As you know, Moscow Vision 2020 and the Moscow-Latah Economic Development
Council are co-sponsoring a series of public information sessions regarding
the proposed Moscow Business Park. In November, Moscow Vision 2020 hosted
a forum at the High School, where Larry Hodge received questions about the
park, its planning and financing.
Although the notes below may appear crude, we are posting them for your
information, and to refresh the memories of those who attended the meeting.
Numerous issues and questions emerged at this meeting. We hope that each of
you will find time to attend the Thursday lunchtime series held at the
Incubator. This follow-up should address several of the issues raised below.
Thanks to Priscilla Salant for transcribing the following.
Susan Palmer
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Notes from Question/Answer segment of Public Forum on Moscow's Business Park, 11/5/95
Part A: Primarily focused on "need" for the park. Tried to hold questions about financing to Part
B.
Q: Intention of Business Park facilities?
A: Research and technology-oriented firms will do business there, after hatching and growing at
the business incubator. Advanced Hardware recently moved out of the incubator to Pullman
because suitable location was not available in Moscow. Three more businesses now in the
incubator are ready to move out when they find a location.
Q: What kind of businesses?
A: Intention is to downzone proposed site east of Tidyman's from "Motorized Business" (retail
goods and services, e.g., gas stations, grocery stores) to "RTO" (research technology oriented)
It is expected that Park occupants will have legal agreement that includes restrictions on
business type, building type, etc.
Q: Will there be restrictions on types of buildings that are constructed?
A: Yes, to protect quality.
Q: What are the logistics of BP land sale to private firms? (Specific Q: How will the cost of
locating in the Business Park compare to cost at the Incubator?)
A: Plan is that an Urban Renewal Agency (created by the Moscow City Council) will build
infrastructure on the site (roads, parking, utilities, landscaping, paths) using money from sale of
bonds. Then the owner of the BP site will sell developed, platted lots to private businesses at
less than market rate, but "something over" current, undeveloped land price.
Q: Who now owns and will own the land?
A: the Thompson family owns it now and will continue to own it until platted lots are sold to
private firms.
Q: Is the EDC developing the land for the Thompsons?
A: Yes. However, the Thompsons will not realize any profits over what they would have gotten if
they sold the land - in its undeveloped state - to the businesses now.
Q: What if bonds are sold, infrastructure is put in place, and no one buys the lots?
A: The land will still belong to the Thompsons. They will retain title.
Q: What might prevent the land from being downzoned from Motorized business to RTO?
A: Hodge referred to Potlatch as example, rezone not "necessary"; court case unlikely on rezone
(clarify with Hodge)
Q: Why wouldn't it be better to build the infrastructure as the lots sell rather than all at once,
now? Are there economies to building it all at once?
A: (This would be piece-meal development.) There are not economies gained by building it all at
once. It is indeed possible to build the infrastructure in phases.
Q: What is the most preferred number of businesses at this site, given RTO zoning?
A: 12-13.
Comment from participant in the forum: "I appreciate the idea of building a bike path along this
site and incorporate the border of the site into the proposed linear park" (as shown on the graphic
that Larry Hodge presented to the forum).
Q: Has any public money been used to get the plan to the current stage?
A: Costs have been primarily covered by donations (from Hodge, etc.), the Thompsons (design
work), $100 from Council for design work, unspecified money from the Council for activities
related to zoning, designation of blighted areas (see below).
Q: (Specifically to Hodge) Why are you unwilling to support subsidies for public housing but
willing to support subsidies to businesses that locate in this park?
A: People who live in public housing have no "pride of ownership" whereas businesses will
actually own lots and buildings at the Park.
Q: Does this mean you would support subsidized public housing if ownership if residents were
owners?
A: No comment.
Q: Would it be possible for businesses to make money through speculation, i.e., by buying a lot
at below market costs (as explained earlier) and then selling the lot to another business at a
higher price?
A: The EDC will form a holding company. A firm that buys a lot will be required to build within 1-2
years or sell back to the holding company at 10% less than what the firm paid. However, it is
possible that speculation will occur. It's possible that a firm would buy the lot, build, then sell.
The subsidy will accrue once -- to the first generation of owners. After that, all transactions will
be at market rates.
Q: What is the intent with respect to taxing sites at the Park?
A: They will be taxed at full assessed value.
