A developer recently got a $310,000 incentive to bring in a big-box store and other shops and restaurants to a property east of Interstate 65 in Greenwood, but the money comes with a new catch.
If property tax dollars paid by those new stores don’t equal or surpass the incentive amount within five years, the developer will have to pay back the difference.
This model of holding developers accountable by way of property tax dollars is new for the Greenwood Redevelopment Commission. While provisions for the city to be reimbursed for an incentive if development doesn’t happen are common, this is the first time the city has specifically tied these reimbursements to the property taxes generated by a project.
If the goal of an incentive is for the city to benefit from increased taxes, officials say measuring the amount of taxes is a fair way to determine if a developer has kept its end of the bargain.
Going forward, the redevelopment commission intends to consider similar requirements for future projects, Greenwood Redevelopment Commission President Brent Tilson said.
“This is a model we want to look at to put more structure around certain types of requests,” he said.
The redevelopment commission unanimously approved giving ETB Precedent Partners $310,000 to help pay for about $950,000 in infrastructure improvements at a 19-acre site at the southeast intersection of Main Street and Graham Road. The redevelopment commission funding will come from one of its TIF districts.
The goal, according to developers, is to attract a big-box retailer similar in size to a Costco as well as additional shops and restaurants. The money from the redevelopment commission would help cover cost of roadwork, storm and sanitary sewers and other earthwork at the site.
But city officials wanted to ensure that their investment, paid from property taxes collected by tax-increment financing districts, would be protected, and proposed that they would provide the funds to the developers, on the condition that if the development wasn’t substantial enough to generate an equivalent amount in property taxes, that the developer would have to reimburse the city proportionally.
For example, if the property generates $200,000 in property taxes during the next five years, ETB Precedent Partners could be required to pay back $110,000 to the city over the following three years.
While the city has used similar measures for having a developer pay back investments if development falls through, this decision is the first to specifically tie investments to the amount of property tax revenue that is expected in return, Tilson said.
Past investments the redevelopment commission has made which it has lost money on include $10 million in incentives and loans given to Elona, a bio-tech company that went bankrupt in 2013, and $130,000 to prepare documents in 2009 for a Cabela’s store that the company eventually backed out of constructing.
Tilson said these new requirements for ETB Precedent Partners weren’t the result of any specific failed deals.
Using property taxes as a measure of whether a development was worth the city’s investment is appropriate, as it gives the redevelopment commission a direct way to see if they’ve gotten enough of a return on the city’s investment, he said.
“We were looking for a way to provide them the incentive to develop the project swiftly and bring businesses in and at the same time protect ourselves on the back end,” Tilson said.
A big-box store alone, something similar in size to a Costco or Kroger, would pay enough property taxes itself to cover the cost of the city’s investment by itself, he said.
Development: ETP Precedent Partners plans to build a big box store and other shops on 19 acres at Main Street and Graham Road in Greenwood.
Incentives: The Greenwood Redevelopment Commission is providing $310,000 to cover about one-third of infrastructure work at the site.
Accountability: The developments built at the property need to pay at least enough in property taxes during the next five years to match the city’s incentive.