Members of the Somerset City Council held a workshop Thursday to go over any final questions councilors may have ahead of Monday’s vote on whether or not to approve two Tax Increment Financing (TIF) districts.
One of the proposed districts cover areas in downtown – specifically around Cundiff Square and the former oil refinery – while a second are covers land surrounding the Somerset Community College, the Lake Cumberland Regional airport, and undeveloped land along U.S. 27 south of Lowe’s.
Creating a TIF District allows the government to pledge revenues that will go towards developing that specific area. The baseline tax revenues, the amount being collected at the time the TIF District is created, are collected and used in the same way as they always have been.
All revenue collected above that baseline amount is set aside in a special fund which can only go towards development within the TIF District.
That development could be infrastructure, such as roads or utilities, or could go towards incentives to draw in new businesses.
While no firm plans have been made nor any developers are lined up – save for plans to bring a four-year college to the area of Cundiff Square – representatives from the Somerset-Pulaski Economic Development Authority (SPEDA) said the areas could be developed into shopping, transportation hubs or even recreation such as campgrounds.
But the point is that any projects that come in should begin to start generating tax revenues above what are currently being collected for the area. A portion of those revenues can, in turn, be used to entice more development, until an undeveloped area is built up, or a blighted area is rejuvenated.
Any residents living within the TIF district will not see a change, said TIF legal expert Jim Parsons from Keating, Muething and Klekamp PLLC.
Landowners will not see taxes go up, and homeowners will not have any restrictions placed upon them outside of the general restriction that go along with their zoning, he said.
SPEDA board chair Brook Ping explained that without a TIF district, if a company wants to come along and build but needs $50,000 of sewer infrastructure put in place first, the city would have to budget that out if either sewer funds or general funds, and it might not have that.
“What would happen if you had a major project come and say, “Hey, we need gas, water, sewer and things right here next to the airport… It’s going to cost $3 million.’ Well, you don’t have that in your budget to do. Now you have a tool.”
Ping said with the TIF district, the city can ask a company to help with the cost of building the infrastructure, then the city will give back some of the company’s tax money over time.
“There’s no victim. It doesn’t cost the taxpayers anything. It doesn’t cost the city anything. The city generates more revenue, because you’re keeping 25 percent of the additional monies, and you’re just giving (developers) a refund back to pay for infrastructure that the city would have paid for.”
Any revenues collected must be used only for works within that TIF district, however. For example, if the area needs a new pump station for water, that pump station can only serve properties within the district.
Or, another example brought up by councilor David Burdine, if the city wanted to create a public transport system such as a bus line, TIF district money could be used only to build the system within that TIF area. Other funding would be needed to extend transport outside of that area.