Q: Why shouldn't retail businesses here in Moscow be given a similar subsidy? Retailers view
this proposal as extremely unfair.
A1: The EDC is not involved in retail business development.
A2: This is classic "economic development" strategy. R/T businesses parks are very commonly
subsidized.
Comment from participant in the forum: I believe that Moscow needs better paying jobs than
those in the retail sector and therefore the subsidy is justified.
Q: Why is the Park not being built in the area that has been designated as blighted?
* Part B: Financing the Business Park
Introduction: A mechanism called tax increment financing (also called tax allocation financing)
will be used to generate money for the infrastructure. This has not been used in Moscow before,
but has been used in Idaho. According to Hodge, this mechanism was used to lure Micron to
Utah.
Step 1 is to define an area in which businesses can build and benefit from tax increment
financing. Bonds are sold to generate money to build infrastructure.
Businesses buy lots at "something over cost of undeveloped land but something less than cost of
developed site", build their buildings, and are taxed at regular, "use value" rate. The difference
between the taxes they actually pay and what the tax revenues would have been had the land
not been developed with infrastructure is used to pay off the bonds. This difference is called the
"increment" -- hence the term, tax increment financing. The increment is allocated (actually,
allocated only in part, as explained below) to cover infrastructure costs.
The more businesses that buy lots at the Park, the more revenue is generated, the faster the
bonds are retired.
Land and buildings are assessed separately.
Law requires that 60% of the increment go to the school district and the remainder to bond
repayment. The argument used for such financing is that "Growth pays for itself. Other services
-- nearby roads, utilities, etc. -- will not fall behind because of increased demand/decreased
revenue." In other words, the businesses are assumed to cover all their own costs.
Q: What about the worst case in which only 1-2 businesses purchase lots at the Park? How will
the infrastructure be paid for?
A: The bond buyers (in this case, banks?) will lose. They are the ones at risk.
EDC is projecting that bonds would be retired within 10 years.
(Comment that banks usually requires leases in advance. Twin Falls created surplus.)
The Urban Renewal Agency, not the EDC, is issuing the bonds.
Q: What is the risk to the public?
A: Two relevant parts of the Idaho code, they are Chapters 20 and 29. Chapter 20 of the Idaho
code is the Urban Renewal Act. Chapter 29 is the Disadvantaged Border Community Act. It
stipulates that if a town can show it is disadvantaged because of neighboring town across state
lines, it can set up an Urban Renewal Agency. As a remedy for the disadvantage, Chapter 20
sets up the mechanism for tax increment or tax allocation financing. Designation of blighted area
is required to qualify for URA authorization. (Hence, two criteria must be met: disadvantage due
to border status, and blighted area. City hired two different consultants to determine that
Moscow met both criteria.) Development financed by the tax increment mechanism does not
have to be located in the blighted area.
Q: Why isn't tax increment financing available without having to meet these criteria?
A: It is designed for revitalization. Allowing it to be used more would invite abuse.
Comment from forum participant that the confusing nature of Idaho's Code detracts from the
debate over whether the Park is needed or not. It seems bizarre that Code allows development
to occur in a "pristine" wheat field rather than in the blighted area itself. From Hodge: Don't rule
out the possibility that the benefits of developing the Park will spillover to the blighted area.
Q: If this is a worthwhile project, why not put it to a community vote? Wouldn't this be a more
direct route without legal tangles?
Public taxes. Burden for police and fire.
10 years and does not go into general funds.
EDC examined private financing, e.g. individual risk too great.
Infrastructure costs? Estimated at $800,000
Not different from private development.
Why not take the risk (private dev.) access to profit.
Compete with publicly financed Whitman business park
point is growth
public subsidizing others' jobs
individuals will pay own taxes
business expansion not producing taxes
city does not have authority to do tax increment financing without urban renewal agency
this is one demand for financing among several
what have the holistic community picture/participation
segmentation v. prioritization.
city indebted about $1 million (low)
management costs of urban renewal
3-member board
$20-30,000 per year
EDC assistance
impact on Troy Highway
Bad case scenario
Businesses with "bad" jobs
low-wage
Zoning restrictions protect some of that
Study to measure effects of growth on infrastructure?
if larger community, what consequences for quality?
quit looking solely at little pieces but whole picture
need for alternate transportation.