poised at a really key moment in the history of the city,” said Cloud. “The stars have aligned. This is our moment.”
Between completed construction projects and those that are underway, the city has $35 million in increased property value, said White. Taxes on that $35 million in increased value can be used to make debt payments on TIF bonds.
Those projects are:
- the sale of the current state office building to Mylan, which will bring a tax exempt building onto the tax rolls;
- construction of the new state office building by ReArch, which will lease the building to the state;
- Mylan’s recent addition of a new manufacturing facility to its Lake Street campus;
- the new St. Albans Cooperative Creamery store and upgrades to its powdered milk facility;
- renovation of the St. Albans House on Lake Street;
- the new Ace Hardware store;
- the renovation of four downtown buildings by Walmart developer Jeff Davis.
The bond payments are estimated to be between $750,000 and $1.1 million per year, depending on how much the city ultimately borrows, the interest rate and other factors.
Voters on Sept. 10 are only being asked to authorize the city council to borrow $13 million. The council will determine the final amount to be borrowed, explained White. Costs may ultimately end up being lower than estimated once the project goes out to bid.
The garage itself is projected to cost $6.85 million with another $1.9 million in site work, including the relocation of utilities. Improvements at the Lake and Federal Street intersection will involve $260,000 in TIF funds.
Engineering, design and legal services will cost $1.45 million while Brownfields cleanup adds another $300,000.
Nearly a million dollars is being spent on acquiring property for the project and demolishing three existing building.
The council will hold a second informational meeting on Monday, Sept. 9, at 9 p.m. at city hall.
In addition, the city has posted information about the project and bond vote on its Web site (www.stalbansvt.com). Mayor Liz Gamache urged anyone with questions to call and speak with city staff or a member of the council.
Speaking about the greater impact of the project, Gamache noted that communities in decline “become more attractive for the kind of business we don’t want.”
“Not moving forward is not staying the same,” she said.