Blaine City Council Considering Additional Tax Funding For East Blaine
By Grace McCarthy
Consultants from the City of Blaine advised City Council on a new economic tool that could boost housing development in East Blaine through a public-private partnership. Council will consider the funding option, Tax Increase Funding (TIF), as it continues to consider how to pay for public infrastructure in the future eastern neighborhoods of Blaine, Grandis Pond and East. Maple Ridge.
“If the TIF did not exist, it would be difficult [to find funding]”CFO Daniel Heverling said in a phone interview referencing East Blaine’s development.” I’m not saying it would be impossible, but it would be difficult.
The TIF would allow the city to borrow money from expected increases in property tax revenues from a designated area that could include the next eastern neighborhoods of Blaine, Grandis Pond and East Maple Ridge, not the entire city, to pay for the construction of streets, water and sewers.
“Your current municipal taxpayers don’t see a difference in the amount they pay,” Briahna Murray, vice president of law firm Gordon Thomas Honeywell, the city’s contract consulting firm, told council members. municipal at the November 8 meeting. “It is the growth within the augmentation zone that determines the source of income. “
If the city does not use the TIF, Heverling said she would likely need to borrow money from city funds, which, in turn, would increase utility rates for all residents. of the city instead of those who only live in new neighborhoods.
The Washington State Legislature passed House Bill 1189, which came into effect in July 2021, allowing cities, counties and port districts to use the TIF. The financing tool is expected to create growth in areas without much economic development, or capped, in the hope that it will further encourage private development and increase property values. The infrastructure should be state-owned and could include water and sewer construction, road maintenance, broadband, railroad, electrical services, stormwater management and the creation of long-term affordable housing.
TIF is not a new concept; it is used in many states across the country, but had been rejected by voters and struck down by Washington courts in the past. To comply with the state constitution, the TIF only applies to local property taxes and does not include state property tax or voter-approved levies, such as a levy. cover or tax liability.
How it’s calculated
Tax districts typically collect the levy from the previous year, plus the annual increase in the levy of 1% and new construction costs. But with the TIF, an additional amount is added that would go to the City of Blaine General Fund for the city to take out loans or bonds to create the public infrastructure in East Blaine. Only the City of Blaine would collect TIF revenue, leaving the other tax districts to receive their normal amount. But because the development would attract more people living in an area, like the 1,400 expected to arrive in eastern Blaine, tax districts like schools and fire districts could generate additional income, Heverling said.
“The law is designed to have no negative impact on the tax districts, so if you think about the fire district and the school district, they will be collecting income that they are not currently collecting,” Murray said. “Their budgets are not negatively impacted by all of this. Rather, they see a benefit for the income they receive.
The area proposed for TIF must have current / historic stagnant growth or unusual / additional development spending. The project also needs market analysis or developer engagement.
If the city decided to use the TIF, it would have to define a geographic area for the increased taxes and what public improvements would be funded. TIF districts cannot last longer than 25 years and the boundaries cannot be changed, according to state law.
Income can only be used for the amount stated in the city’s TIF ordinance. The additional revenue generated by the TIF is redistributed to tax districts in proportion to their usual tax withholding rates, Murray said.
The TIF directives require that there cannot be more than two active increment zones at the same time and that they cannot overlap. A TIF zone also cannot have an estimated value of more than $ 200 million or have more than 20 percent of the total City of Blaine valuation, whichever is less, according to the consultants’ submission.
Murray said she believes the development of eastern Blaine will meet all the requirements for a TIF district.
“It is my assessment that it fully answers the question for the test which is required by law and therefore makes it an ideal project for the use of tax increase funding,” she said. declared.
Jones said he and city consultants met with the Skip Jansen team at JIJ Construction, owners of East Maple Ridge and Ken Hertz of Blossom Management, owners of Grandis Pond, who will be the two primary land owners of the land. east of North Harvey Road. .
The city does not consider TIF funding the expected $ 6 million sewer system repairs needed in central and eastern Blaine, Jones said.
“It’s another way to pay for infrastructure,” he said. “This is primarily, however, a way to pay for a whole new infrastructure for a new development, and not for the overall system improvements. “
If the city decides to continue with the TIF, the next steps would be for the city to prepare a project analysis and to carry out awareness-raising actions with the tax districts. If the answer is yes, the consultants will hold two public briefings, submit a project analysis to the state treasurer, and draft an ordinance on the TIF.
The Council will continue to explore the TIF over the coming months and could potentially take action in 2022, Heverling said.
“I’m not asking you to make decisions tonight,” Jones said. “It’s really just an educational opportunity.”