Special tax district option around bypass outlined to commission, EDA

by Kate Shunney

A Bridgeport tax attorney with Steptoe & Johnson briefed Morgan County commissioners and members of the Economic Development Authority (EDA) about the benefits and requirements of creating a special tax district in the county – potentially one encompassing the area around a new U.S. 522 bypass.

Joshua Jarrell was invited to speak to the new workgroup, set up by commissioners at the request of EDA Director Daryl Cowles to consider economic planning around the bypass project.

Commissioners Sean Forney and Ken Reed attended the public meeting with members of the EDA board last Wednesday, November 13. Also attending were Matt Pennington of Region 9 Planning & Development agency and officials from the Senior Life Services of Morgan County, State Senator Charles Trump and members of the public.

Cowles framed the discussion by calling these “big, important times” for Morgan County. He likened it to the 1930s, when a new high school and hospital were built in the county.

“It’s prudent and important we take a well-reasoned approach to future growth,” he said.

Jarrell described two special tax districts authorized by the West Virginia Legislature — Property Tax Increment Financing Districts (TIF) and Economic Opportunity Development Districts (EODD).

Jarrell spent most of his presentation outlining how a TIF works.

The EODD is based on large-scale retail development and substantial private development, he said. There are only four such districts in the state, and it’s unlikely Morgan County would qualify to establish one.

A Property TIF District would be available to Morgan County as a tool to pay for large infrastructure

projects, said Jarrell.

The county would have to apply to the West Virginia Development Office to set up the district, and describe specific projects to be funded through the TIF.

According to Jarrell, the TIF district works by “capturing future taxes and leveraging them for local projects.”

“TIF makes sense for areas that haven’t been developed before,” he said.

How it works

If the county decides to pursue the option of setting up a special tax district, officials must set the geographical boundaries of the district and calculate the value of land and buildings within the district through the Assessor’s Office. That figure will be the base assessed value.

After a defined period of development — such as five years — the county would establish the new assessed value of property within the district. The difference between the base value and the current assessed value – the growth of value – would be known as the tax increment.

Taxes gained by a growth in value would be collected and deposited in a Tax Increment Financing (TIF) Fund that can be used to pay for large projects or pay on bonds purchased on the pledge of the TIF Fund, said Jarrell.

Eligible projects can include road construction, streetscapes projects, water and sewer infrastructure, stormwater systems, fiber optic services, land acquisition, renovation of existing buildings, demolition, environmental cleanup and new buildings.

The county would have to show that the projects tied to the tax district would not be possible except through the special tax district financing, said Jarrell.

Bonds issued by the county and guaranteed by the TIF Fund could be bought by private developers to fund development inside the tax district.

A TIF can be set up for a maximum of 30 years under West Virginia law.

Jarrell said this is a good time for Morgan County to look at the TIF as an economic development tool.

“If you wait too long, you’re going to miss the optimal time to capture the TIF, when base values are at their lowest,” he said.

If the county waits to create the district until after a bypass is built, property base values will be higher and the tax increment won’t be as large, he explained.

In response to questions, Jarrell said the tax district would keep the county’s real estate values inside the district at base levels. That means the county would not take in more taxes from properties inside the tax district if property values there rose due to development.

Instead of taking higher tax revenue into the county’s general budget as property values rose, the additional tax money would go into the TIF Fund to be used for designated projects.

Rises in property value outside the special tax district could still generate more tax revenue for the county’s general budget.

Commissioner Sean Forney asked if the tax district could be anywhere in the county, such as along the 522 bypass route. Jarrell said that’s true, as long as the district is all connected, or contiguous.

Charles Trump pointed out that property owners inside the special tax district wouldn’t pay any different property tax.

“It’s not a tax break or a tax hike. They’re paying the same rate,” said Trump.

“I think you’re at a real flashpoint,” Jarrell said. “It’ll always be there, but this is an optimal time” to establish a TIF district, he said.

Jarrell said the district could be expanded once it is created.

Matt Pennington asked if there has ever been a TIF district created where it was approved but no development came after.

Jarrell said that has been the case, and the district is best done when there are viable projects already being considered.

“Some development has to happen in order to create the increment,” he said.

If the TIF district includes any part of the Town of Bath, that municipality has to agree to the TIF.

Jarrell and Trump said a TIF would not create a tax shortfall for the Board of Education, even though it would freeze real estate values inside the district at a base rate for some period of time. The state aid formula accounts for the TIF district, and the state Department of Education would make up any lost tax revenue, said Trump.

The work group also heard about potential development pad sites along the Fairview Connector road – a related West Virginia Division of Highways road project slated to connect U.S. 522 and Fairview Drive in the area of War Memorial Hospital.

Robert Milne of Thrasher Engineering presented draft maps of where pad sites might be located to capture development interest along the new roadway. The group will review the maps and submit suggested changes at their next meeting.

The next meeting of the work group will be held on Wednesday, December 4 at 1 p.m. at the County Commission meeting room.