TIF Plan Back for DDA Vote

After agreeing in March to push back a vote on a new proposed tax increment financing (TIF) plan by one month, Traverse City Downtown Development Authority (DDA) board members could take action Friday to approve the plan and send it to the city commission. That would set in motion a chain of events to move the plan forward after years of discussion, including a public hearing and commission vote – though a potential public referendum still looms at the end of the process.

Moving Downtown Forward, as the new TIF plan is called, would replace the DDA’s existing TIF 97 plan. According to DDA Interim CEO Harry Burkholder, failing to approve a new TIF plan would mean all district maintenance and infrastructure upgrades – as well as future infrastructure projects – will fall directly on city taxpayers, instead of being shouldered by the region through cost-sharing.

Failure to pass a new TIF plan would “likely mean that hard choices would need to be made," Burkholder wrote in a memo to DDA board members, with upgrades potentially “eliminated or deferred.” He added: “In addition, large transformative infrastructure projects that are typically bonded – like a parking structure or improvements to the Lower Boardman Riverwalk – would not be as feasible without imposing additional financial burdens on city taxpayers.”

TIF 97 is expected to bring in more than $4 million in the 2024-25 budget. Those funds are captured on rising property values exclusively within the TIF 97 district. If TIF 97 is not renewed, roughly $2.3 million annually will go back to the city – which would then be responsible for covering any project costs going forward in the former TIF 97 district – and $1.7 million would go back to other regional taxing partners. Downtown property owners contribute approximately 53 cents on the dollar of TIF funding, according to Burkholder; regional partners contribute the other 47 cents.

“If TIF is not renewed, the city will need to fill a $1.7 million hole in one of three ways: by raising taxes, cutting critical services, or allowing infrastructure (to) deteriorate and projects to halt,” Burkholder wrote. “In addition, the city will need to determine how it intends to fund the ongoing costs of maintaining downtown and build additional infrastructure, an issue that does not go away if TIF is not renewed.” Though Traverse City’s population hovers around 16,000, approximately 50,000 from the region pass through the city each day, in addition to millions of annual tourists. 

Opponents have argued that TIF 97 has accomplished what it was intended to do – address blight and help create a thriving downtown – and should be allowed to expire. Critics such as former Traverse City Mayor Jim Carruthers believe the DDA should keep its “promise” to regional taxing partners by letting the plan end and returning funds to those entities. The plan was always “intended to end with the increased taxable revenues given back to the city and other taxing authorities — a win/win opportunity,” Carruthers said in a recent social media post. “The DDA needs to remember what was promised and move on.”

Several DDA board members have countered that many of the planned projects in TIF 97 have not yet been accomplished, and that preserving the funding mechanism is crucial to maintaining a vibrant downtown – arguing its upkeep requires continual investment. “If we want these (downtown improvements), we either have to renew TIF 97 or we have to articulate some other funding mechanism, which no one has been able to do,” DDA board member Pete Kirkwood said at a previous meeting.

Throughout Moving Downtown Forward’s drafting, board members have made several changes in an attempt to garner more support from the public and taxing partners. That includes incorporating a new revenue-sharing model with other taxing partners. Moving Downtown Forward proposes to return roughly 30 percent of the expected TIF intake to those partners, as well as 50 percent of the inflationary growth each year. Over the 30-year lifespan of Moving Downtown Forward – which would expire in 2054 – that approach would share back roughly $24 million to the city and $16 million to the taxing jurisdictions. Special millages approved by city voters after January 1, 2023 would also be excluded from TIF capture – a change made after public feedback.

In addition, a contentious proposed third downtown parking deck on State Street has been eliminated from the plan. Stormwater infrastructure, housing, and climate change and resiliency projects have all been added as areas of allowed spending. Burkholder noted that other funding sources can be combined with TIF funds to support Moving Downtown Forward projects, such as grants and other public and private investment.

If DDA board members approve the plan Friday, Moving Downtown Forward would then go to the city commission. That body would have a likely introduction on the plan in early May, with a public hearing and commission vote in late May or June. If it is approved by the commission, a 20-day window would begin for TIF opponents to circulate petitions and collect enough signatures to put the plan on the ballot this November.

Some DDA board members have expressed concern about Moving Downtown Forward potentially being on the ballot at the same time as another TIF ballot proposal – this one a citizen-initiated proposal that would require a public vote to create, modify, amend, or extend any TIF plan. Many TIF supporters see the latter proposal as an existential threat to TIF funding throughout Traverse City – not just the DDA TIF but all TIF plans, including brownfield plans that have supported redevelopment projects ranging from The Village at Grand Traverse Commons to environmental clean-up along the Boardman River and Boardman Lake. DDA Board Chair Gabe Schneider previously worried dual ballot initiatives could potentially confuse the public and lead to both failing at the polls.

Regardless of those risks, several DDA board members have said they believe their work on Moving Downtown Forward is complete – and any further delays would only be detrimental. “There comes a point where you just have to put forward the idea and see what happens,” Mayor Amy Shamroe said.