Some call it directing sales tax revenue back to the community in which it was generated.
Others argue that tax dollars are tax dollars, and it doesn’t matter which local government is doling them out.
And even others question why more money should be spent on an already expensive project.
Whatever the case may be, a state-funding tool that allows a city to recoup a portion of sales tax revenue generated within its borders is creating a stir in University Place.
Through the state Legislature’s Local Investment Financing Tool, or LIFT, the City of University Place was granted permission two years ago to collect $500,000 a year for 25 years to pay for infrastructure improvements at the city’s future development, Town Center. (Click here for city staff's report on the measure)
What that means is a portion of the $15 million in state sales revenue generated annually in UP from its 9.3-percent sales tax would go back to the city for the mixed-use project instead of the state. The city only can spend the money for street, sewer and other infrastructure improvements.
The money would be repaid with sales tax revenue collected in University Place, not out of the city’s general fund. There would be no tax increases.
No new taxes, no problem, right?
When the issue came up at the University Place City Council meeting this month, most on the dais said that redirecting sales tax money to help a project that will likely generate sales tax dollars for the suburban community when completed – yet has been crippled by a struggling economy and delays with potential developers – is a good thing.
They liken the model to the Greater Tacoma Convention and Trade Center, for which a public facilities district was created. A portion of the sales tax collected in University Place, Tacoma, Lakewood and other local governments helps pay for the center’s infrastructure every year. (Click here to view the City of Tacoma's report on the center)
The UP measure would require the creation of a separate board run by the University Place City Council that would take out a bond that must be repaid with sales tax dollars.
“Creating a public authority will ensure that the city and its taxpayers have no liability or responsibility for paying the bonds,” Mayor Debbie Klosowski . “Instead, the bondholders can only look to state funds.”
University Place City Councilwoman Caroline Belleci says although the community generates $15 million for the state every year, “we only get a portion of that back.”
But not everyone agreed that accepting the money is a good thing.
Councilman Javier Figueroa sent an e-mail to his supporters over the weekend with a laundry list of questions about the financing:
- Why should the city be allowed to spend any more tax dollars on the city
owned Town Center property?
- What specific projects/tasks will be completed with the bond money?
- Should we approve the bond issue and receive the funds before we know how
the funds will be spent?
- Will the funds cover the entire infrastructure that is needed to complete
the city's required infrastructure to secure/attract developers and tenants?
- Why were we told that the properties were pad ready?
- When will we be done using tax dollars towards the proposed Town Center?
The last question refers, in part, to some $11 million that the city has spent on the project’s infrastructure since 2009.
University Place School Board member Kent Keel, who’s running for a spot on the City Council in November, encouraged officials “to ask a lot of questions about this.”
“If I’m a resident of the state, I will be affected,” he said.
The questions come at a time in which the city has yet to officially sell a Town Center parcel for retail, although officials insist there is interest and action from developers that the public won’t know about until a deal is closed.
Momentum, officials have said, is key to Town Center’s attraction, as the opening of an Applebee’s has been pushed back to next year.
Depending on the rate of the bond when it’s issued, the city could get $5 million to $6 million.
Whether or not the city should accept the money is still up for debate.
The UP City Council is scheduled to vote on the measure at its June 20 meeting.