WORTHINGTON -- Through the last several years, the City of Worthington has provided financial assistance for business construction -- most recently last month, when council members resolved to cover about $39,000 in site preparation costs for a proposed Dollar General store on Ryan's Road.
While there's the perception that the city is throwing money at huge retailers -- the city has also approved about $80,000 in site preparation money for Walgreens in recent months -- Mayor Alan Oberloh says there's more to the story.
"The Dollar General property will go from paying taxes of $1,000 a year to paying taxes of $26,000 a year," Oberloh said. "Yes, we're paying money to corporations, but with this project, we'll be generating a much greater amount in tax revenue."
Oberloh and other city officials point out that there's more to spurring economic development than what may meet the eye. In the cases of Dollar General, Walgreens and other properties, the explanation begins with action taken back in the mid-1980s.
Funds come from TIF
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Brad Chapulis, the city's manager of planning and economic development, explained Thursday that the city has been using money left over from a previously established tax increment financing (TIF) district to help fund projects such as Dollar General. He said the TIF district was created in the mid-1980s for development of property south of Interstate 90 between Swift & Co. and Diagonal Road -- excluding Northland Mall and a portion of the residential area north of the mall.
"It was created primarily to take care of infrastructure needs of the area as well as the wastewater treatment plant that primarily serves Swift," Chapulis said. "That was the redevelopment district (for the TIF), and if you did this today, the financial district would have to be the same as the redevelopment district. The financial district was an industrial area ... that included Swift, ShopKo, land south of Wal-Mart and land on the south side of Stower (Drive)."
In 1999, the Worthington City Council amended the budget for the TIF district, in turn creating a new funding mechanism for economic development.
"Our expenses ended up being $500,000 less than what was anticipated," Chapulis said. "The council at that time had a choice: either decertify the district one year early due to the excess funds, or to put that $500,000 toward some sort of redevelopment activity. At that time, the council saw more benefit toward putting that money toward redevelopment.
"After several discussions, it was apparent to council that there were areas within the redevelopment district that were being overlooked due to deficiencies," he added. "That was what spurred the creation of the site preparation program."
Several reap benefits
A number of development efforts have proceeded to utilize the program over the years. Slumberland ($100,000), Benson Funeral Home ($21,110) and Ground Round ($75,000) each received site preparation dollars for "unsuitable soils for development," Chapulis said. The Kevin Lease insurance office ($12,563) and Ron's Repair ($26,300) got funding for "teardown of blighted structures," while Johnson Builders and Realtors ($36,937) received money "for removal of asbestos and demolition of an existing structure."
The Faigus Group, developer of the Walgreens store at the corner of Oxford Street and Humiston Avenue, was approved for site preparation assistance not to exceed $80,000. Most of that money was for relocation of existing public infrastructure, with $10,000 for soil mediation. The Dollar General amount is not to exceed $39,032.
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In total, Chapulis said, $391,456 in site preparation assistance has been given by the city since the 1999 TIF amendment. Based on property valuations at the time each respective development occurred, the amount of private investment has been $6,659,000, and the annual increase in tax generation a little less than $118,000, he added.
The remaining site preparation money must be used by Dec. 1, 2011.
Keeping it going
While money in the TIF fund cannot be replenished under state law, there are options the city can pursue to add to its economic development coffers.
Chapulis said the city can utilize a tax abatement program now used for commercial properties that don't fall within the TIF district. Or, the council can review the TIF to determine if its revenues exceed what was planned, then take those revenues and approve an amendment similar to what was done in 1999.
No matter what route the city chooses, the city will likely continue to play its part to help in-town and out-of-town businesses flourish. Councilman Mike Woll, who acknowledged that he received negative feedback after the approval of site preparation money for Dollar General, suggested the current economic climate mandates it.
"In a competitive environment, Worthington has put some things in place to mitigate costs and encourage development," he said. "If a property is paying $1,000 in taxes and the next year generates $30,000, and the city gave $25,000 to make that happen, I don't think that's a bad thing."
