The city of Blaine and east Blaine developers are no longer pursuing a tax-increment financing district (TIF) to fund infrastructure needed for upcoming housing development.
City manager Michael Harmon said in a phone interview that the city won’t move forward with TIF after conversations with developers determined it would not be the best funding model. Harmon said the state will still review a project analysis, which cost the city and developers $75,000, and city staff will look at the state’s comments if it decides to use TIF in the future.
Former city manager Michael Jones initially proposed a TIF district to east Blaine developers in 2021 to fund public infrastructure in Grandis Pond and East Harbor Hills. The city would have taken out bonds or loans to pay for the infrastructure and then repaid those debts through projected increases in assessed property value.
City council voted 4-3 during its February 27 meeting to send the project analysis to the Washington state treasurer for feedback. Some councilmembers opposed to the financing method had voiced concern in previous council meetings that TIF was too risky while the city’s general fund was facing nearly a $1 million deficit for the 2023 budget.
The decision to stop pursuing TIF was jointly made by the city, East Harbor Hills developer Skip Jansen, Grandis Pond developer Ken Hertz and Harbor Custom Development, which is under contract to purchase Grandis Pond.
Jansen and Hertz cited a lack of support from city council and a shrinking project as reasons why they no longer saw TIF as a feasible option. Jansen added the city was up against a tight deadline to submit the analysis to the state and he would have liked to see council spend more time understanding the project. The project was supported by the three city managers who worked on it, but ultimately didn’t have council’s backing, he added.
“It didn’t make sense anymore,” Jansen said. “It just didn’t pencil out.”
The original TIF plan was to fund $14 million of infrastructure, but was halved to $7 million, and then $3.5 million, the amount ultimately reviewed in the analysis sent to the state. City council had also discussed using grants to pay for part of the $3.5 million, potentially decreasing the city’s cost of infrastructure to $1-1.5 million.
Jansen and Hertz both said the smaller TIF project no longer made sense because the developers would have encountered additional costs and time delays with less benefit.
“It got to the point where there was a lot of bureaucracy involved,” Hertz said.
Hertz said the city would have benefited from being in control of which infrastructure projects were approved.
Jansen said he would support the city reconsidering TIF in a year or two, adding that the slow market may delay east Blaine infrastructure.
“The city is facing a deficit and the best way to counter that without laying people off is to create growth and development like we’re trying to do,” Jansen said.
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