Economic Development Director Mario Iezzoni and Developer Ken McGurn presented a proposal last night to the New Port Richey City Council for an incentive package to spur development at the much maligned “Main Street Landing” site on the west side of the Cotee River on Main Street. The project has been at a standstill since 2007 after city council turned down a deal very similar to the one proposed last night.
Iezzoni’s idea is to use Tax Increment Financing (TIF), a process that can only be described as complex, to provide incentive funding for McGurn to continue construction. *UPDATE* Mr. Iezzoni provided preliminary numbers which indicate the total bond amount that McGurn would receive for development would be $2.3 million if the term was 15 years, and $3.2 million if the term was 20 years.
According to the Pasco County Tax Appraiser, the property is currently valued at $562,650. This would place McGurn’s current tax liability in 2015 at $13,840.57. Iezzoni’s proposal would freeze McGurn’s tax payments at $13,840 for at least the next 15 years. McGurn would not have to pay taxes on any increase in property value (which will occur as the project finishes). What would happen instead is that McGurn would receive a bond for the full amount of the value of the taxes that would have gone into city coffers from the increase in property value for the entire period of the TIF. This bond is then paid off by McGurn’s property taxes. So, hypothetically, if that period was 15 years and the property doubled in value, McGurn would receive a bond in the amount of $207,000. New Port Richey would, in effect, be loaning McGurn that amount to complete the project. The true value of the bond is likely to be much higher. The caveat is that McGurn will have to reach 90% completion of the project before receiving the bond.
McGurn is also asking the city to pay more than $118,793 outright to pay for the completion of a sea wall that has already been constructed. Former council member Marilynn deChant objected to this request, saying that the construction of the wall was completed by an unlicensed contractor under McGurn’s direction (link to relevant TBTimes article). deChant asked that an investigation into that portion of the project be completed before that money was paid out by the City. deChant also urged the city to pursue a performance bond, a mechanism that cities can use to ensure that developers follow through on their promises. No performance bond was in place during Main Street Landing’s initial construction–something current council members say has taught the City a hard lesson.
McGurn and Iezzoni also outlined a plan to convert the original plan for the space from a mix of commercial and residential condominiums to a purely rental apartment complex. McGurn said that they have been working within a “limited market” and will “shoot for the best we possibly can.” Both men said that they have been working to reduce the overall square footage of the proposed apartments to increase affordability and the profitability of the project. “The last thing we want to see is low income apartments,” said Councilman Jeff Starkey in response, “I understand [the need] for a performance bond. I agree with that 100%.” Starkey expressed displeasure about McGurn’s responses later in the meeting, pointing out that he had asked McGurn a straight question and felt he had not answered the question.
Here’s the overall problem with the Tax Increment Financing plan: if McGurn is building rentals, and doesn’t have to pay taxes on the true value of those rentals–is that fair to property owners who are renting to tenants in the City? They will still be paying property taxes at the true rate while having to directly compete with McGurn’s property. In fact, they will actually be paying for their competitor to be in business. Further, if McGurn’s taxes go toward a bond for the development of the property, and that property is a success–those tenants are going to need services maintained: sewer, building inspections, street maintenance, police, fire, water and sewer. Who will pay for the need to provide these services to the tenants at the property? It won’t be McGurn, because his taxes are going toward the bond.
by Jon Tietz