Mayor suggests TIF loans, not grants
Springfield Mayor Jim Langfelder says that monies from tax increment financing accounts should be distributed as loans instead of outright grants that don’t have to be repaid.
“We need to go more toward loans so we can get money back in the (TIF) fund,” Langfelder said.
Beyond replenishing TIF funds, Langfelder says that loans could help jump-start development for projects that can’t get traditional financing from banks.
“What you’d be able to do is loan it at a lower interest rate and for a longer period of time,” the mayor says. “The mindset now, it seems as if TIF funds are there for grants. Really, what we need to do is maximize those funds as much as possible.”
During the 1990s, TIF money was used to make loans for downtown development projects, with interest rates ranging from 3 to 5 percent. Langfelder cites the Lincoln Square Apartments in downtown as a TIF loan success story. Loans used to develop the complex recently were paid back, Langfelder said.
“That’s what we need to get more toward,” Langfelder said.
One development that might be affected is a stalled project on the 500 block of East Monroe Street, where developer Rick Lawrence’s plans to convert three buildings to street-level commercial space and upper-story residential units have languished.
The city in 2012 approved $1.9 million in TIF funding for the project. About $900,000 in TIF funds have been spent so far, Langfelder said. But none of the rehab work has been completed.
“I’m embarrassed I got stuck like this,” Lawrence said. “It’s been a challenging project. … The process of repurposing an old building, particularly high-rise buildings like this, turns out to be very expensive.”
The key to completion is securing federal tax credits, Langfelder and Lawrence agreed. If $3 million in tax credits can be nailed down, Langfelder said he favors an $800,000 loan from TIF funds in addition to previously allocated money to complete the project.
“It’s somewhere around that amount,” Langfelder said. “We could say ‘We’re not going to spend anymore,’ and then we’d have a vacant building downtown that’s partially done. … He has a lot of it done. You can see the potential.”
After city financing was secured, plans changed so that an elevator would be built between two of the buildings to serve both structures. “We got a little off kilter with that elevator,” the mayor says. “It’s a matter of getting over the hump. The real key to it is the tax credit portion.”
The mayor’s proposal to use a TIF loan to complete the project came as a surprise to Lawrence and others.
“Where is this coming from?” he asked when told about the mayor’s plans to use a loan to complete the development. “Really, the ball’s in my court, and I’m stuck with having to get these tax credits. The city has expressed an interest to stay involved in the project and be as involved as they can. There’s been no definite direction or decisions as to how that might come about.”
Langfelder’s proposal to reinstitute loans from TIF accounts also blindsided Brad Schaive, business manager for Laborers Local 477 who sits on the city’s economic development council that reviews requests for TIF money. “I don’t know anything about any of this,” Schaive said.
Lisa Clemmons Stott, executive director of Downtown Springfield, Inc., also said that she wasn’t aware of the mayor’s plans to start making loans from TIF funds, but downtown needs financial support from the city.
“It’s news to me,” Clemmons Stott said. “I feel like this is a methodology that some other cities use. Honestly, I’d have to look into it more. It’s an understandable thought, because TIF dollars are finite.”
Ward 5 Ald. Andrew Proctor, whose ward includes downtown, said that he’s heard talk about making a TIF loan for Lawrence’s project. But he said he’s not familiar with any proposal to revamp the TIF program to make loans for other projects instead of grants.
“The concept is news to me,” Proctor said. “I’ll be interested to see the outline of it and see what he (Langfelder) is proposing. … Just in general, I think the city needs to be more creative in how we use TIF funding.”
Contact Bruce Rushton at firstname.lastname@example.org.