Property owners across the state have picketed and protested after seeing tax bills skyrocket this year.
But the same factors causing homeowners to cringe may also have kept the Harrison Square development from being scrapped.
Property trending, rising tax levies and other factors allowed the city to keep the project alive even after a key component – the private investment in a downtown hotel – was slashed.
Yet there is still a chance a tax appeal from the owners of Jefferson Pointe could put the project’s promised financing in jeopardy.
The $120 million downtown development is financed from an almost even split of public and private investment. The development includes a $35 million Courtyard by Marriott with parking garage, new condominiums, new retail and a $30 million city-owned baseball stadium.
Mayor Graham Richard has long promised that the project can be done without using any general property taxes.
To do this, the city structured a deal that includes public money from a variety of other sources. The primary sources of public money are income taxes, property taxes generated by the project itself and property taxes generated by the Jefferson Pointe area.
When city officials announced the project’s hotel would be a Courtyard developed by White Lodging Services and Acquest Realty, it was also noted that it would be a $35 million private investment. That investment was significantly less than the $47 million hotel originally announced in April.
This not only reduced the size and quality of the hotel, but it put the entire project in jeopardy, City Controller Pat Roller said. Because the hotel’s value decreased, the property taxes it will generate also dropped, cutting needed financing for the project.
Roller estimated the property taxes from the hotel dropped $8.1 million over the next 30 years because of the smaller investment. The entire development is in a tax increment finance district along with the Jefferson Pointe area.
Tax increment districts capture property taxes generated by development within the district. Property owners still pay full tax rates, unless abated in a separate action, but the taxes don’t go to general government services, like school districts, the library or police and fire protection. The money instead is put aside for projects in or serving a designated area.
The tax dollars generated by the hotel will be used to help pay off the debts for the rest of the project, including building the parking garage and ballpark.
“When I heard the hotel was going to be something less than I originally hoped … we would have had to do some more homework on whether this thing was going to work or not,” Roller said. “We never thought at any point this was just a done deal.”
Fortunately for the city, tax revenue from another source – the Jefferson Pointe area – will more than make up that difference.
When announcing the project’s financing, Richard said the city would only use half of the money generated by the Jefferson Pointe tax increment finance district on the Harrison Square development. The rest of the money captured by the district would be used for other projects, such as the ongoing expansion of Jefferson Boulevard.
Originally, the city anticipated using $25 million in taxes from the Jefferson Pointe district for the downtown project, but that number grew to almost $42 million in the most recent projections.
The increased tax revenues will not only cover the $8 million lost from the hotel, but also an additional $8 million to cover rising interest costs.
More Jefferson Pointe tax dollars are available because the shopping center is generating more taxes because of its increased value. The total assessed value for the taxing district is $112 million this year, a jump of $41 million from 2006. Assessed values are the value of property calculated by local governments. Higher assessed values result in higher property tax bills, and the jump in the district resulted in an increase in annual tax revenues of almost $1 million.
This increase in tax revenue from the district allowed the city to use an extra $500,000 for Harrison Square each year without breaking its promise to not use more than half of the taxes from the district.
John Stafford, a consultant for the city on the project, said it would have been next to impossible to keep that promise without the increased taxes.
“It certainly would have been very, very difficult,” he said.
City Councilman John Shoaff, D-at large, opposes the project because of its use of a baseball stadium. He also said he is concerned about taking more money away from the Jefferson Pointe tax district.
“There are a lot of other excellent potential uses for that revenue,” he said.
For example, he said the city needs to work harder to beautify Jefferson and Washington boulevards as they lead into the city from the west.
City Councilman Sam Talarico, R-at large, said people should have expected the deals to change since they were outlined in April. He said the project still makes sense to him because of the large private investment involved.
“I think it’s a very wise use of those dollars,” he said.
The value in the tax increment district jumped mainly because trending increased the value of the mall portion of Jefferson Pointe, but the mall owners plan to fight their increased taxes.
Trending involves updating property values annually so they reflect market values. This year’s jump was the first in the now annual process and reflected about five year’s worth of annual increases.
Trending, reduced state property tax relief and rising local property tax levies – the amount of revenue governments collect – has sparked a 24 percent average increase in tax bills across the state. Those same factors also created more tax revenue to be used for Harrison Square.
The value of the largest section of Jefferson Pointe, including most of the stores but not the movie theater, jumped from $27.6 million to $64.3 million. The taxes for the outdoor mall alone jumped $900,000 since last year. The increase in value and taxes for the entire taxing district was primarily caused by increases at Jefferson Pointe.
Allen County Assessor Stacey O’Day said her office was able to use sales of similar properties around the state to determine the proper value of the mall. This along with updating square-foot costs allowed her office to better value the shopping center, she said.
The assessment of the mall, however, has been appealed by the owners of Jefferson Pointe.
Dave Mattison, Jefferson Pointe general manager, said it was good management to appeal the new assessment because increased taxes will mean increased costs for mall tenants.
“We have an obligation to our tenants to review the taxes and ensure they are fair,” he said.
O’Day said she is confident her assessment of the property is correct, especially because the entire outdoor shopping mall – including the theater and surrounding shops – was sold in late 2005 for $98 million. According to the county, the total assessed value for all properties owned by the mall owners is almost $81 million.
“We feel confident in our numbers,” she said.
During the appeal, Jefferson Pointe will continue paying its new tax bill, but that money could be refunded in the future if it wins the appeal. But this could take time.
For comparison, Glenbrook Square’s appeal from the 2002 reassessment remains unresolved and is scheduled to go before the Indiana Board of Tax Review in December.
City Councilman Tom Smith, R-1st, said it would be wise for the city to not spend any money generated by the mall until the appeal is settled so the city isn’t forced to pay back money.
“It’s just prudent to find out what’s going to happen to that appeal,” he said.
Roller said the city always has concerns about assessment appeals when it could change projected revenues for projects. She said she is still confident the financing would work if Jefferson Pointe won an appeal, as the taxes projected from the district don’t account for any future growth in the district over the next 30 years.
“The numbers continue to be conservative,” she said.
The City Council on Tuesday approved the financing of the project based on those numbers. The city must present the finances of the project to the state Department of Local Government Finance next month. The state’s approval is the final one needed for the project’s financing.