The Village of Cambridge’s tax incremental finance (TIF) district is experiencing common peaks and valleys, said the village’s financial consultant.
The Cambridge Economic Development Committee heard a summary of the TIF district’s performance at its Jan. 20 meeting, in order to take stock of the TIF district’s financial picture.
Greg Johnson is a senior municipal advisor for Ehlers & Associates, the village’s contracted financial advisor. Johnson presented the TIF district’s annual report.
The TIF district includes the former Melster Candies site, Home Again Assisted Living on England Street and the downtown area.
It was created in 2013 as a mixed-use district, and is currently the only TIF district Cambridge has open, Village Administrator Lisa Moen said. Johnson said the TIF is projected to close around 2033.
“The first two years of the district, the TID actually lost value, and then there were some notable gains in value. The last two years, the district has lost value again,” Johnson said.
Johnson and Moen added that some value fluctuations came from the assessment of the original Home Again building.
“The first year the assessment didn’t include the full amount, which was corrected in subsequent years. This has now been corrected and those numbers have stabilized,” Moen said.
Johnson said the TIF’s debt load currently includes two State Trust Fund loans amounting to about $460,000 in principal and $162,000 in interest. Both are expected to be paid off no later than 2034.
In the 2019 fiscal year, Johnson said, tax increment revenue in the district amounted to about $73,000. That’s the amount of tax revenue collected each year based on the rising value of the property, beyond what the base value was in the year the TIF district was created.The TIF has generated a total increment value of $3.2 million, as of January 2019.
At the end of 2018, Johnson said, the TIF district had a $27,000 deficit.
Village expenses related to the TIF district since its creation have included an upfront development incentive of $360,000 provided to Home Again and $100,000 of debris removal and site clean-up competed by the village within the district. Both of these projects were financed with the State Trust Fund loans. The Village is also paying a $250,000 development incentive to Home Again from tax increment generated by the facility annually. The village is also being reimbursed a total of $85,000 for land it purchased.
“The district is remaining in a deficit, but is projected to recover that,” Johnson said. “But not (until) well out into the future.”
Johnson said deficits are not uncommon for municipalities, but Cambridge could benefit from new development in the district.
“The fact that there’s a deficit isn’t alarming or unusual. It comes down to how you manage that situation going forward,” Johnson said.
“The district really isn’t in position to take on new cost, absent new development to help pay for those costs. Actually there needs to be some existing development, new development...just to cover the costs that are there already,” Johnson continued.
Cambridge Village President Mark McNally, and member of the Economic Development Committee, asked Johnson why municipalities benefit from using TIF districts.
Johnson replied that it’s a way for municipalities to share costs of improvements among other taxing bodies like school districts, technical colleges and county governments, and to encourage development in specific areas by supporting developers. Moen added that taxing bodies benefit from increased tax bases created from the TIF district.
-In other matters, the Economic Development Committee is working with the Lake Ripley Management District, and are considering teaming up for upcoming events. McNally said the goal is to encourage residents of Lake Ripley to come downtown Cambridge and support local businesses, and to bring more people out to the lake.