Developers have told Franklin’s mayor that the area around the Interstate 65 exit could be a great location for businesses, but nobody wants to be the first to invest in improving the vacant land.
Mayor Joe McGuinness said he wants that to change and soon. That’s why Franklin will consider borrowing $15 million, which would be used primarily to bring utilities to vacant lots around I-65 and reroute poorly planned roads near the interstate. Funds also would be used to make stormwater improvements downtown that would help reduce flooding citywide.
But the city is under a tight deadline. It must borrow the money before July 1.
Doing so would allow the city to extend the life of its biggest tax-increment financing, or TIF, district by about six years after the state set an expiration date for those taxing districts, which set aside money for infrastructure and economic development projects.
Extending the expiration date will allow the city to take out a bigger loan for improvements and collect more tax money in the taxing district.
But that also means that in the next three months, city officials will need to finalize a list of projects and go through the process to borrow the money.
If Franklin doesn’t make the deadline, the city potentially could lose out on millions that could be used for projects, McGuinness said. Franklin might be able to borrow only about half as much, and the city wouldn’t collect an additional $8.5 million from its biggest TIF district if it expires sooner. The law change doesn’t impact TIF districts in Greenwood.
The rush is necessary to be able to fund the large projects that the city has been discussing for years, McGuinness said.
“This is not us cramming anything in. We have been putting the ball in motion for a longer period of time,” he said. “We’re trying to fast-track some of these projects and spur some development.”
State sets expiration date
Last year, state lawmakers approved changes to TIF districts, including setting an expiration date of 30 years after creation for any district formed before 1995, unless the district has debt.
In Franklin, the Musicland, Casting Technology and Franklin Business Park TIF district is affected by that law and is set to expire in 2024. That TIF district raises about $1.5 million per year, about half of the city’s total TIF income. Since it collects the most income, it allows the city to get a 15-year loan of about $15 million, McGuinness said. The loan payments would be made out of the taxes already being collected, so it wouldn’t affect tax bills, he said.
The loan money would immediately be plugged into projects, McGuinness said.
Near I-65, the city is considering about $3 million in work. The owner of about 22 acres of vacant land north of King Street between McDonald’s and Paris Estates wants to sell or develop the site, but it has no utilities, McGuinness said. The city could pay to bring water, sewer and other utilities to that area to get it ready for development. He also would want to reroute Paris Drive, which currently twists with two 90-degree turns, he said.
The city should release a draft of an I-65 development plan, which will identify possible projects, in the next 30 days, he said.
The city also recently completed its stormwater master plan to address flooding. One of the top-priority projects would be replacing the railroad bridge just south of Monroe Street, which impedes flow and causes Hurricane Creek to backup east into the city. That project could cost $4 million to $7 million.
Other stormwater projects could cost $30 million to $43 million total, which the city won’t be able to fund if it continues to use TIF money only as it is collected, he said.
Franklin’s redevelopment commission has other projects on its long-range plan that keep getting pushed back due to funding, city council president Steve Barnett said. Roaring Run drainage improvements, connecting a new road from Heritage subdivision to Commerce Parkway and making road improvements around Scott Park are other projects the city could do if more money is available, Barnett said.
The city would need to save for several years to do projects that could be accomplished now by borrowing, McGuinness said. The city also needs cash that can be used as incentives for new businesses, which can come at any time and can’t be scheduled, he said.
“We’ve invested in a lot of long-term projects with short-term money,” McGuinness said. “But when you get a company like B2S who comes to town, are you going to have money to help get them started, or is it all going to be tied up in those long-term projects?”
Taking out a 15-year loan would allow the city to extend the life of the large TIF district by about six years to 2030. During that time, the district would continue to capture taxes, totaling about an extra $8.5 million.
But if the district were allowed to expire in 2024, the property value would be added back to the city’s overall total value of properties, which could help reduce tax rates and increase funding for local governments. TIF districts set aside some taxes collected from businesses to be used for infrastructure and economic development projects, and the money does not go to other local governments, including schools, libraries and city government.
Impact on schools
Officials from Franklin Community School Corp., which misses out on the largest share of taxes captured by the TIF districts, are supportive of the plan so far.
Local governments wouldn’t get an extra $1.5 million when the TIF district expires, financial consultant Jeff Peters told city redevelopment commission members Tuesday. The additional assessed value would help reduce tax rates and reduce what governments lose to property tax caps, he said.
Franklin Community Schools gets about half of the taxes residents pay, but the school system wouldn’t get $750,000 more in taxes when the TIF district expires, Franklin schools executive director of finance Jeff Mercer said. The amount would be significantly less, he said.
That’s not a big concern for Franklin schools, since the debt payments will drop from $11.6 million in 2024 to about $2.4 million in 2026 and beyond. Keeping the TIF district in place wouldn’t cause the school district to lose any more taxes than it already has been losing, Mercer said.
The school district has more to gain by Franklin’s efforts to spur new development, Superintendent David Clendening said. If more people move into Franklin, the schools will get more funding, since the state funds schools based on enrollment. And if new subdivisions or businesses are built, that also will increase the city’s total property value, he said.
No new district planned
McGuinness said he will not create a new TIF district around the I-65 exit, so any new development that happens there will add to the city’s total property value and tax dollars will go to all local governments.
Any new developments, such as a hotel, grocery store or sit-down restaurants, would serve eastside residents who now must drive to U.S. 31, as well as help attract more people off I-65 to stop in Franklin and explore the city, McGuinness said.
“We’ve done a lot of good things downtown with the revitalization. It’s now time to shift direction. When people come to shop and visit, we need to focus on our gateways,” McGuinness said.
Redevelopment commission members would need to approve the plan and are discussing it.
Board members want time to review a list of potential projects to make sure they’re needed. Commission President Bob Heuchan said he was uncomfortable with the idea of borrowing money just to extend the life of a TIF district and wished the topic would have been discussed six months ago. Commission member Jay Goad is supportive of the idea but noted the 90-day window will make it look like the city is scrambling to squeeze in a large loan before state law changes.
Commission member Richard Wertz, who also serves on the city council, wants to quickly bring together the mayor, council, redevelopment commission and financial consultants to discuss the plan and lay out why it’s needed. Wertz said he is opposed to borrowing mainly because he doesn’t have enough information about why it’s needed and how it would be used.
Franklin is considering taking out a loan that would help pay for improvements around the Interstate 65 area and stormwater projects that could prevent flooding. The loan would be paid back with taxes already being collected in the city’s tax-increment financing, or TIF, districts. Here are the details.
$15 million: Loan amount being considered
15 years: Term of the loan
2024: Expiration date of the city’s largest TIF district, if the city doesn’t borrow money
2030: Extended expiration date if the city borrows for 15 years
$3 million: Approximate annual income from all TIF districts
$1.5 million: Approximate annual income from largest district.
$3 million: Estimated cost of road and utility improvements north of King Street
$4 million to $7 million: Cost range to replace railroad bridge south of Monroe Street for drainage improvement
$30 million to $43 million: Total cost of all projects outlined in stormwater plan
SOURCE: City of Franklin