Ottawa city commissioners voted unanimously this week to approve a development agreement with the Ford dealership in the city’s South 59 Tax Increment Financing (TIF) District. A TIF is a special financial tool that can generate money for economic development in a specific geographic district.
Advantage Ford, 402 N. Main St., Ottawa, plans to build a 26,645-square-foot dealership and service center next year on 3.9 acres of land southeast of the intersection of East 23rd and South Oak streets in a commercial district on Ottawa’s south side.
With an estimated construction cost — including landscaping and parking lots — of about $2.2 million, the project’s total cost would be about $3 million, according to a city report. Advantage Ford’s TIF request is for tax increments totaling $750,000 — to be paid out over eight years — to recoup most of the land acquisition cost for the construction project.
The three parcels of land where the dealership would be built are located at 2330 S. Oak, 2320 S. Oak and 244 E. 23rd streets — within the 604 acres of developed and undeveloped tracts that comprise the South 59 TIF District, established by the city in 2008.
TIFs are created by local municipal governments to provide incentives to lure private investment and help finance infrastructure improvements. TIFs work by capturing new property tax revenues from a specific area and re-investing those revenues in that area.
“A TIF is a program that allows new property tax increments, created by a new project, to pay for approved project costs within the TIF District,” Wynndee Lee, the city’s director of planning and codes administration, told city commissioners earlier this month regarding Ford’s proposal. “Generally that’s infrastructure, but TIF funds also are eligible for acquisition costs and limited site development costs.”
Love’s Travel Stop, 203 E. 27th St., used TIF dollars to recoup some of the cost of putting in a sanitary sewer system at its location in the South 59 TIF District, Lee said.
“We are writing the check for the land acquisition,” Pyrant said. “We are not asking the city for one dollar to purchase the land.”
Jeff Richards, city commissioner, also stated during the hearing the city would not be out any money under this TIF proposal.
“We would still collect property taxes on the site, and we would collect 5 percent of the TIF [monies] to cover our administrative costs,” Richards said. “There is no financial risk on the part of the city.”
The city’s financial advisor Bruce Kimmel, a senior financial adviser with Ehlers, a Roseville, Minn.-based firm that specializes in public finance issues, estimated the TIF-captured assessed value of the Ford project to be $672,232 — which would be paid out to Ford in annual TIF reimbursements of $96,011, up to a total amount of $750,000.
Pyrant said at the public hearing these tax reimbursements would help the business generate enough cash flow to make the venture viable.
Lee said the reimbursements would be paid out to Advantage Ford through the course of about eight years. A TIF project plan is set for 20 years, Lee said, so tax increments collected during the remaining 12 years of Ford’s project could be reinvested in other projects within the TIF District.
Doug Carder is senior writer for The Herald. Email him at dcarder@ottawaherald.com