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Just too good a bet
By Jim Sack
Fort Wayne Reader
$500,000 vs. $60,000.
$3 million in “free” money.
7 to 2.
The first two equations explain the later and teaches us a lot about the political process.
The matter in question before Fort Wayne City Council was whether or not to grant what amounted to roughly a $3 million tax break to the redevelopers of the forty-year old Metro Building on the corner of Harrison — the new golden corridor in Fort Wayne — and Berry.
The question was called in the wake of a steady march of reform of the abatement system culminating in a vote but a couple weeks ago where a businessman was denied an abatement because he didn’t follow the rules, the same rules the Metro developers didn’t follow.
When that poor businessman, heading a company called Apollo Plaza, came to the table accompanied by a representative of Greater Fort Wayne, Inc., two matters were challenged by a number of councilmen, most notably Michael Barranda and Dr. John Crawford. Attorney Barranda is a stickler for following the rules. In the case of Apollo the cart was before the horse; in short, Apollo was well along in the construction process before the abatement request was tendered. That implies that the project would go ahead without the abatement, a question Dr. Crawford has come to ask repeatedly of developers: If you don’t need the taxpayers’ money why are you asking?
Both violations of the norms were also the case with the Metro project, but it was obvious that most members of council were willing to overlook the rules or obliterate their own lines in the sand to have this project proceed.
Apollo’s abatement application lost 3 to 5; Metro won their request 7 to 2.
Two sets of numbers tell the story. First, there is the question of return on investment, ROI, a typical yardstick developers use in assessing whether to undertake a project or not. The higher the ROI the better the deal.
In the case of the Metro project, tax revenue is the measurement. Currently, the Metro Building is paying a bit over $60,000 in taxes to the community. Once the project is completed and reassessed, it is projected that the taxes will jump to $500k per year. The community invests in a project with the expectation the project will pay dividends over a long period of time.
There is another critical factor behind this approach, which Councilman Glynn Hines summed up: with Fort Wayne blocked from using annexation as a method of increasing the local tax base, the only option is to improve, improve, improve which in turn leads to property value reassessment which in turn leads to higher property taxes which are used to pay for better schools, more capable public safety, a better library, improvements at the airport and all the other public works that bind the community together. The alternative is a slowly deteriorating community.
The most obvious tool with which to accomplish the renovation of Fort Wayne, according to city economic development mavens, is the tax abatement, so Fort Wayne is going full bore with its use to revive the downtown. The tax abatement approach, especially since the council vote last year against annexation, is an important tool to build community wealth. Loosely translated, we are well into the public-private partnership era where the community, we collection of taxpayers, work through their elected officials to team with entrepreneurs and developers to rebuild the city, raise property values and spread more broadly the tax burden, or at least that is the theory.
There are other financing tools, one of which was mentioned in passing at the meeting, and which weighed heavily in the discussion: The Community Revitalization Enhancement District (CReED) Tax Credit, a state program that matches local tax contributions to larger projects. In this case the state offered to toss in $3 million or so, if Fort Wayne would match. The abatement counts as the match.
As for a third financial development tool noted at the meeting, the Tax Incremental Financing district, TIF, the Metro Building lies in the Civic Center TIF. Basically, increased taxes generated from the Metro project to go right back into the same TIF for use on future projects in that TIF. If the numbers pan out that could amount to some $400,000 per year will be deposited in that relatively compact TIF that spreads a few blocks to the east and north, from the Grand Wayne to Superior Street. Mr. Barranda was quick to note that TIFs usually have a 20-year life-span, but could also be dissolved at after a couple of years by council.
Why, you might ask, did he point that out? One answer would be that in order to justify his vote, which was in violation of his norms, the additional tax revenues could flow directly into the general fund. The other possible motive is that he doesn’t want the $400,000 per year to be used to finance the arena or any other downtown projects.
As for the Metro deal, one councilman summed it up as “good for the city.” Simple as that.
In the past, abatement rules have been ill-defined by council, abatement recipients have failed to keep their commitments to the community, and the city has ill-managed the program to the point where the usually taciturn council took the many tedious steps to clarify some rules and tighten others.
In the case of the Metro Building, project council members admitted those rules had been broken, but to seven of the nine, the project was just too good and too important, they said, to pass up.
Such is politics.