TIF/TIRZ Administrator: 101
During its June 28, 2018 meeting, the Forney TIF/TIRZ Board met (official video - not much audio!) and in summary:
Mr. David Hawes, the TIRZ administrator, spoke, stating TIF & TIRZ are the same thing. Watch Video
Forney's TIRZ was created legally, 10 yrs ago, but don't have TIF plan approved by TIF board or council. The ordinance has 3 pages attached as the financing plan; that's impossible. When create the zone & appoint board, board creates a plan, which goes to City council for approval. That was never done. What's attached is not a legal project/finance plan. Will be working with Mr. Medford, Mr. Thatcher, EDC, developer to talk things through. When do Agreed-Upon-Procedures (AUP) must look at ordinance and finance plan (which doesn't exist). They did a great job in AUP describing what's been spent.
2 items: agreement is one of his from 1998, parts verbatim. The interest rate is a big one. In 26 years never seen 12%, usually prime+1, fixed. Mr. Phillips asked about the bond rates, should be about 3% - Mr. Hawes said if that gets worked out, would use the rate and go back to recalculate amount when money was spent. 2nd item, he said "I want to drive this home for the media, the public and for you: the $45 million based on the 12% in costs expended in AUP is not, is not, is not city debt. It is not the city of Forney's debt, or the city of Forney's obligation. It is not an obligation of the general fund, it's not an obligation of any fund. It is an obligation of the TIRZ." If developer doesn't perform and create the value, you don't owe it to them. If they never build value to pay it, they won't get paid. It's not city debt, is performance driven, developer has to perform to get paid back.
Mr. Hawes presented a slide show - over 180 TIRZs exist in TX now.
A developer could be anyone, even city. as did here, for part of the bridge. ETJ property may be in TIRZ. have some here that needs infrastructure like lift station. ISD can participate with limitations.
380 agreements are for cities, 381 for counties, identical text. He prefers 380 to TIRZ. It's the only statute that allows public funds for private purposes, such as demolition, or giving land to a business.
Eligibility - if, without a Zone, no development would occur. One must be true: Open land; tax base low; potential to stimulate new development; defective sidewalks, utilities or streets; faulty lot layouts. TIRZ is NOT: tax abatement, everyone pays, it's more of a redistribution. Should be in separate fund. Not a subsidy to developer. Not a tax break for property owners. The developer is advancing funds for public infrastructure.
The concept - base value always belong to taxing districts. If there is an AG rollback, that changes the first 5 years base value. Under this agreement, developer gets paid back first. When it ends, any money left goes to entities. Creation: he's counting the document attached to the ordinance as the project plan. Public hearings were held. Now, non-contiguous parcels are allowed. Financing plan is what has not been done. Sometimes government corporations are created to issue non-TIRZ debt. If city issues TIRZ debt, is like sewer revenue bond, not a tax obligation bond. A revenue bond, not like a road bond. It is not debt of the city.
TIF project plan must include land uses; proposed ordinance changes; estimated non-project costs; relocating displaced persons. Re: non-project costs - say had a TIRZ, but not going to pay for internal roads, but could pay for thoroughfare roads.
He listed estimated project costs to include; no economic feasibility study can be found, so they are working on that. About 1/2 of the items are in ordinance, but none in project or finance plan. Parts of development in city but not in TIRZ, parts in ETJ.
No matter what happened 1 or 10 yrs ago, can fix it now. They have been working on collecting all the items that need to be worked on
He listed Permitted uses, which are infrastructure, and built in for administrative costs of 5%, plus fees. Don't have to issue bonds, can do public financing through larger banks
Rules for board - 5-15 members, other taxing units may appoint members, 2-year term, vacancies filled by appointment, and more.
Eligibility: qualified voter of the city or county, 18+ years old OR owner of real property in the zone; resident of the county where the TIRZ is.
Zone duration: ends on earliest of: designated date, or can pass ordinance to terminate, or extend; when all project costs have been paid. If city extends, county not required to extend.
Recent changes were listed - annual report to AG was eliminated.
Mr. Phillips said there are so many questions, none of the board here was on when plan originally done.
Mr. Owen asked: is developer on board with cleaning this up? Yes, they understand are issues. This is kind of like starting all over. Have good rapport with developer. Will need to have some definitions changed; in his book, residential doesn't equal apartments. Need to clean it up; words matter, intent matters.
Mr. Owen asked about the mechanics: could appoint a committee to work with them and city, and the EDC.
Mr. Owen asked what is timeline - end of year, took a while to get numbers from developer, worked through issues. The 12% is non-starter. Ms. Wood asked if that would be changed; Mr. Hawes said that would be his major recommendation. They (developer) are not in drivers' seat. Document is fine, some terms not. Even if all been done correctly, likely would still review it, things change (in 10 yrs).
Mr. Hobbs asked who is negotiating with developer - no negotiations , just finding out what developer is doing. Mr. Medford said this was education process for developer. Mr. Hobbs asked if once they work it out, come to TIF, then to City Council - yes. Mr. Hawes said they should meet once a month.
Ms. Wood asked about limitations for developer - can they continue? City has other issues with them, piggyback with those issues. Mr. Medford said they will continue working with developer.
One thing Mr. Hawes going to be really hard about is interest rate - it's just wrong. People wanted to get things done...
He suggested holding the AUP report to council in abeyance until issues resolved.
He stated again, $45million listed in AUP (half is interest?) is not city's debt.
