CLINTON — No Kohl’s.
No development in the Lyons Tech Park.
Less tax revenue.
That's what Clinton officials say the city would have if they hadn't used tax increment financing to attract development.
Tax increment financing allows the city to capture future tax gains to fund current improvements. Although TIF carries some negative associations, city officials argue that TIF is a tool that has played an integral part in growing the city.
In fiscal year 2012, more than $1.8 million in incremental tax revenue was generated by TIF districts in Clinton. Most of that money is given back to the developers as part of the development agreements and the other part is used for the city to pay debt associated with the development. The city, county and school districts still receive their share of the base tax value and once the development agreements on these TIF districts come to an end, they will reap the benefits of the increased tax value.
The amount of incremental tax will grow in the coming years with RAIL.ONE coming to the Lincolnway Railport, Data Dimensions expanding their Clinton footprint and the Wilson Building slated to become high-end apartments and commercial space.
The city of Clinton has used TIF districts to spur economic development and remediate blight for more than a decade.
"The effect of using TIF is development. You make the argument of, would you have the business park if there wasn't a development agreement with them to utilize TIF dollars? Would you have some of the residential subdivisions that were developed? Would you have a Kohl's, a Target, a casino?" City Finance Director and interim City Administrator Jessica Kinser said. "I understand that it's tying up tax dollars, but there always has to be the question of would this exist? Would the tax value exist and would that future taxable value exist if you didn't do something? It's a balance of what do you want as a community and is the use of TIF going to get you to that point?"
The city first used TIF in the late 1990s for Hy-Vee. As with many firsts, the city learned how to make a development agreement including using bond counsel to create the agreement, and establishing a minimum assessed value so both parties know what to expect in tax revenue.
City officials didn't jump to employ more TIF districts immediately after the initial run, Mayor Mark Vulich said.
If the city had avoided TIF altogether, Vulich said the city would have more blight than development.
"Look at what Clinton looked like 20 years ago. Had we not aggressively used TIF, we would be continuing our downward spiral," Vulich said.
The west end of Clinton has experienced exponential growth in the past 15 years with TIF playing a lead role in the development. In 2000, the land east of Wal-Mart and south of the former Best Western Frontier was bare. Now, Clinton residents and visitors from neighboring cities and Illinois venture to the area to shop at Kohl's or see a movie at the Clinton 8 Theater.
Steve Howes and Dan Jeffries, real estate partners and partners in the private development company, Valley Bluff, developed the land using TIF dollars. They borrowed $1.2 million to extend Valley West Court from the cul-de-sac to U.S. 30. That money was paid back with tax revenue under the development agreement approved by the Clinton City Council.
Howes said the development and the TIF incentive made Clinton more attractive, ultimately paying that obligation faster than anticipating and bringing more revenue into the city.
"Kohl's brought Clinton from a leaking community to a community that brings people in and generates more sales tax dollars," Howes said.
Leakage was the lowest in 10 years during the period from 2006 to 2008. Leakage measures the dollar difference between the county’s actual sales and the total sales it could generate if residents satisfied their retail needs locally. In five years, Clinton went from a leakage of $100 million to $8.6 million by 2008.
The Wild Rose Casino was built because of a development agreement including TIF incentives. This TIF district attracted the Hampton Inn and Clinton Auto Group to the area, which in turn will mean the TIF obligations are paid down faster. Without the TIF district, Vulich said he doesn't know what would have happened to the 117 acres of low-lying farm land off of U.S. 30.
"Some of that was swamp land that might have been used for farmland," Vulich said. "It probably would have stayed that way forever had that development agreement not occurred."
The economic development perks of TIF also can be seen in the Lyons Business and Technology Park and in Home Depot.
In the case of the Ashford University expansion in the tech park, the city traded a TIF District for jobs.
Ashford University received 100 percent of the TIF revenues from the Ashford district in semiannual grants for the 2008 and 2009 fiscal years, and 25 percent the following three years. The agreement was contingent on Ashford investing $8 million in the project area, adding 120 jobs in three years, and adding students.
"These developments bring employees to Clinton, who will then locate their family in Clinton, all because we brought a factory or a business," Vulich said.
TIF incentives also have been used to spur residential development in the city in the Mill Creek Highlands and the Town and Country Developments.
While city officials and developers stand behind the TIF districts that have been used in Clinton, they realize it's a tool that can be abused, pointing to Coralville's use of TIF dollars to lure Van Maur from Iowa City to Coralville's Iowa River Landing district.
"The deals have to be structured and used judiciously," Howes said. "In Clinton, I believe they have been."
The latest development agreements have been some of the most aggressive in the city's TIF history. RAIL.ONE will receive 100 percent of its incremental tax for 10 years with the amount not to exceed $6 million; the Wilson Building will get a 95 percent TIF rebate for 10 years not to exceed $1.26 million.
"Yeah, those are pretty high numbers and it's 10 years at those levels, but it goes to the importance of the project to the community and what's essential to make sure community redevelopment happens downtown and industrial development happens out at the railpark," Kinser said.
The latest TIF offerings won't be the last Clinton residents will learn about. City officials plan to employ TIF districts in the future because they say without them, Clinton can't compete.
"These companies are shopping around for where to put their business. If you don't offer them something, you're not in the running," Vulich said.