TIF Could Spur Development Along Rogers I-540 Corridor

For decades, tax increment financing districts have been used nationwide to redevelop “blighted” areas. But in 2001, the Arkansas Legislature passed Act 1197, which meant TIF districts could also be established to spur development in areas where roads and infrastructure are lacking.

That’s what Rogers Mayor Steve Womack is counting on when he pitches his idea for a TIF district to the City Council this month. Womack wants to make a TIF district along both sides of Interstate 540, from Olive Avenue on the north side to the Lowell city limits on the south.

That would allow Rogers to get a tax break on construction of interchanges, overpasses and access roads in the district, which would ultimately make the area more attractive to developers.

The I-540 corridor in Rogers is already home to two major shopping centers, Scottsdale Center and Village on the Creeks, with the 856,300-SF Pinnacle Promenade on the drawing board. Rogers also has a 248-room Embassy Suites hotel with plans percolating for another hotel in the same area.

“It’s transparent to taxpayers,” Womack said of his financing plan.

A 2003 bond issue provided $45 million for street improvements, but Womack said another $100 million in street work is needed in Rogers.

“The TIF won’t pay for all of that,” he said. “I’d like to see the TIF generate $40 [million] or $50 million more of improvements … We’ll become a draw, if you will, for about 100 miles.”

Womack said he hopes to have a public hearing on the proposal in mid-June, and it could go before the City Council as early as June 22. Specific projects it would include along I-540 would be the overpass at Pleasant Grove Road, the interchange at Perry Road and widening the Olive Street overpass. The real estate in the proposed TIF district is privately owned, Womack said, “but they pay taxes, too.”

TIF districts work by, in effect, freezing property taxes at current appraisal levels for possibly as long as 25 years. What actually happens is, after a district is improved with new or redeveloped buildings and infrastructure, the additional property taxes that would be paid through a higher appraisal are turned back to the TIF district.

“They can use it for a variety of purposes that improve the district,” Womack said. “In this case, primarily roads. Our focus is going to be on the rapid and strategic location and development of transportation infrastructure.”

Impact on Schools

After the 2001 law was passed, many school officials in Arkansas opposed TIF districts saying they took money from schools to pay for underfunded city infrastructure.

A major problem with Act 1197 was that it penalized school districts because the state funded the districts as if the money going back to the TIFs was really going to the schools, said David Cauldwell, business manager for Rogers Public Schools.

“2001 was different,” he said. “When they were counting assessment against our funding formulas, we would have lost a couple million dollars a year … I mean, we just couldn’t stand it.”

But state Act 43 of 2003 changed that by eliminating the increase in property value, based on improvements within the TIF district, from the state’s school funding formula.

The state collects the amount taxed on the first 25 mills in each school district and returns that money to the district with additional state funds to equal a statewide per-student formula ($5,400 per student for the 2004-05 school year).

Cauldwell said a school district’s debt mills are excluded from the TIF. (A mill is one-tenth of one percent of assessed property value.)

Of Rogers’ 39.5 mill total property tax, 16.4 mills go to pay off debt. That means the school district’s 23.1 taxable mills is below the 25-mill cutoff in the state’s funding formula. So, if less money is collected in Rogers because it’s going back to the TIF, the state will add funds to equal the per-student funding amount. Essentially, in Rogers’ case, the state is paying for the TIF instead of taxpayers in the school district.

By Cauldwell’s calculations, if buildings in the Rogers TIF district appraise for $100 million, the TIF would get $462,000 and the school district would lose only $11,000.

“The residuals of what the $100 million will do is a whole lot more than $11,000,” Cauldwell said. “It wouldn’t negatively affect our revenue stream. When I look at it, I just don’t see how we lose any money.”

Cauldwell noted that the formula could vary from school district to district based on how much debt service is being paid off through property taxes. He has been working with Womack on the mayor’s TIF district proposal.