Washington City considers using tax-incentive zones to spur developments

ST. GEORGE — Washington City officials are considering the creation of reinvestment zones that could help attract new business to the city while improving city infrastructure as well.

In this file photo, Matt Loo, Washington City’s economic development director, shares details of the city’s economic endeavors during a State of the City address given during a St. George Area Chamber of Commerce luncheon, Washington City, Feb. 10, 2021 | Photo courtesy of Washington City, St. George News

Last month, the Washington City Council heard a presentation regarding community reinvestment areas, or CRAs. These are areas where the local property tax rate is frozen for set amount of time – anywhere between 10 and 20 years – and any revenue generated above that baseline can be put back into the CRA for developers to use on improvements.

Called tax increment financing (TIF), this practice is used to attract new business and help revitalize parts of a city, or both. Businesses and developers can be drawn to a CRA with the promise of the tax incentives which can be used to reimburse improvements to the area that they initially pay for, or receive as a part of milestones during the life of the CRA, like hiring so many new employees at a certain wage or higher.

“What you would spend on tax increment financing is what the developer will spend on infrastructure,” Matt Loo told St. George News in early March while still working as Washington City’s economic development director. He has since left to work for a private developer.

“Roads, trails, utilities – all that stuff. Those are all expenses that the TIF can reimburse the developer for,” Loo said.

Through that development, the CRA’s ultimate purpose is to provide an increased tax base to the city.

The city of Ivins has also recently debated creating a CRA for an under-construction resort, rejecting the CRA for now.

The three proposed community reinvestment areas, or CRAs, around the Exit 13/Washington Parkway interchange in Washington City, Utah | Graphic courtesy of Washington City, St. George News | Click to enlarge

Currently, Washington City does not host any CRAs or similar economic reinvestment zones. However, previous discussion was had on the matter in 2018 regarding the incoming Grapevine Crossing development on the east side of the Exit 13/Washington Parkway interchange of Interstate 15.

Around Exit 13 in general, which has seen heavy development in recent years, is the proposed location for three community reinvestment zones.

One of those zones in where the Grapevine Crossing commercial development is being built, while another is the potential future site of a high-end auto mall.

On the western side of the interchange sits the third proposed reinvestment zone where the construction of a new hospital and surrounding medical village was recently announced.

A fourth CRA is proposed for an area by the St. George Regional Airport where Washington City officials anticipate the creation of a complex focused around automotive testing and recreation. This includes a test and race track that can also be used by area police departments for vehicle-based training.

“With this tool, we can bring in better amenities, better designs that will enhance the character of the project, and enhance the uniqueness of the community with something that’s a lot cooler at the end of the day,” Loo said.

A list of potential benefits posed by community reinvestment areas from Washington City’s former economic development director Matt Loo | Courtesy of Washington City, St. George News | Click to enlarge

Along with creating new amenities and possibly upgrading others, Loo said an additional benefit the CRAs can bring to Washington City’s residents is that incoming developments and businesses within these redevelopment zones can help keep property taxes from going up.

Cities fund many of their day-to-day operations with revenue collected from sales and property taxes, which includes public safety. However, when a city lacks a sufficient sales tax base, there is the potential for property taxes to be hiked in order to help cover the cost of city operations.

“The hope is to attract high-generating sales tax or high-generating jobs or services to make the community better,” Loo said.

The City Council had a more recent presentation on CRAs from Benj Becker, a Zions Bank representative who went into more details on how the reinvestment zones worked and how they can be applied.

First, in order to establish a CRA, all of the taxing agencies within a proposed zone would have to agree to let property taxes be frozen for so many years. Locally, these taxing agencies are Washington County, the Washington County School District, the Washington County Water Conservancy District and a smattering of others.

An example Becker gave of a CRA agreement was a 25/75 split between the city and the other taxing agencies. The 25% of property taxes generated from the existing – and now frozen – tax base would continue to go to the other agencies, while 75% would be used to go back into the CRA for project area improvements.

Benj Becker (lower right) of Zions Banks shares details about community reinvestment areas with the Washington City Council, Washington City, Utah, April 20, 2021 | Photo courtesy of Washington City, St. George News

At the end of the 10-20 year life of the CRA, the area would be been enhanced and produce higher property tax values. Becker said there is also the potential for increased sales taxes through commercial ventures or higher-paying jobs that may otherwise have not occurred if not for the CRA.

Becker showed a hypothetical development area assessed at $50 million that may bring in $15,000 for the county school district before development takes place. Following the creation of a CRA, that lasts for 20 years and leaves an enhanced area now worth $50 million. The school district would rake in $327,300.

Advantages of a CRA not only include the possible recruitment of new businesses and community redevelopment, but is also another tool the city can use in master planning, Becker said.

Developers seeking tax incentives can be required to apply particular standards and designs the City Council wants in an effort to maintain the look and feel of certain parts of the city, for example.

And just because a development or company may already exist inside the new reinvestment area, it does not automatically mean they get tax incentives.

Renderings by architecture firm ESa as of March 2021 reflect Steward Health Care’s current vision for the new state-of-the-art hospital in St. George, Utah, slated to open in October 2023 | Photo courtesy of Steward Health Care, St. George News

“Just by virtue of their being in the CRA boundaries does not guarantee them to be able to use the money,” Becker said.

Councilman Kress Staheli asked about the proposed auto malls, as auto dealership generate far more sales tax over property tax. Auto dealerships alone can be high generators of sales tax for a city in general, and Staheli asked if there was a way to capture that.

Becker said there is a way to freeze sales taxes as well within a CRA and it involves a similar process to set in motion.

Though he believes Exit 13 will continue to develop on its own without the aid of the proposed CRAs, Councilman Kurt Ivie said it could be a good tool in revitalizing the city’s downtown area.

Thus far, the council has not moved on creating the proposed zones beyond information presentations.

Copyright St. George News, SaintGeorgeUtah.com LLC, 2021, all rights reserved.

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