The city of Blaine’s consultants advised city council on a new economic tool that could spur east Blaine housing development through a public-private partnership. Council will consider the funding option, tax-increment financing (TIF), as it continues brainstorming how to pay for public infrastructure in future east Blaine neighborhoods Grandis Pond and East Maple Ridge.
“If TIF didn’t exist, it would be hard [to find funding],” finance director Daniel Heverling said in a phone interview referring to east Blaine development. “Not to say it would be impossible, but it would be hard.”
TIF would allow the city to borrow money from expected increases in property tax revenues from a designated area that could include the upcoming east Blaine neighborhoods Grandis Pond and East Maple Ridge, not the entire city, to pay for street, water and sewer construction.
“Your current city tax payers don’t see a difference in the amount they’re paying,” Briahna Murray, vice president of Gordon Thomas Honeywell Law Firm, the city’s contracted consulting company, explained to city councilmembers during the November 8 meeting. “It is the growth within the increment area that drives where the revenue comes.”
If the city doesn’t use TIF, Heverling said it would likely need to borrow money from city funds that would, in turn, raise utility rates for all city residents instead of those just living in the new neighborhoods.
The Washington state legislature passed House Bill 1189, which went into effect July 2021, authorizing cities, counties and port districts to use TIF. The financing tool should create growth in areas without much, or plateaued, economic development in hopes that it will encourage more private development and increase property value. The infrastructure must be publicly-owned and could include water and sewer construction, road maintenance, broadband, railroad, electric services, stormwater management and creating long-term affordable housing.
TIF isn’t a new concept; it’s used in many states across the country but had been rejected by voters and struck down by Washington courts in the past. To comply with the state’s constitution, TIF only applies to local property taxes and does not include the state’s property tax levy or voter-approved levies such as a levy-lid lift or revenue bond.
How it’s calculated
Taxing districts typically collect the previous year’s levy, plus the yearly 1-percent levy increase and new construction costs. But with TIF, an additional amount is added on that would go to the city of Blaine’s general fund for the city to take out loans or bonds to create east Blaine public infrastructure. Only the city of Blaine would receive the TIF revenue, leaving other tax districts to receive their normal amount. But because development would bring more people living in an area, like the 1,400 expected to come in east Blaine, taxing districts like schools and fire districts could see additional revenues, Heverling said.
“The statute is designed to not have any negative impact on taxing districts so as you think of the fire district and school district, they will be collecting revenue that they are not currently collecting today,” Murray said. “Their budgets are not negatively impacted by any of this. If anything, they see a benefit to the revenues they receive.”
The area proposed for TIF needs to have current/historic stagnant growth or unusual/additional development expenses. The project also needs a market analysis or developer commitment.
If the city decided to use TIF, it would need to outline a geographic area for the increased taxes and which public improvements would be financed. TIF districts can’t last longer than 25 years and boundaries can’t be changed, according to state law.
Revenue can only be used to the amount listed in the city’s TIF ordinance. Additional revenues generated through TIF are distributed back to the taxing districts in proportion to their regular tax-levy rates, Murray said.
TIF guidelines require there can’t be more than two active increment areas at the same time and they can’t overlap. A TIF area also can’t have an assessed value of more than $200 million or have more than 20 percent of the total assessed valuation of the city of Blaine, whichever is less, according to the consultants’ presentation.
Murray said she believed that the east Blaine development would meet all of the requirements for a TIF district.
“It’s my assessment that it very much meets the buck for the test that is required by the statute and therefore makes it an ideal project for utilizing tax-increment financing,” she said.
Jones said he and the city’s consultants have met with Skip Jansen’s team at JIJ Construction, owners of East Maple Ridge and Ken Hertz of Blossom Management, owners of Grandis Pond, who will be the two primary property owners of the land east of North Harvey Road.
The city is not considering TIF to finance the expected $6 million sewer system repairs needed in central and east Blaine, Jones said.
“This is another way to pay for infrastructure,” he said. “This primarily, though, is a way to pay for brand-new infrastructure for new development, not the overall system improvements.”
If the city decides they want to pursue TIF, the next steps would be for the city to prepare a project analysis and conduct outreach to the taxing districts. If response is positive, then the consultants would hold two public briefings, submit a project analysis to the state treasurer and draft a TIF ordinance.
Council will continue to explore TIF in the next few months and could potentially take action in 2022, Heverling said.
“I’m not asking for you to make any decisions tonight,” Jones said. “This is really just an opportunity for education.”
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