A Utah city has begun the process of providing a massive tax incentive to build a “walkable” community, which includes a mix of housing, office space, and some retail.
South Jordan City has created a new project area just to the west of the existing Daybreak community, surrounding the Mid-Jordan Trax line.
According to city documents, the development of 860 acres will have a mix of land uses that “will be organized in a compact walkable format around connected parks and plaza spaces that promotes civic engagement, sustainable mobility choices and further utilization of the Mid-Jordan light rail transit line.”
The city is arguing that the project area will bring private investment and contribute to the tax base by way of increased property and sales tax revenue.
However, the impact could be over $500 million in tax increment financing (TIF) over the 30-year life of the project area, according to city documents provided for the April 5, 2022 City Council/Redevelopment Agency Board.
75% of this revenue would go into the project area, while 25% would return to taxing entities. It would also take until 2054 until the participating entities receive the tax on the full value of the land in the new development. As construction or redevelopment of the project area begins, theoretically, property taxes on the land will increase. That money can then be returned to the area for future investment.
Over the course of the project area, Jordan School District, as an example, is anticipated to provide $148 million in TIF. Salt Lake County would give more than $60 million in this same period. The statewide basic levy, which helps fund public education, would be participating at $56 million.
The city, working with the developer, estimates the budget of the land cost and improvements (excluding housing) to be $622 million. This includes $247 million in public parking structures. 40% of the estimated budget is to be used for building parking lots.
Your Taxpayers Association does not immediately oppose all types of CRAs and tax increment financing. The Association stands by CRA usage in the case of blight, or if the land is likely to not be developed on its own and create new economic activity. We call it the “but for” test. Essentially, would the economic activity exist “but for” the incentive?
We ask elected officials that are reviewing an option of approving a CRA and tax increment financing whether the land in question would be developed without the need of utilizing precious taxpayer dollars. In many circumstances, we believe the use of CRAs is unnecessary to stimulate development in an area, which is the case with this particular project.
With Utah’s significant and booming housing market, this land would likely be developed regardless of tax incentives. In fact, the developer of this project has said that housing would be built on the land, but the tax incentives are needed to build parking structures and erect commercial buildings.
While South Jordan has created the new project area, it is also asking other entities that can tax this land to participate in providing TIF. Interlocal agreements are being drawn, and it is expected in the coming weeks that other entities, such as the Jordan School District, will be asked to forfeit their tax dollars to pay for this project.
The Utah Taxpayers Association continues to monitor this project very closely, particularly when it comes time for other entities to be asked to join and encourage policymakers to keep a close eye on how to utilize their existing, precious tax dollars. This project does not appear to pass the “but for” test that should be applied and we are urging those other entities to decide against providing this incentive.