City admin Johnson talks dollars and sense
This summer has undoubtedly been a season of change and activity for the city of Merrill.
From various street projects to larger scale projects such as the new aquatic center, River Bend Trail and newly acquired Lincoln County Fairgrounds, the wheels of progress have certainly been turning.
But progress certainly comes at a price and its share of uncertainty, which has led to questions and concerns of how these changes are being funded.
The answer, as city administrator Dave Johnson explains, varies for each project.
On Tuesday afternoon, Johnson met with the Merrill Courier to discuss the three large scale projects under way or about to be under way in the city, as well as the city’s ongoing campaign on blighted properties.
As Johnson explained, a key source of funding for infrastructure improvements and this summer’s projects, stem from that of TIF of Tax Increment Financing, which is drawn from TID’s (Tax Increment Districts).
To understand how TIF and TID’s factor in as a funding source, it’s important to understand how the two are different and how they relate to each other.
TID’s consist of districts in the city that are organized based upon agreements of members of a joint review board, comprised of representatives from the city of Merrill, Lincoln County, MAPS and NTC. These four entities receive portions of local property taxes, and by entering into TID agreements, each of the entities bear the opportunity for further growth in the future.
TIF are funds made available by the difference between initial property value when the TID is created, and value after property is developed.
The city is then able to use TIF monies for various purposes, but in turn there are also strict regulations and restrictions governing use of the funds. Legal uses of TIF funds include infrastructure improvements, demolition, real estate/property acquisition and development incentives (i.e Super Seal and Los Mezcales).
On the flip side, illegal uses include financing city salaries or city equipment purchase.
Putting TIF to use can be done in several ways including use of funds directly from a TID, or borrow funds and make payments with TIF, which generally is seen with larger projects.
Another aspect of TIF which can prove beneficial to municipalities, and has proven useful to the city of Merrill is that of being allowed to allocate funds from a prosperous TID such as that of TID 3 (far east side of the city) to a blighted TID such as the downtown area.
During an interview with the Courier in early May regarding the city’s ‘Downtown Vision Plan’, Johnson and Redevelopment Authority member Amanda Kostman, elaborated on what exactly a “blighted TID” means.
“A blighted area is an area which consists of properties we want to evaluate for revitalization,” Kostman explained.
“These properties can range anywhere from structures which are falling apart, properties which just aren’t being maintained well, to properties which could use a few cosmetic changes and even properties which are being maintained very well.”
“Just because an individual’s property is located in a ‘blighted TID’,” Johnson added, “does not necessarily mean your property is blighted.
“State statute dictates how TID’s are set up,” Johnson continued. “Unfortunately, we cannot pick and choose what properties are included in a blighted TID. In fact we have some wonderfully maintained properties in the downtown blighted TID. We just have no control over that.”
Restrictions and specific uses for TIF dictate how and where the city has been able to use funds, in terms of this summer’s projects.
“When discussing the use of TIF on any project, it is important to emphasize the fact of TIF being used strictly for building and additions,” Johnson stated. “TIF will not be used for long-term maintenance.”
Below are the key projects under way this summer and a breakdown of funding source and long term maintenance, according to Johnson;
(Also included is the development of the former Lincoln County Fairgrounds, of which the city is set to take ownership after Labor Day.)
Demolition of Blighted Properties-
Cost: Average $8-9,000 per residence, includes demolition and asbestos abatement.
Funding Source: Combination of TIF, the city’s operating budget and government grants. Avg 8-$9,000 per residence, included demo and asbestos abatement.
Notes from Johnson:
*7 residences demolished this summer and one commercial building (900 E. First St.)
“To date all of residences taken down have been tax delinquent. The 900 E. First St. property was no longer structurally sound and was 6 years tax delinquent.”
*Neighboring property owners have expressed in interest in vacant property created from the residential demolitions.
* “On the bright side, a new business is already being planned on the 900 E. First St. property. Kind Hearted Home Care LLC of Merrill had the winning bid and is in the process of designing a brand new building.”
Cost: Remaining balance of $284,000 for ‘double slide’ amenity.
Funding Source: Local fund raising. Possibility of borrowing if funds cannot be raised.
Long term maintenance Funding: User fees and operating budget from previous pool at Stanges Park. Possibility of local taxes.
Notes from Johnson:
*Due to use restrictions, TIF cannot be used for pool but can be used for infrastructure such as water and sewer extension, road work or parking.
* When Stanges Park pool was closed in 2013, annual operating budget remained intact to help design and maintain a new pool. Budget was never decreased, funds in operations budget still in place.
*“Uses of TIF are very specific, being the pool is not considered infrastructure or a real property acquisition, TIF cannot be used for the pool itself. If we cannot raise the funds, we may need to borrow. But if we do, the borrowed amount would be minimal.”
* “Other amenities have already been funded thanks to the help of local businesses. The cost of the climbing wall has been donated by Park City Credit Union. Other donors including the Rotary Club, Lincoln Community Bank, Merrill Federal Savings and Loan, and Sierra Pacific have made considerable donations toward funding other features such as the play structure, diving boards and basketball court.”
“I expect the use of the new pool to be far greater than the old pool, just due to the number and type of amenities we will have there.”
River Bend Trail-
Funding Source: River District Development Foundation, annual lease payments in the amount of $18,000/year from new cell tower set to be constructed on Anson-Gilke property.
Notes from Johnson:
“The River Bend Trail is 100% funded by the River District Development Foundation.”
“Zero city dollars have been, are or will be invested in the River Bend Trail. City workers have not been involved in the construction or maintenance of the trail. All construction work has been completed by Musson Brothers Inc. and Merrill Sand and Gravel.”
Development and Improvement of the former Lincoln County Fairgrounds
Cost: Undetermined. RFP are currently being accepted for grandstand structure.
*$1.2M in insurance funds from Lincoln County upon exchange of ownership after Labor Day.
* $250,000 TIF from TID 3 for infrastructure work including paving, electrical and sanitary/sewer work.
Long Term Maintenance Funding: Operating budget, user fees, local taxes.
Notes from Johnson:
*Emphasizes use of TIF is strictly for improvement and addition. TIF will not be used for long term maintenance.
“Maintenance is generally funded through the operating budget.”
“I have said from the very start, the city will not make money on the fairgrounds or the aquatic center. “The city may not even break-even! Cost of maintaining the fairgrounds may be up to the tax payers.”
With the exception of the River Bend Trail, Johnson emphasizes the aquatic center project and fairgrounds developments may never be sources of revenue for the city, but the projects still bear value for the community as a whole.
“The fairgrounds will be a subsidized property like the aquatic center, Merrill Go-Round, enrichment center and all of our parks for that matter. I made that very clear from the start. But the main reason for subsidizing these entities and services is to improve quality of life in the city and make the city more attractive.”