Jack Z. Smith Special Projects Reporter Fort Worth Business Press
While the recent unveiling of the dynamic new Sundance Square Plaza is a milestone in revitalizing downtown, city leaders envision much more to come. Downtown Fort Worth Inc. and its tax increment financing district, or TIF, are setting the stage for the future. “We’re not done by a long shot,” insisted Andy Taft, president of Downtown Fort Worth Inc. (DFWI), which manages the TIF.
Future TIF expenditures could provide financial incentives for high-density residential and commercial development and accompanying multilevel parking, infrastructure improvements such as new utility lines (for example water and sewer lines), additional downtown housing that would include units for people with modest incomes, construction by the Fort Worth Independent School District of a proposed new STEM (science, technology, engineering and math) school downtown, upgrading of lackluster building facades, enhancement of public transit and better signs to aid people in getting around downtown. The appointed TIF board and Fort Worth City Council have voted to raise the TIF’s lifetime cap by $28 million, to $100 million. Other local units of government participating in the TIF have not yet formally voted on the cap hike, but Tarrant County “has indicated it is supportive,” Taft said.
The TIF has injected money into projects ranging from trail-blazing condo construction in a tornado-ravaged bank tower to free parking on evenings and weekends for visitors flocking to the city’s core. The TIF had been in operation nearly 18 years. It has made $69.4 million in funding commitments to a wide variety of projects, leaving it only $2.6 million short of its lifetime budget cap of $72 million. $100 million cap proposal The TIF board and city council also have approved an amended Project and Financing Plan calling for $30.6 million in new TIF spending on future projects if the cap is raised to $100 million. Final approval of the higher cap, the amended Project and Financing Plan and proposed reductions in TIF funding participation rates by TIF members, would require new interlocal agreements that could be completed next spring, said Jim Johnson, director of downtown development/TIF district for DFWI.
The participation rates of TIF members are proposed to be lowered because incremental tax revenues being generated from properties within TIF boundaries now far exceed the TIF’s annual spending limit of $5 million. The excess revenues above that amount, totaling more than $7.5 million in the 2013 fiscal year that ended Sept. 30, are retained by the participating TIF members to spend as they please. The proposed changes in participation rates also would result in the city of Fort Worth paying a greater share of the total contribution to the TIF, based on the assumption that it derives the greatest benefit from it. Potential new expenditures
With the TIF nearing its current $72 million cap, Taft said, “The true question is do we want to keep this development tool available…? And the answer is, we want to keep this tool in the toolbox.” Taft said he foresees the TIF as “continuing to accelerate thoughtful growth,” in concert with a strategic downtown development plan. Taft said the recently updated plan calls for “acceleration of dense residential and commercial development” that would expand the downtown property tax base and increase tax revenues flowing to local units of government and the TIF.
Creation of a TIF district allows it to capture the increased tax revenues from appreciating values of properties within district boundaries and to invest them in improvements within the district. A “base year” for property valuations is established for the TIF. If property valuations increase above the base-year amount and boost property tax revenues, the incremental gain in tax receipts can pay for TIF-supported projects. Formal approval of a $100 million cap and new funding participation rates have yet to be voted on by these TIF members: Tarrant County, the Tarrant County Hospital District, Tarrant County College District and Tarrant Regional Water District. The city council created the TIF on Dec. 15, 1995, with a primary aim of providing financial incentives for investment in attractive downtown redevelopment. That remains its chief aim.
Fort Worth ISD exits TIF TIF incremental tax revenues totaled more than $12.5 million in the 2013 fiscal year. They are projected to drop roughly $4 million in the 2014 fiscal year that began Oct. 1 and remain at lower levels in the future. Those assumptions are based on the Fort Worth school district having dropped out of the TIF earlier this year and the expected adoption of lower participation rates for remaining TIF members. The school district dropped out because, under changes in state law, it cannot participate in the TIF as other types of local government can, Johnson said. The TIF is budgeted to spend only about $4.3 million in 2014. Taft said TIF spending requirements are expected to drop as a result of the recent completion of the Sundance Square Plaza project and the renewal of a parking lease with Tarrant County at a lower cost to the TIF.
The participation rate is the percentage of incremental TIF tax revenue from each local unit of government that goes to the TIF. Under the proposed new rate schedule, the participation rates will be: the city, 60 percent; the county, hospital district and water district, 40 percent; and the college district, 20 percent. All the entities previously have had a 100 percent participation rate except for a 50-percent rate for the college district. Fort Worth’s proposed new participation rate of 60 percent is markedly higher than the other TIF members because it is viewed as the biggest beneficiary of TIF projects that boost downtown. The city is the only TIF participant directly benefiting from increases in local sales taxes and hotel taxes resulting from downtown growth. The other entities do not receive money from local sales and hotel taxes.
The downtown TIF is viewed as a success because most of the projects it has aided are widely regarded as contributors to the city’s downtown revitalization. Taxable values of properties within the TIF totaled $916.1 million in 2013, nearly triple cumulative base-year levels from the TIF inception in 1995 and a modest geographic expansion in 2001. Since its creation, the TIF has received $53.6 million in revenues to support various projects. The latest examples are the recently completed Sundance Square Plaza and the pending renovation of Hunter Plaza, a Fort Worth Housing Authority apartment house, into an upgraded 164-unit mixed-income residential development. The TIF has made total funding commitments of $69.4 million, some for not-yet-completed projects that will be funded with future TIF revenues.
About $54.9 million in excess incremental tax revenue from the TIF has been retained by participating local units of government for their own uses, Johnson said. The TIF is not scheduled to expire until Dec. 31, 2025.
Condo successes Taft said the dramatic conversion of the Bank One skyscraper, which was devastated by a tornado in 2000, into The Tower development of 294 condominiums and 30,000 square feet of retail space is among the most successful TIF-backed projects. The TIF contributed $2.9 million for asbestos removal, while three TIF members – the city, the county and the hospital district – provided substantial property tax breaks. The condo project was completed in 2004. “The investment in the Tower unlocked the condo market in downtown,” Taft said, generating construction of about 1,000 condos. “It wasn’t until the TIF and its participation in The Tower that the market really took off.”
Taft said condominium developments now “are a real market force in downtown Fort Worth,” and, “going forward, we want to accelerate dense residential development in downtown.” Parking program a hit Taft also cited the TIF’s support for a long-standing program under which it has funded six leases that provide 2,800 free evening and weekend parking spaces for downtown visitors. The cost for the leases totaled $3.4 million in 2013, but the TIF’s Johnson said in a recent public presentation that the parking program buttresses more than $140 million “in annual restaurant and drinking establishment sales.”
Taft said the support for free parking is “very important, because it levels the playing field with the suburbs” and “has led to a very robust dining, retail and entertainment market.” The TIF provided significant support for one project that quickly proved a bust, despite being in attractively renovated facilities along the railroad tracks on the south side of downtown. A new public market, dubbed the Rail Market and modeled somewhat after Seattle’s successful Pike Place Market, opened in 2002 but shut down in 2004 because it didn’t generate enough revenue. “It was ahead of its time,” Taft said. “But we were able to turn lemons into lemonade,” he said, by recruiting the University of Texas at Arlington to establish a Fort Worth center at the Rail Market site. UT Arlington offers classes in a variety of master’s degree programs there, with the result that “we have an exciting higher education presence in downtown,” Taft said.