MOUNT VERNON — Residents at Monday’s council meeting differed on growth philosophy, but they agreed no incentive money should go to a developer for infrastructure costs.
City officials said if council members did not grant incentives, city residents would face a $5.2 million deficit over 30 years.
At issue is whether to use a New Community Authority (NCA) and tax increment financing (TIF) to reimburse Arista Villas developer KNG Equity for infrastructure costs.
Arista Villas plans 100 single-family homes on Vernonview Drive. The estimated infrastructure cost — roads, water, sewer, stormwater — is $7,485,740.
Area Development Foundation President Sam Filkins said the question is whether the developer pays the cost upfront and passes it to the home buyer, or whether the developer uses NCA and TIF revenue to pay it off over 30 years.
The schools receive their share under both scenarios.
By the end of the night, council members approved the NCA but discovered they have to wait 30 days to vote on the TIF.
The proposal
An NCA places an extra fee (10 mills) on people who buy the homes. Each homeowner would pay an estimated $1,260 annually through the NCA charge; $252 goes to the city, $1,008 to reimburse the developer.
A TIF redirects taxes on new property value into a special fund.
“That’s important because no existing property tax revenue is being taken from existing homes to use for this infrastructure. The tax revenue being used is generated by the new value that would not exist if the development did not exist,” Filkins said.
“So when you hear that the city is ‘subsidizing development,’ I think it’s important to understand what that actually means. The city is not taking money from an existing taxpayer to give it to a developer.”
KNG Equity will take out a third-party bond to cover infrastructure costs, meaning the city carries no debt exposure. If council approves the incentives, KNG repays the loan over 30 years using NCA and TIF revenue.
How does it affect current residents?
Initial infrastructure costs run $249,524 annually ($7.485 million divided by 30 years).
Mayor Matt Starr estimates it will cost $230,370 a year to maintain the development, for a combined $479,895 annual cost.
Projected annual revenue from the development ($172,500 in income tax plus utilities and stormwater) is $304,764 — a $175,131 shortfall residents citywide would have to bear. It equates to $5.25 million over 30 years.
By contrast, NCA and TIF revenue is projected at $674,508 a year ($10.38 million over 30 years), yielding a $194,613 annual surplus or $5.83 million over three decades.
“If we have no incentives, if we have no investments here, you surely will be subsidizing this development,” Starr said.
The need for housing
Councilman Taylor Jacklin said one concern residents questioned was the need for housing. Jacklin chairs the Land Use and Development Committee.
Resident Gary Kester said he sees a serious transition underway.
“We’ve got this disease that we have to grow, we have to have housing,” he said. “We have several housing developments already underway. … Can we even handle that current growth that’s already been authorized. To go forward, I have serious concerns about.”
Jeff Dalton said the need for housing is a false premise based on Intel expanding into Licking County. He favors a TIF if it is used outside of Aristas Villas.
Filkins said local employers need people for current jobs and to fill the void left by retirements.
“We have, just in healthcare and manufacturing, which are our largest employment bases in Knox County, 3,550 retirements looming in the next six years. We have an aging workforce, and we need to fill those thousands of jobs with people who need to find a place to live,” he said.
“If we want businesses to grow, we need people. And if we want people to live here, we need places for them.”
Residents remain unconvinced
Don Carr said the real conflict is between the philosophy of growth and development decisions. He said most social media comments prefer the city to stay the way it is.
He noted a TIF is useful for commercial development but is not prevalent for housing.
Carr asked council to vote no on legislation that allows TIF funds to be used inside the boundaries of private property. He also asked them to remove the emergency clause.
Former councilman Mike Hillier said he is not opposed to growth. He voted to establish the city’s NCA when he was on council.
However, he does not want the city to become a Pickerington or Johnstown.
He asked council to vote for the TIF and NCA after amending it to state that no city, TIF or NCA money will be used for the Arista Villas development.
Hillier said the NCA and TIF money is to upgrade water, sewer and roads outside of a private development.
Darby Dooley, legal counsel for the city on the tax incentives, said the city can use the NCA revenue anywhere in the city. It can use TIF money outside the TIF area if it is tied back to benefiting the parcel that generated the revenue.
He expects TIF revenue to exceed what is given to the developer, leaving a city surplus. He said the city will cap the developer’s reimbursement amount. The city is still negotiating that number.
Jennifer Showman said that as a homeowner, she wants to see costs upfront, not at closing.
She also questioned whether the homes are affordable with current jobs and fill a need. She believes the 8-2 split between the developer and city is skewed.
Objective standards, not personal feelings
Filkins said the city should judge the NCA and TIF by objective standards — the project, infrastructure, public benefit, and financial structure — not by feelings about the developer.
“I support these tools because I believe Mount Vernon needs housing, because that housing requires infrastructure and because these tools provide a way for that infrastructure to be paid for, so that the development pays for it,” he said.
When it came time to vote on adding Arista Villas to the NCA, Councilman Jacklin proposed two amendments:
• Add the dates of the hearings.
• Remove the emergency clause.
The motion failed by a 4-3 vote, with Jacklin and Council members Dale Miller and LeNan Hager voting yes.
Jacklin then proposed to amend the ordinance to only include the dates; council passed that motion unanimously.
The final vote to adopt as amended was approved by 5-2 vote. Jacklin and Miller voted no.
On the ordinance creating the Arista Villas TIF district, council voted 4 to 3 to remove the emergency clause.
Because Ohio law requires a 30-day waiting period between the TIF hearing and adoption, council postponed the third reading to Sept. 14.
(Below is a PDF of Starr’s entire presentation.)
