Amidst Questions, Tax Zone Moves Forward

The La Grange City Council approved the second and final reading of an ordinance to establish a Tax Increment Reinvestment Zone (TIRZ) at their meeting last Monday, but not without some dissent.

Councilwoman Violet Zbranek voted against the ordinance. And local attorney Pam Giese raised a number of concerns about its financial impact to the City.

The TIRZ established last week includes two tracts one encompassing properties around the Fairgrounds and the hospital north of the SH 71 Bypass, and another in downtown La Grange. As property values rise within the zone, either through gradual appreciation or through new development, the ordinance allows the City to dedicate a portion of the increased property tax revenue to a Tax Increment Fund (TIF). Money in TIF can be used to incentivize new development. Developers can apply for TIF money to reimburse the cost of things like infrastructure improvements and parks.

The City hired the consulting firm Pettit and Ayala to help organize the TIRZ. While formulating the program, City Manager Jack Thompson and Natalie Ayala Hall from Pettit and Ayala approached the County about participating in the TIRZ. The City generates a relatively small portion of its revenue from property taxes. The opposite is true for the County. If the County were to participate, the TIRZ could potentially grow at a much faster rate, which might attract even more development.

But the Fayette County Commissioners Court were not so receptive to the idea, especially in regard to their representation on the TIRZ governing body.

At last Monday’s meeting, Giese questioned the financial viability of the TIRZ, especially if the County does not participate.

“Analysis of this zone is faulty in that it appears that it is based upon County participation at a rate that would have been higher than the City of La Grange participation,” Giese said. “Therefore the feasibility, or advisability that this is a good idea for the City of La Grange is no longer valid because this analysis was done without any kind of binding contract with the County or any other taxing agency. And at this point in time, there is no agreement, and according to the county commissioner, they’re not interested in this.”

In addition, Giese questioned the need to include downtown La Grange as part of the TIRZ. TIRZ programs are supposed to be used in areas that could not be developed without incentives.

“I don’t see how that part of La Grange fits the criteria, that it significantly impairs the sound growth of the city, or that private development would not occur but for you putting this zone in place,” she said. “I think you’ve missed the mark and I don’t think this has any effect.”

Moreover Giese questioned whether the city should incentive development even in the northern tract.

“I also notice that in the zone that is in the north, a large portion of the land is owned by individuals that are LLCs that clearly can fund their own private development,” she said. “I also question whether or not the citizens of La Grange really want this.

“So I would just ask that each and every one of you look carefully at this,” Giese said. “Maybe you have to have the County (perticipation) before you can have the zone.”

Councilwoman Violet Zbranek said she has heard similar concerns.

“I have heard these comments, too, from people on the outside,” she said.

Hall said the City will continue to negotiate with the County about joining the TIRZ.

“The zone is still feasible without the County participation,” Hall said. “So just because the County doesn’t participate doesn’t mean that the zone collapses, if you will. But what it does mean is that you’ll have less revenue to enter into any sort of development agreements. You would only have the city’s revenue stream, but that is still a significant amount of money that could potentially incentivize new investment.”

Giese also questioned whether the TIRZ could issue debt to fund development.

“Can the City incur indebtedness to be able to give out these grants, funds, whatever you want to call them, before the fund grows large enough, or is it only restricted to what is in the fund?” she asked.

Hall said the City could issue bonds and pledge the revenue to it.

“Philosophically, that’s not something we’re for,” Thompson said. “We’re very much of a pay-as-you-go mentality.”

“I’m less concerned with what the mentality is than what the ability is,” Giese said.

Thompson said that even if future city leaders wanted to mortgage the TIF fund, lenders would only do so if the fund was healthy and productive.

“Bondholders are going to want to know they’re going to get paid back,” Thompson said.

The City Council then discussed the TIRZ governing body. Giese proposed a board with at least one private citizen. The ordinance eventually passed with an amendment stating the board would be comprised of the mayor, and four members to be chosen by the City Council, with at least one private citizen. The final reading of the ordinance passed with one vote against, cast by Zbranek.