The Town Council voted unanimously Monday night to establish a Development Program and Tax Increment Finance (TIF) district plan for about 1,000 acres south of the Manchester-Boston Regional Airport. The area includes what has come to be known as the Pettengill Road project.
Stuart Arnett of Arnett Development Group, a contracted consultant for the town, outlined what the TIF would do at Monday night’s Council meeting.
“This is our third chance to discuss the infrastructure investment for this area,” Arnett said. “Let’s look at every assumption we’re building this on.”
Arnett said the TIF had two goals, economic development and acceleration of the bond paydown.
“A TIF district is a tool the town has to use new incremental tax revenues received by private investment paying property tax, take that incremental new revenue, and apply it against any bonding for that district until such time as it is paid off,” Arnett said.
Arnett said that by using a TIF, the town can accelerate the bond paydown because every year the bond is open, money from development, which should expand over time, can be used to pay down the bond. He explained that as more money comes in with growth, more money is available to pay the bond down.
Vice Chairman Tom Dolan said Monday night that the Council needed to decide whether to establish the TIF. It would not make any monetary decisions that evening.
“Tonight there would be no obligation of any funds,” Dolan said. “If the TIF is decided, if it’s a bond, then it would be (decided) in the March election. Dolan was acting as chairman in the absence of John Farrell.
Arnett said that “like with anything, the first question you ask is “why do anything?”
“The first reason is we know that if you adopt the district, then there is an opportunity to, not a requirement to, use 80 cents of revenue collected vs. 20 cents if the TIF district wasn’t there,” he said. Because the district is not residential, the money the school district would receive for its portion goes to pay down the TIF bond.
“If it wasn’t a TIF, you would only get the 21 cents that goes into the operating budget. So generally it is a four times accelerator to pay off the bond until such time as the bond is paid off,” Arnett said.
Arnett said that by having the TIF, a better quality of road and sewer infrastructure would be built, compared to what the town would have without one. He said that would result in better and more jobs and would allow a greater tax base from increased per-square-foot floor space valuation.
According to Arnett, additional reasons to create the TIF are: faster growth; greater tax base: $70/square foot assessed value to $100-plus square feet; realizing benefits sooner; expansion potential for the road later if traffic warrants; greater density: and trail system expansion.
“As far as conditions before funding, the Town Manager has to be convinced that there will not be a negative effect to the town tax rate, basically tax positive or tax neutral from day one, and also that there is significant private sector contributions now and subsequent investment later,” Arnett said.
Arnett emphasized the vote to enable the TIF does not commit the town to spending. He said revenues from the TIF could be used for road, sewer, utilities, rights of way, trails, intersections, lights and sidewalks, as well as administration and marketing.
He said that to have the TIF bond, a public vote in March is required, and construction bids must be submitted before any “go” order. In addition, the project must be cash flow neutral or better.
Economic Revitalization Zone
Arnett then turned to the ERZ, which stands for Economic Revitalization Zone, often referred to as an Economic Recovery Zone.
“We have two of them now and we are going to ask you at a later date to expand one of those,” he said. “The reason we are linking those up is that we are getting a little close on time, the deadline being Dec. 31, 2013.”
Arnett said that expansion would include the TIF area plus known projects, and would allow for credit against New Hampshire business taxes for Londonderry companies that make significant investments.
The town’s ERZs are south and west of the Manchester-Boston Regional Airport runway and another to the east of Route 28. The expansion would be to the east of the runway.
Dolan said the town has received inquiries from companies interested in the area but he cannot speak about them because non-disclosure agreements were made. Arnett did say that current inquiries are for fewer but larger buildings.
Comprehensive Planner Jon Vogl explained that businesses locating or expanding in an ERZ get a potential break on state taxes. He said the town has no plan to let either of its ERZs expire but wants to add to the one on the west. “We want to have all of the TIF within the ERZ,” Vogl said.
Arnett said the range of projects eligible for TIF financing are $8.5 million to zero for road and traffic fixes, the zero amount meaning the business could pay costs; $200,000 to zero for the trail; zero for rights of ways; $4.5 million to zero for sewer, water and utilities, with zero for the developer paying and the City of Manchester providing the water. Another option would be that the town could provide those services and recoup the money.
Concerning a time frame, Arnett said the town must adopt the TIF as an option before April 1, 2014, with a vote then taken for the bond in March. With those approved, road and sewer construction would start by July 2014 to keep existing permits. The ERZ would have to be adopted by December 2013.
Arnett said rights of way would have to be secured, and hearings before the School Board and County Commission would be required.
Dolan said any bond would go before the voters in March, and would require a 60 percent approval to pass.
Town Manager Kevin Smith noted the TIF could be amended at any time.
Arnett said that once there is positive cash flow for one year, any surplus would be used either to accelerate the payoff of the bond or to go into the general fund to be used by schools, county and town.
“Suppose you had a $500,000 bond payment and the first year that’s what you took in, then that would go to the bond,” Dolan explained. “But after a while the area grows and there’s a million dollars that comes in; $500,000 would still go to the bond paydown but the remaining $500,000 could go to the general fund or could be used to accelerate the paydown. That’s a decision that would have to be made at the time.”
Resident Ann Chiampa asked about the status of the TIGER (Transportation Investment Generating Economic Recovery) grant for the Pettengill Road work, and Arnett said the towns that had received the grants had already heard and Londonderry had not heard anything, which was a good sign that it wasn’t granted.
“Everyone who got a ‘yes’ heard from the government several months ago,” Arnett said.
Dolan said that although it wasn’t a requirement, the federal government wanted to see a matching amount from the town in a TIGER grant, but the town had requested 100 percent financing.
Chiampa asked if granting the TIF would set a precedent for more of them.
“This is totally in the hands of the voters,” Dolan responded.
Resident Ray Breslin asked about an aquifer under the proposed TIF land and asked if a developer could seek to draw water from it. Councilor Tom Freda cited steps in place, such as Planning Board approval and state statute.
Breslin asked how a TIF would benefit the town and Smith said it would be a public/private partnership.
Dolan added that the TIF would accelerate development and therefore bring in tax revenue sooner.
Resident and former Town Councilor Brian Farmer asked if the bond could be amended and Arnett said that could be done at any time the district was still on the books.
“For the amended part, you would lose the increment that you got to date and you would be starting over,” Arnett said. “That keeps the town from perpetually rolling over.”
Dolan said that there was a financial disincentive to amend the TIF.
Councilor Jim Butler said the town, without the TIF, would be taking a back seat regarding development.
Councilor Joe Green asked how the Pettengill area is different from other areas in town, and Vogl said it was where the action is.