City's TIF certification increases as more developments come to fruition

A key development incentive towns use to woo investment continues to serve Monticello.

Recent developments including Kwik Star, a new Theisen’s store and Monticello Family Dentistry took advantage of tax increment financing (TIF) to lop off some up-front costs associated with their projects.

TIF is a development incentive that cities use to make building a new structure — or renovating an existing one — more affordable for developers by keeping the property owner’s taxes at a base level for a set number of years before taxes begin to phase in incrementally.

To qualify, a development must fall within a city’s TIF district. Monticello’s tiff district includes the majority of town north of East First Street and east of North Cedar Street as well as portions of the northwest side of town and the properties along South Main Street.

Typically, an owner receives a 100% property tax rebate on improvements for the first 4 to 5 years of its existence. Then, over the next handful of years — and until the development agreement sunsets — the rebate slowly decreases.

As the rebate decreases, the city collects the new taxes, which are then available to support other projects within the TIF district. Projects can involve improving public infrastructure, eliminating blight, or promoting affordable housing.

Monticello City Administrator Russ Farnum said without this mechanism to attract developers, new construction would be much harder to finance — especially when factoring in current construction costs. The incentives also can encourage business owners to pursue larger investments. Farnum referenced Lindsey and Rick Meyer’s Monticello Family Dentistry project on the corner of South Main and East Oak streets as an example.

“Their existing building is old and has been remodeled several times, and it’s not set up ideally for their situation as a dental office,” Farnum said. “There’s a lot of improvements that Lindsey wanted to make to that building. So, you are faced with the question of, ‘Do I spend a lot of money on this building, and it still won’t be what I want it to be? Or do I build a new building that is what I want it to be, but we’re going to pay (a higher number) to build that building?’

“Giving (the Meyers) a little bit back on all this new (tax) revenue we’re creating for the city makes their decision a little easier because it lowers their cost of doing business … and allows them to transition to operate their new building and sell the old building (before paying full taxes on the new one),” Farnum added.

The point at which the Meyers’ property will begin receiving rebates depends on when construction is completed. The Meyers will continue to pay the property tax on the lot’s current value, but once the building is complete, they will receive a 100% rebate on its increased value for the first four years of the new building’s existence. The rebates will then reduce 10% each year over the remaining five years of the agreement. The property will receive an estimated $152,000 in rebates over the life of the nine-year development agreement.

The incentive for the city to offer such a deal with the Meyers was clear to Farnum: It rids the city of a lot that had been vacant for a long time, and over the long haul, drastically increases the amount of property tax revenue it generates — an estimated $27,000 annually, Farnum said.

Striking a deal

Farnum said every TIF development deal is different and is reflective of what the developer needs.

Development deals are typically 10 years, though the agreement worked out with Dollar Fresh covers 15 turns of the calendar. Farnum said the city works with developers for upward of two years prior to the project breaking ground. All development deals require a public hearing -- so neighbors can weigh in if they so choose -- as well as City Council approval.

“We keep it a level playing field,” Farnum said. “We are not giving one person advantages or more incentive than the other, but (the city) likes to give just enough incentive to make the project work. I call that the financial gap. I don’t offer incentives to just line someone’s pockets. We will get a good investment out of the deal.”

Farnum works with developers for a year or more prior to a project breaking ground.

“People are expected to give me a form of what their building will cost and what land development will cost so I can build a flow chart and figure out what’s advantageous to the city and what they need to fill the gap and make the project go.”

Example of TIF at work

The primary use of TIF funds is economic development, though infrastructure is another key use. For example, when the city dug up and replaced Sycamore Street and all the pipes underneath, it utilized a general obligation bond to pay for the work up front. And now, it’s paying off the bond with TIF money.

“Those TIF payments mean (that project) isn’t being paid for by general taxpayers as a whole, but the revenue from the TIF district (and those specific properties),” Farnum said. The Sycamore project is also paid for with revenue from water and stormwater dues.

The council certified $850,000 in TIF for fiscal year 2027. This includes property tax rebates to 13 businesses and payments for bonds used to fund city infrastructure projects, including for Sycamore Street the Northridge subdivision. It’s the largest TIF certification since at least fiscal year 2016, according to city documents.

Future uses of TIF

The Breckenridge housing development on the north side of Monticello is another project that has generated TIF money, which will likely be used to support the development of affordable housing elsewhere in the district, Farnum explained.

“We have to set aside a portion of the TIF money we spend on a residential development for the promotion of affordable housing,” Farnum said, adding that the money can be used for something like building a new home for a low-to-moderate-income individual.

The TIF money from the Breckenridge subdivision ultimately went to Jones County Economic Development.

“The money has not been used yet,” JCED Executive Director Derek Lumsden told the Express. “However, when we do use it, it will be to help bring in new (low-to-moderate income) housing to Monticello, including the possibility of down-payment assistance to qualified individuals.”

One of the Monticello Council’s priorities in the coming months and years is to spur upper-story housing development in the downtown. Multiple council candidates mentioned it during the recent election cycle, and Farnum said he anticipates the Council will adjust the city’s TIF district to include the entirety of the downtown for this benefit. This, too, will lead to the availability of development incentives for those looking to invest in those apartment spaces.

“We are close to looking at having some incentive packages to do second-story housing,” Farnum said. “Within the next year you will see a program for the downtown that will be set up to encourage (apartment development). And our incentives are going to be targeted at that specific use in the downtown.”