A 2009 law called for reports on TIF programs to be made every five years. Even though Monett's TIFs predate the law, City Administrator Dennis Pyle said the second TIF district is marking its fifth anniversary. To comply with the spirit of the law, the city opted to hold a public hearing on both of its TIF districts at the same time.
TIF Commission Chairman Mark Nelson reviewed the history of the city's two TIF projects. The TIF 1 district had two core projects: widening Business Highway 60 by the new high school and widening Highway 60 west from Chapell Drive to Hess Drive to accommodate construction of the new Walmart.
Later projects included widening of Chapell Drive and water and sewer main extensions. In 2008, the TIF took on paying for further expansion of Highway 60 plus the addition of new bridges over Waldensian Road and Clear Creek.
In a TIF arrangement, land is classified as "economically blighted." Improvements are made to remove the blight and paid for by increased sales tax and property tax revenues spurred by the enhancements. The amount of taxes collected in the year before the TIF becomes the base. All of the property tax and half of the sales tax collected in addition to the base are captured by the TIF to pay off the cost of the improvements.
The second TIF district was established in the spring of 2005 to widen Highway 60 east of Chapell Drive and add both roads and infrastructure around the new Lowe's store, which opened in March 2006.
In both TIF districts, Nelson said tax revenues generated through the TIF went exclusively into infrastructure improvements. TIF 2 even participated in construction of the water standpipe south of Lowe's.
A TIF district has a 23-year life. Monett's TIF 1 will expire in 2019. TIF 2 will run until 2028. Ten retail areas within TIF 2 can also be activated for 23 years, though none have yet started. If the smaller retail areas in TIF 2 do not begin by 2015, they will cease to exist as separate entities, Nelson said.
An aerial map showing the city prior to the TIF projects showed pre-development conditions. Commissioner Jerry Dierker pointed out areas along Highway 60 that have since switched from fields to commercial use.
Debts for the two TIF districts were set up in different ways. TIF 1 has regularly scheduled payments on bonds to meet. The 700-acre district generates enough revenue to produce a surplus, allowing the TIF commission to consider other projects with the surplus money.
TIF 2 was set up as a "super sinker," requiring all revenues to go back into paying off the debt every year. The more-than-$6-million debt required annual payments greater than Lowe's projected its store could generate in its early years. Consequently, the city added a half-cent community improvement district (CID) tax to augment the revenue. The CID tax started in April 2008, two years after the TIF began, to run for four years.
Pyle said the CID tax was projected to generate $75,000 a year. With sales tax income dropping about 8 percent in the current economic downtown, the CID has produced around $67,000 a year.
"We are not where we thought we'd be. We have not met our original projection," Pyle said.
With TIF 2 limited to less than 400 acres and drawing on essentially only one source of sales tax revenue, Pyle said additional action by the city proved pivotal to managing the debt. The city council committed all of the sales tax income earned from the district for the first two years.
The city also made $500,000 in payments on the debt principle early, leaving only interest due. Pyle said the city had hoped to make payments of $200,000 a year on the principle to pay down the debt even faster than necessary.
Litigation filed by Barry and Lawrence counties challenging the legitimacy of Monett's TIFs impacted that strategy. Money from county sales taxes generated in Monett had been paid back to the TIF. Both counties have withheld TIF payments, placing them in escrow until the litigation is resolved. Pyle said the city has made no payments on the debt principle since the litigation began.
Sales tax income from TIF 2 that has reached the city has been enough to make necessary payments on the debt, Pyle said, along with the CID money.
TIF 1, with its large new debt from the $9 million widening of Highway 60 in 2008, will also feel the impact of having revenues from county sales taxes withheld, Nelson said.
TIF 1 will have a payment of $3,710,000 due on Oct. 1, 2011. Nelson said the Missouri Department of Transportation's payment on its part of the innovative financing will cover that payment.
"The city has been in litigation for over a year, and we have adequate revenues to get through to October 2012," Pyle said. "We'll see where we are then."
Over the years the TIF commission has approved new projects, like storm water retention basins, in the TIF 1 district. Property owners were paid back as their businesses generated new tax income. Nelson said such projects received payments from TIF 1 surplus income.
"I'm not classifying anything as surplus now," Nelson said. No new projects are being considered.
Nelson credited the soft economy for stalling further development within the TIF districts. He said business prospects have continued to look at land within the TIF for retail and commercial development.
"Monett is still looked at as having a fairly vibrant economy and it would be an asset for companies to expand here," Nelson said.
Rod Anderson, a longtime member of the TIF commission, praised Nelson for serving as chairman of the TIF panel from its inception in 1996, a position without pay.
"The city has been very fortunate that Mark has served as long as he has," Anderson said.
City Commissioner Mike Brownsberger agreed and called the public hearing to a close.