It wasn’t on the Sept. 9 Jefferson city council agenda, but Jefferson city administrator Scott Peterson again pitched the idea of using an internal loan from the city’s water treatment plant fund to comply with regulations on the use of tax increment financing (TIF).
He used time under the “Reports” item on the agenda, saying there had been many questions about the idea after it appeared on the Aug. 26 council agenda. It wasn’t discussed at that meeting “on the advice of bond counsel.” He said city staff is still working with counsel on it.
Peterson explained that in order to collect TIF revenue, a government entity must have certified TIF debt (debt incurred for the purpose of urban renewal). A city can follow the traditional method of selling bonds; enter into a development agreement; make an annual appropriation to a corporation; or assume internal debt by lending money from one account to a TIF account.
Peterson proposes the internal debt route, saying it would save paying interest as the city would on a bond issue, and it would save the initial cost of selling bonds. He said interest on a new loan would be in the 3.5 – 4 percent range.
The city now has $3.09 million in a fund for construction of a new water treatment plant. That project is planned for 2034 or 2035. Peterson proposes borrowing $1.8 million and repaying it with TIF from the already established urban renewal district. The district generated $1.9 million in TIF this past year.
The debt would be repaid to the water plant fund over six years, before the money would be needed for that project.
The $1.8 million would cover annual allocations to Greene County Development Corporation, Jefferson Matters and the city of Jefferson for economic development efforts, along with about $400,000 in a drainage project north of the county fairgrounds.
Peterson said there would be “close to zero risk” in the process, and that it would have no direct effect on property tax rates. Councilman Harry Ahrenholtz, a member of the council’s finance committee, said that committee agrees with the proposal.
Peterson was questioned, though, by residents attending the meeting. Among them was Sue Bose, who is running for city council. She asked if the council should ask voters to approve the expenses through a referendum. Peterson answered that the planned projects deal with an essential corporate purpose and as such, the council can approve them.
Bose said she has talked to a member of the Iowa Statehouse, who said it’s possible the legislature would end the use of TIF. She asked what the council would do if that were the case.
Council member Darren Jackson answered that it’s important to let legislators know the importance of TIF to Iowa cities and counties. Mayor Craig Berry has a long history with the Jefferson city council. He recalled that it was Dr Buckley who first mentioned tax increment financing to the council 30 or 35 years ago. “We’ve been using TIF since then, and we haven’t had a failure yet by using it,” he said.
