Proposed Tax Incremental Financing for New Hotel Site +

Last week, the City Council received a request to hold special City Council and Finance Committee meetings on Wednesday, November 5, 2014. ('Special' because the Council would normally meet on 11/18/14 this month and the Finance Committee, later in the month.) The meetings are scheduled for 7:00 p.m. (City Council) and 7:30 p.m. (Finance Committee) at City Hall.

The special meeting was called so that the Council and Finance Committee would be able to hold readings of several important measures before the regular 11/18/14 meeting and then hold final votes on them on 11/18/14, for quick turnaround. The driver of this accelerated schedule is a proposed Tax Incremental Financing package for a hotel developer, to develop the site at 284 Elm Street for a 92-room, 54,000 square feet hotel. Any Tax Incremental Financing package must also be reviewed and approved by the Commonwealth and the committee that reviews these proposals only meets quarterly; this schedule is designed to get this to the committee before the end of 2014.

284 Elm Street Property

What is Tax Incremental Financing (TIF)? It is an economic development tool made available through the Commonwealth through which a locality such as Amesbury provides an economic incentive for a developer in the form of waived property taxes at a negotiated level for a negotiated period of time. Amesbury approved guidelines for using TIF as a development tool earlier this year.

The way it works is that the City can elect to waive property taxes collected on future increases in property value based on the desired development. For example, if a property generates $10,000 in property taxes in its current state but would generate $20,000 a year in taxes in its developed state, the City can waive some or all of that new $10,000/year in anticipated taxes, for a set period of time.

In this case, the Mayor is requesting that the City waive:

• 75% of the new (incremental) tax revenue for the first 5 years 
• 35% of the new tax revenue for the next 5 years

 

 In this particular case, the value of this TIF incentive (that is, the waived property taxes) is $802,500.

The rationale for offering the incentive in the first place (under the guidelines that we approved earlier this year) is that the proposed site itself offers constraints that add cost to any developer and make the project prohibitively expensive without the TIF incentive. The developer is required to use the tax savings essentially as self-financing for part of the project (proposed at around $10 million total). Here are the numbers (as legibly as I could cut/paste them from the proposal):

You can read the entire TIF package HERE. This is Amesbury's first TIF and likely out only 'bite' at creating an incentive for this property, so it is important for us to get it right. The City is 'investing' over $800K in waived taxes but some short-term and a good bit of long-term gain in new tax revenue from the property.

The OTHER significant item in front of the City Council at this special meeting on 11/5/14 is the authorization for the City of Amesbury to purchase 116 Whitehall Road for $400,000. View the property HERE.  This is land currently zoned for 61a agricultural use and as such, the City has the 'right of first refusal' when the property is up for sale. This request from Mayor Gray is to exercise that right and purchase the land, presumably as open space. As one can see from a map view of the property, this open space links the north side of Woodsom Farm over the ridge down to Whitehall Road, offering the potential to expand the size of and access to the Woodsom Farm property.

You can read this request HERE.

I encourage anyone interested in either of these items to attend tomorrow's 11/5/14 City Council and Finance Committee meetings.