Author Topic: The Ford on Bay  (Read 123009 times)

jaxoNOLE

  • Full Member
  • ***
  • Posts: 224
Re: The Ford on Bay
« Reply #390 on: May 21, 2022, 10:12:50 AM »
On the $9.6 million completion grant, based on the amount of the REV grant, the property is expected to generate $36 million+ in tax revenue over the next two decades. After the REV grant, that leaves a good $10 million+ in incremental tax revenue during the REV window. So the city will ultimately break even on the completion grant too, right?

Even the discount on the land might knock $4.6 million off the balance sheets as an asset - but it's not coming out of the general fund.

Is it inaccurate to suggest that this "$41 million in taxpayer money" isn't really costing the city much of anything in the long-run, aside from opportunity cost that something better will magically come along?

As a member of a development organization, I think it is inaccurate to call it taxpayer money.  These properties aren't currently on the tax roll, so even at a discounted rate, it's a net positive in ad valorem tax revenue to the city.  The structure of the incentives also puts almost all of the risk on the developer.  If they don't complete what they promise, they receive no completion grant and the REV grant is also at risk.  It makes a better headline to say that the city "gave them $41m", but that is not an accurate depiction of the incentives.

It appears to me that this may be a bit too simplistic.

Property taxes are to pay for city services related to the property's use, using property value as a best estimate of such costs.  It appears that often we only look at that we gave up $X taxes as an incentive in return for collecting greater $Y taxes in the future to more than pay back the $X we gave up.

However, during the tax abatement period, we need to recognize that additional city services will be needed for the increased intensity (especially when talking about vacant or unused properties) of the use of the property.  On this basis, the taxpayers are losing as we are now subsidizing those city services out of pocket until the abatement period ends.  And, when such abatement period ends, if the value of city services consumes the full property taxes, there is little or nothing left from the property taxes to pay for other incentives, such as grants, property discounts, etc.

Good point that incremental costs need to be considered. At the logical extreme, $1 of additional tax revenue for a massive development is obviously not a net gain to city cashflow.

However, I wouldn't lean too heavily on the assumption that our property tax rates are so precisely calibrated as to reflect the true cost of city services to a particular parcel. There's a lot of judgmental allocation/cost accounting going on there, not to mention the judgment inherent in assessing the property value itself (complicated further in downtown as absent a number of competitive bidders, there isn't really an independent "market" value to the land).

I think the ROI calculations looking at the deal specifics are likely to be more useful than assuming the standard property tax rates and underlying assessed value are accurate representations of the cost to serve the property. That assumption works well in aggregate, city-wide, but doesn't hold when broken down to an individual property.

To your point, though, we accept projects with ROIs under 1.00. I'd be interested to see where this one comes in.