The deferred-tax arrangement is widely used in NH
As Torrington Properties redevelops what was the Mall at Fox Run into what will be Seacoast Landing, it proposes a financing agreement with the Town of Newington to help it bankroll infrastructure improvements for the site.
The method is called TIF: Tax Increment Financing.
It’s basically a mechanism that helps a developer pay for infrastructure improvements through an agreement with a community on tax payments and reimbursements based on the future value of the project.
TIFs have been around this country for some 70 years, originating in California in 1952. The law (Chapter 162-K) establishing the original TIF guidelines in New Hampshire was adopted in 1979.
There are several examples in the state — Concord, Dover, Durham, Franklin, Hooksett, Jaffrey, Peterborough and others — where TIFs have been used to help finance large-scale development projects.
The developer and a community work together “to benefit both parties,” said Raegan LaRochelle, a municipal government consultant and former member of the Maine House of Representatives, who is consulting for Torrington on the Seacoast Landing project.
“That can be new infrastructure development required by the proposed project, investment in a blighted or underutilized property, new jobs from a business relocating or expanding and/or new assessed value being created in the town by the development,” LaRochelle said to NH Business Review. “In the case of Newington, this project would be providing all of these benefits for the town.”
Currently, the mall area is assessed for $71.3 million, yielding $562,000 a year in property taxes to the town of Newington.
Torrington expects that Seacoast Landing will ultimately be valued at about $133 million, giving the town an additional $500,000 in taxes annually. And that, according to Torrington consultants, is a conservative estimate; the actual assessment could be much higher.
With the TIF proposal, Torrington wants Newington to pay for the infrastructure improvements with the proceeds from the additional taxes that will come from the expected higher assessed value.
“Because the assessor’s valuation of the completed project is conservative, Torrington is de-risking the town by requesting to finance the project and get reimbursed with 85% of the new taxes that are created from the increased value on the site,” said LaRochelle, noting that, in most cases, a community takes out a bond to finance infrastructure improvements for a project like this.
Torrington puts the costs for infrastructure improvement (roads, electricity, water, natural gas, wastewater management, etc.) at between $10 million to $15 million.
Assuming $15 million in costs, a Torrington proposal shows a 30-year payout to pay off $15 million, each year using 85% of the expected new value/new taxes.
For instance, in the 10th year of the project (2035-36), the town would still be getting the taxes based on the original value of $71,342,800, estimated at $576,236. The increased value of the property in year 10 would yield an additional $554,086 in taxes. The town would keep 15% ($83,113) and would use 85% ($470,973) to pay down the infrastructure debt.
The payoff will be faster if the ultimate value of Seacoast Landing is above the currently projected $133 million.
Torrington put three consultants in front of a somewhat skeptical trio of selectmen at their meeting on Jan. 29 to make the company’s pitch for the TIF.
They included George Campbell, a development consultant with McClure Consulting, a national firm specializing in economic development, offering strategic planning, market analytics, site selection, community assessments and organization building for public and private sectors.
Campbell was joined by LaRochelle and Christopher Clement, chief government relations officer with McClure. Clement is the former commissioner of the NH Department of Transportation and vice president of finance and administration at UNH.
Selectmen raised questions about the timing of a town meeting that would be required to approve a zoning change to create a TIF overlay district for the Seacoast Landing property. And they questioned what the overall assessed value of the property might be, saying it’s hard to know without also knowing who the Seacoast Landing tenants are going to be.
Campbell said Torrington is under strict nondisclosure agreements with potential tenants.
Current tenants at Fox Run have been vacating the mall with demolition of the entire property expected to start soon.
Among the documents given to selectmen was a delineation of six lots within the TIF district and the fact that Lot 3 of 152,000 square feet is devoted to a “membership discount club.”
This means that the site is being set aside for either a Costco Wholesale, a Sam’s Club or a BJ’s Wholesale Club.
