SALISBURY — The city of Salisbury is looking for creative ways to address debt and future finances, including establishing Tax Increment Financing (TIF) locations or the flexible use of bonding.
The City Council began a preliminary dialog with brokerage firm Davenport and Company, LLC last Monday, looking for long-term solutions and ideas on how to re-energize Salisbury’s economic drivers.
“The purpose of our conversation today is primarily education to discuss our future as it relates to our debt,” said Council President Jake Day. “We realize that we have a rather significant item in our wastewater treatment plant coming on very soon, and I thought that it would be wise for us to start to have some educational conversations about our debt and our financing structures and options into the future.”
There are a number of different paths that Salisbury could take, according to Joe Mason, a representative from Davenport. Currently, there are several different irons in the fire in terms of projects that could be used to re-vitalize and re-develop Salisbury’s downtown. There could be a window open for witnessing strong growth in the near future if the city chooses to be active in pursuing development, by Davenport’s estimation.
“Construction costs are still relatively favorable,” noted Mason, “as are interest rates.”
TIFs are one possible avenue that could be explored to give the downtown area a jumpstart. In layman’s terms, a TIF uses anticipated future revenue to subsidize the same projects that would trigger said revenue increase. Once completed, TIF projects, either private or publically initiated, are expected to raise the property value and therefore property tax revenue of the surrounding area.
It can be a significant economic driver and one that it used across the country. However, it’s not a silver bullet and a lot of care should be taken before relying on a TIF, according to Councilwoman Terry Cohen.
“TIFs we know can be successful but they would need to be limited in their use,” she said. “Ask the state of Illinois that went crazy with their TIFs and have had tax issues as a result of it.”
Before Salisbury made any move in that direction, Cohen was adamant that safeguards be in place to protect tax payers, saying that city residents shouldn’t be “involved in real estate speculation.”
Mason agreed and told Cohen that a partnership between the city and Davenport would guard against just such an issue. Sam Ketterman, Davenport’s vice president, elaborated.
“We suggest that clients develop policies simply so that they can wean out projects that are not consistent with the plan,” said Ketterman, “that are not consistent with expectations and have little chance of success.”
There is input from the community with these issues so that residents aren’t locked out of the process. Davenport could serve as the “gatekeeper” along with the city legal team to make sure that any proposed TIF projects would be viable and in the case that one fell through that the city would be protected.
“If a transaction fails, if it defaults, then it’s not on the backs of the city tax payers,” Ketterman said. “It is the developer who loses it and the city has a right to sell the property at tax sale just like you would any other property that has defaulted on its property taxes.”
“Which is not to say that it wouldn’t be a mess,” added Mason. “You’d be reading about it and it would be ugly … sometimes it can be messy.”
According to Mason and Ketterman, there are also other options that can be explored in the future such as the use of general obligation bonds, which are extremely flexible.
“If you’re thinking about a multi-million dollar set of investments, there may be any number of different tools that you can use within the confines of the city’s charter … you could use the tool of general obligation bonds, which we do for a variety of different things,” said Mason.
While there’s a lot of room to explore, council members were clear that at this point they aren’t actively pursuing anything, only discussing their choices in the long run. Mason felt that was a good strategy. He compared Davenport’s potential role in the process to that of a quarterback who would work under the city’s direction to find safe, effective ways to address debt.
“This is the beginning of a conversation,” said Mason. “We’re happy to go back and sharpen our pencils and do some analysis and bring that back before you.”
While the prospects for investment in Salisbury, particularly downtown, are exciting at this time, Mason acknowledged resources are finite and the city has neither unlimited capital nor unlimited borrowing power. Therefore, any major project down the road will be a case of eating the elephant bite by bite.
Still harboring a lot of questions, the council agreed that there are several more conversations on the horizon concerning Salisbury’s debt and finance options. Day asked Ketterman and Mason to continue their dialog with city staff until the council requires another update.