The Jefferson City Public Schools Board of Education has been concerned about revenues that haven't caught up with their annual operation costs, but forgoing property tax isn't the only reason the district's representatives will vote "no" tonight on the Tax Increment Financing (TIF) proposal for redevelopment of the Truman Hotel property.
District officials don't believe a TIF is necessary to redevelop the Truman Hotel. A new proposal from the Puri Group of Enterprises, which owns the Truman Hotel & Conference Center, didn't change board members' stance.
"The Puris have been great," JCPS Chief Financial Officer Jason Hoffman said. "This is much better than the original proposal without a doubt. I think it's a good deal for the city. There's no doubt that this is a much better deal.
"I don't think it's so much really this project; it's more of a philosophical view of how TIFs should be used. I mean, Drew (Hilpert, city attorney) sent an email where he said anyone that's willing to make a significant investment in the community, we look at providing a TIF. We just can't be of that mindset, I don't think."
School board members have opposed the TIF since it was publicly proposed several months ago - one of the reasons being the developers originally proposed a TIF that requested reimbursement through 100 percent of new property tax revenue, a main revenue source for the district.
The new proposal lowers the amount of recaptured property tax to an estimated 40 percent over 25 years for the two-phase project. The other 60 percent comes from the city's lodging tax - with half of the lodging tax generated at the property to go toward the TIF reimbursement.
Vivek Puri, of the Puri Group, said the developers anticipate more of the estimated $8.89 million in TIF reimbursement will be paid for through lodging tax because the city will annex two Puri Group-owned hotels, The Hampton Inn and Comfort Suites, currently outside city limits. By annexing the hotels, the forgone city lodging tax revenue will be more than made up by the new lodging tax generated by those two hotels, Puri said.
By incorporating lodging tax, instead of forgoing $15.46 million between all local taxing entities that collect property tax, about $8.48 million less in projected new property tax revenue will go to the taxing entities rather than the TIF.
The Puri Group previously made a case that because TIF reimbursement comes from new revenue resulting from the development, taxing entities like JCPS aren't losing any current revenue but actually are gaining revenue over the 25-year lifespan of the TIF and will continue to gain more property tax revenue after the TIF ends.
However, the board still unanimously decided it was against the TIF during a special work session Wednesday morning.
"Each TIF has be weighed on its own merit," board President John Ruth said. "We're ultra-concerned about the budget. Every TIF that passes for a profitable project, we forgo property tax revenue. Every but-for that's performed, we have to check the validity of it. (The project) could stand on its own."
Puri suggested if the school board isn't satisfied with the but-for analysis, then it should pay to conduct its own. He said the Puri Group tried to address concerns the district had but to no avail.
"At this point in time, I think this is nothing more than a discriminatory process from the school board against the Puri Group because of who we are," Puri said. "It has nothing to do with the children of the school district. It has nothing to do with the value of the money that's going into the school district. We've addressed those concerned."
The project has passed two third-party, but-for determinations commissioned by the city and conducted by an outside firm. Both concluded the project would not be profitable without the TIF, and tax assistance is needed to move forward, Puri said. A but-for determination is required by law to analyze the validity of a TIF proposal.
Puri said the need for a TIF is not a result of his personal opinion but of the findings of the experts who performed the but-for anaylsis based on the project's budget and projections.
"It's short-sighted of the district, especially when the new proposal addresses their concerns," Puri told the News Tribune. "(Projected new revenue from the project to the district) went from $1.8 million to $7 million. Their return (during the life of the TIF) is more than three times what it was. They're putting their biased approach or analysis before the benefits of the community, especially when the community has upward of $100 million to gain."
Hoffman said, according to the Puri's data, the project is within the range of being profitable without the TIF - it may be on the low end of the range, but it's within the range. Puri said the developers' third-party financing is contingent on TIF assistance, and without the TIF, they can't finance the redevelopment to make the project happen.
The school board remains unconvinced.
"TIFs should be used very sparingly for only extreme-type projects," Hoffman said. "If we approve one that may or may not go on its own, are we going approve every single project that lets their property run down and needs to be improved? Our tax rate is in the bottom third of the state. We can't keep up and provide the adequate education that our community demands."
Puri said he is not sure how the vote will go at today's 5:30 p.m. TIF Commission meeting at City Hall. But, he knows he gave the project everything he had, and if it doesn't go through "it wasn't meant to be," he said.
The school district has two representatives, Hoffman and Superintendent Larry Linthacum, on the 11-member TIF Commission.
If the commission does not approve the TIF, it requires a two-thirds vote of approval from the City Council.
Puri said if the TIF isn't approved, he has no other plans for the property at this time. When discussions for a TIF first began, he thought the community benefit would outweigh any concerns taxing districts had, he said.
"I'd rather have one pigeon in my hand than two in the bush," he said. "Would I rather have the possibility of $7 million right now, or would I like to have the possibility of maybe I can get just a little bit more because somebody else will come along and develop something else? Well, I own that piece of property, and I will own it for a long time. I will hold onto it for a very long time."
Previous coverage:
New Truman Hotel funding plan proposed, June 19, 2016
Truman Hotel TIF decision delayed again, June 1, 2016
JCPS expects new TIF proposal, May 24, 2016
Developer meets with JCPS board to discuss TIF, May 10, 2016
Truman Hotel TIF meeting rescheduled, April 12, 2016
Schools historically have little power in TIF decisions, April 10, 2016
JCPS balks on proposed Truman Hotel TIF, April 6, 2016
Truman hotel seeking Tax Increment Financing for proposed developments, March 20, 2016
Truman Hotel closes, Dec. 4, 2015