The city of Ridgefield may implement a method of earmarking property taxes toward infrastructure projects intended to spur economic growth.
During its Feb. 9 meeting, the Ridgefield City Council heard from financial consultants about what a tax increment financing (TIF) area would do and where it would be located.
TIF areas are intended to fund infrastructure projects that allow private development in the area, Nick Popenuk, an economic consultant told the city council at the meeting. Properties in the area have their contributions to property taxes “frozen” when the area is created for the majority of levies they pay, with all additional funds generated by development and other growth in the properties’ assessed value going to specific projects.
“In this way it allows the growth in tax revenue from those private developments to pay for the infrastructure improvements that were necessary to make those developments happen in the first place,” Popenuk said.
He noted creating a TIF area doesn’t mean additional taxes will be placed on properties outside of any growth in assessed value that results from the infrastructure investments funded by the area.
“No property owner or taxpayer will wind up paying more because of this program,” Popenuk said.
The funding mechanism is fairly new to Washington. It came into existence through legislation in 2021. Washington’s TIF areas have a limit of 25 years for the maximum time they can be in place, Popenuk said. In states like Oregon, there is no hard sunset date, which has been a complaint of taxing jurisdictions impacted by the areas.
The boundary for the proposed TIF area in Ridgefield sprawls across properties on both sides of the Interstate 5 junction, going as far west as Royle Road and as far east as 85th Avenue. The boundary also dips as far south as South 20th Way and north to North 20th Street.
Not all of the property between those streets are in the boundary. Ridgefield Finance Director Kirk Johnson said parcels with known future development and ones with expected development in the next 25 years are the focus of the proposed area.
“That’s adding services the council’s been looking for, for the residents, along with long-term revenue that will really stabilize the financial situation for Ridgefield for the years to come,” Johnson said.
There are 32 projects in some stage of development within the proposed TIF area, Popenuk said, with most in the permitting phase. If they all developed on schedule, they would add an estimated $200 million of assessed value to the city.
For those to be built, Popenuk said infrastructure improvements are necessary, which includes what would be funded by the TIF area.
Speculative development based on economic analysis shows $20 million more of assessed value every year over the duration of the TIF area, Popenuk said. The analysis forecasted at the end of the area’s duration, roughly half of the property in it would not be developed.
“What that means to us is that while this forecast does call for a lot of sustained development over the next 25 years, there really is the potential for there to be … more development in this area, or for that development to happen faster than we are forecasting here,” Popenuk said.
Base county, city, port, fire protection and library levies are subject to the TIF area revenue redirection, while excess levies from any jurisdiction as well as state and local school district levies are not, stated information from the presentation to the council.
Popenuk said successful uses of a TIF area leverages the infrastructure investment to encourage development and the subsequent property value increase that otherwise would not have happened without it.
“That’s how you really leave all the taxing districts better off in the long run,” Popenuk said.
In total, the economic analysis forecasts about $47 million will be allocated to the district in the 25-year lifespan of the area. Taking into account interest on debt payments incurred and inflation throughout those 25 years, the effective dollars the area would generate in 2023 is more like $26.5 million, Popenuk said.
He said the TIF area funding wouldn’t be the sole source for many projects, where private investment and grants could also be used.
Without the TIF area, the redirected funds would largely go into the respective jurisdictions’ general funds.
“One caveat, though, is that if you don’t have the tax increment area, it is unlikely that this amount of revenue would be generated over the 25-year timeframe,” Popenuk said.
Most of the potential projects involve extending or widening existing roads, as well as building new ones, according to a project list presented to the council. The list also includes a new stormwater facility northwest of the I-5 junction and an overpass over the interstate to connect South 11th Street to the west and South 10th Street to the east.
Johnson noted the project list is set when it is approved by the council for the duration of the TIF area’s existence and can’t be changed.
The current timeline for enacting the TIF area has final approval by the council scheduled for the end of August. That would mean the first collection of TIF area funds would be in 2025. Based on anticipated projects, Johnson explained starting the collection that year would result in more revenue than if it started next year.
The creation of a TIF area can be unilaterally approved by the city, Elaine Howard, another consultant at the meeting, said. Ridgefield would have to submit their plan to the state treasurer’s office, though that office would only make suggestions for changes and not a formal approval itself.
She added the city was recommended to take part in stakeholder meetings and public briefings ahead of its formal adoption. Popenuk said being able to convey the benefits the TIF area would bring is integral to making the program work.
“When you’re looking at what makes a successful tax increment area, it’s being able to communicate to those partners that the amount of new development here is really going to be a positive impact on the community long-term, and it’s really going to increase everyone’s tax base long-term, and that the short-term sacrifice of tax revenues is necessary and worth it to achieve this outcome and this vision,” Popenuk said.
