Advertisement

Centre developers to get tax break

July 20, 2000

Centre developers to get tax break



By DAN KULIN / Staff Writer


The Hagerstown City Council is expected to approve Tuesday a resolution that would give the developers of the Centre at Hagerstown a tax break probably worth at least $2.9 million and possibly worth as much as $6.8 million over the next 21 years, according to the city's finance department and economic development coordinator.

continued

The tax break comes through a tax increment financing plan or TIF, which was part of an annexation agreement approved by the City Council in April 1998. The council gave consensus approval to the TIF resolution at its last meeting.

Under the agreement, the city would return a portion of the taxes collected from properties at the new shopping plaza to the developers, with the intention of reimbursing the developers for the cost of adding or extending roads, and water and sewer lines to the Centre property.

Advertisement

"It was an incentive to extend the infrastructure, roads and utilities, and an incentive for annexation of the properties," Debbie Everhart, city economic development coordinator, said.

Councilman Alfred W. Boyer said the TIF plan "was a good idea because we had a significant development project that brought some wonderful commercial development into the community, got the infrastructure in place for future development and increased the tax base."

Boyer said the TIF plan "helped entice" the developer to come to Hagerstown. He said the project probably wouldn't have happened without the tax incentive.

The annexation brought 400 acres on the west side of Interstate 81 into the city, and through the agreement extended city water and sewer lines to the site. The Centre at Hagerstown occupies 79 acres of that property.

Petrie Dierman Kughn in McLean, Va., and Developers Diversified Realty Corp., in Cleveland, the developers of the Centre at Hagerstown, paid for the addition and extension of roads and water and sewer lines. The tax increment financing plan is a way to reimburse the developers for that work.

The TIF plan is set up so the city would receive the base tax - taxes that would have been owed on the property if it weren't developed. City Finance Director Al Martin said the current estimate for the base tax is about $50,000.

The increase in tax revenue, or incremental tax increase, which is the result of the Centre being built, would be split by the city and the developers. The city would receive 10 percent of the incremental tax increase and the developers would receive 90 percent of that amount. Martin said the city's 10 percent would be worth an estimated $26,000 this year.

For the TIF plan to be implemented the developers had to satisfy certain criteria including having at least 350,000 square feet of the Centre open. Everhart said the Centre, which opened in May, now has about 540,000 square feet in use.

The agreement limits the amount the developers can receive from the city, and terminates the TIF plan after 21 years or when the monetary cap is reached. Under the agreement, the city can reimburse the developers for up to $2.9 million financed at an annual interest rate not to exceed 9.5 percent.

To get any of the money the developers will have to provide documentation that shows how much the road and utility extensions cost and documentation of the interest rate on their loan, said Everhart.

If the developers' documents show those improvements cost less than $2.9 million then that lower figure, plus interest, would be the limit that the developers could receive from the city through the TIF plan.

But Everhart feels the developers' costs were more than $2.9 million. Last year a Petrie Dierman Kughn official said extending water and sewer lines and making road improvements would probably cost more than $6 million.

A lower interest rate would also decrease the maximum reimbursement.

The total reimbursement the developers could receive would be about $6.8 million through the TIF plan. They would get that amount if they spent $2.9 million or more on the improvements, if the interest rate on their loan for that money were 9.5 percent, and if the payments last all 21 years.

Previous estimates that the TIF plan could cost the city as much as $7.7 million were based on previous estimates using a longer term for the agreement, Martin said.

Also, the base tax amount on the property, now estimated to be about $50,000, is higher than previous estimates of $42,000 to $46,000.

The Herald-Mail Articles
|
|
|