Note: This post is a personal theory based on circumstantial evidence. I hope it starts a conversation that needs to be had. Now on with the show…
Synthetic TIFs and Baseball
Fayetteville is borrowing money to to build our new baseball stadium. We’re using a “TIF” to pay back the money. If you’re wondering what that is, here’s an explanation:
What is a Project Development Financing/TIF?
A project development financing (hereinafter referred to as TIF) is a type of debt financing in which a local government establishes a district and borrows monies to fund public infrastructure projects that will benefit (and incentivize) new private development in the district. The unit pledges as security for the loan (and uses as funds to repay the loan) the incremental increase in property tax revenue generated within the district due to the increase in property valuation caused by the new development.
Fayetteville has gone all-in with this TIF thing. The idea is that economic growth surrounding the stadium will pay for the stadium in the long run, without increasing taxes on Fayetteville residents. Here’s City Manager Doug Hewett explaining how the parking garage, hotel and office tower under construction next to the stadium will “provide revenue to fuel the synthentic TIF.”
As you can see, Fayetteville needs private development and the increased tax base that comes with it to finance the stadium.
The stadium is at least $7 million over budget.
It was projected to cost $33 million. Unsurprising to anyone who’s ever paid a contractor to build anything, the cost has grown to over $40 million. City officials are doing their best to encourage you to look the other way:
(Assistant City Manager Kristoff) Bauer said he does not anticipate that the extra costs will require a property tax increase. Bauer said revenues to pay off the bonds are coming from sources such as ticket sales, renting out the stadium, and tax district in downtown where any revenue from rising property values will go toward the stadium debt.
“We’re seeing it happen faster and at a higher value that we expected,” he said.
The city took out limited-obligation bonds to fund the stadium’s construction. Cumberland County is pitching in as well, contributing revenue from downtown property taxes.
There are two possibilities:
- Bauer is correct and property values are increasing at a higher rate than “expected.”
Or, 2. The City needs to find more money.
My money’s on 2.
The additional $7+ million needed to construct the stadium will have to come from a source not contemplated in the city’s original projections.
Lately, there have been rumblings in local press and radio of City Hall being sold along with the police station next to it. The justification is that these buildings are now sitting on “prime real estate” thanks to downtown development.
Let me point out that I think that’s an absurd reason to sell a public building. City Halls are supposed to sit on prime real estate, and they do in most of the cities I’ve been to.
Moreover, Fayetteville’s City Hall and police station are relatively new and modern. Why waste these buildings and incur the cost of new land and construction???
It’s very simple: City leaders have put a great deal of political capital into the stadium and the downtown development project. They can’t afford to let it fail.
And so, City Hall and the police station will be sold to a private developer. The real estate will be added to the downtown development district where it will “provide revenue to fuel the synthetic TIF,” as Mr. Hewett would say.
And so, we’re selling City Hall to play ball.