He reminded the board to not discuss issues among themselves, to avoid open meetings law violations.
Adjourned at 1839
Forney's TIRZ was created legally, 10 yrs ago, but don't have TIF plan approved by TIF board or council. The ordinance has 3 pages attached as the financing plan; that's impossible. When create the zone & appoint board, board creates a plan, which goes to City council for approval. That was never done. What's attached is not a legal project/finance plan. Will be working with Mr. Medford, Mr. Thatcher, EDC, developer to talk things through. When do Agreed-Upon-Procedures (AUP) must look at ordinance and finance plan (which doesn't exist). They did a great job in AUP describing what's been spent.
2 items: agreement is one of his from 1998, parts verbatim. The interest rate is a big one. In 26 years never seen 12%, usually prime+1, fixed. Mr. Phillips asked about the bond rates, should be about 3% - Mr. Hawes said if that gets worked out, would use the rate and go back to recalculate amount when money was spent. 2nd item, he said "I want to drive this home for the media, the public and for you: the $45 million based on the 12% in costs expended in AUP is not, is not, is not city debt. It is not the city of Forney's debt, or the city of Forney's obligation. It is not an obligation of the general fund, it's not an obligation of any fund. It is an obligation of the TIRZ." If developer doesn't perform and create the value, you don't owe it to them. If they never build value to pay it, they won't get paid. It's not city debt, is performance driven, developer has to perform to get paid back.
Mr. Hawes presented a slide show - over 180 TIRZs exist in TX now.
A developer could be anyone, even city. as did here, for part of the bridge. ETJ property may be in TIRZ. have some here that needs infrastructure like lift station. ISD can participate with limitations.
380 agreements are for cities, 381 for counties, identical text. He prefers 380 to TIRZ. It's the only statute that allows public funds for private purposes, such as demolition, or giving land to a business.
Eligibility - if, without a Zone, no development would occur. One must be true: Open land; tax base low; potential to stimulate new development; defective sidewalks, utilities or streets; faulty lot layouts. TIRZ is NOT: tax abatement, everyone pays, it's more of a redistribution. Should be in separate fund. Not a subsidy to developer. Not a tax break for property owners. The developer is advancing funds for public infrastructure.
The concept - base value always belong to taxing districts. If there is an AG rollback, that changes the first 5 years base value. Under this agreement, developer gets paid back first. When it ends, any money left goes to entities. Creation: he's counting the document attached to the ordinance as the project plan. Public hearings were held. Now, non-contiguous parcels are allowed. Financing plan is what has not been done. Sometimes government corporations are created to issue non-TIRZ debt. If city issues TIRZ debt, is like sewer revenue bond, not a tax obligation bond. A revenue bond, not like a road bond. It is not debt of the city.
TIF project plan must include land uses; proposed ordinance changes; estimated non-project costs; relocating displaced persons. Re: non-project costs - say had a TIRZ, but not going to pay for internal roads, but could pay for thoroughfare roads.
He listed estimated project costs to include; no economic feasibility study can be found, so they are working on that. About 1/2 of the items are in ordinance, but none in project or finance plan. Parts of development in city but not in TIRZ, parts in ETJ.
No matter what happened 1 or 10 yrs ago, can fix it now. They have been working on collecting all the items that need to be worked on
He listed Permitted uses, which are infrastructure, and built in for administrative costs of 5%, plus fees. Don't have to issue bonds, can do public financing through larger banks
Rules for board - 5-15 members, other taxing units may appoint members, 2-year term, vacancies filled by appointment, and more.
Eligibility: qualified voter of the city or county, 18+ years old OR owner of real property in the zone; resident of the county where the TIRZ is.
Zone duration: ends on earliest of: designated date, or can pass ordinance to terminate, or extend; when all project costs have been paid. If city extends, county not required to extend.
Recent changes were listed - annual report to AG was eliminated.
Mr. Phillips said there are so many questions, none of the board here was on when plan originally done.
Mr. Owen asked: is developer on board with cleaning this up? Yes, they understand are issues. This is kind of like starting all over. Have good rapport with developer. Will need to have some definitions changed; in his book, residential doesn't equal apartments. Need to clean it up; words matter, intent matters.
Mr. Owen asked about the mechanics: could appoint a committee to work with them and city, and the EDC.
Mr. Owen asked what is timeline - end of year, took a while to get numbers from developer, worked through issues. The 12% is non-starter. Ms. Wood asked if that would be changed; Mr. Hawes said that would be his major recommendation. They (developer) are not in drivers' seat. Document is fine, some terms not. Even if all been done correctly, likely would still review it, things change (in 10 yrs).
Mr. Hobbs asked who is negotiating with developer - no negotiations , just finding out what developer is doing. Mr. Medford said this was education process for developer. Mr. Hobbs asked if once they work it out, come to TIF, then to City Council - yes. Mr. Hawes said they should meet once a month.
Ms. Wood asked about limitations for developer - can they continue? City has other issues with them, piggyback with those issues. Mr. Medford said they will continue working with developer.
One thing Mr. Hawes going to be really hard about is interest rate - it's just wrong. People wanted to get things done...
He suggested holding the AUP report to council in abeyance until issues resolved.
He stated again, $45million listed in AUP (half is interest?) is not city's debt.
He reminded the board to not discuss issues among themselves, to avoid open meetings law violations.
Adjourned at 1839
meeting_date:
Thursday, 2018, June 28