Schools OK tax incentives now to reap cash later

Sources who attended the impassioned breakfast meeting at the Provo Marriott last month said the new process created healthy dialogue. School district officials expressed frustration at carrying the heaviest load. "What is the city giving up?" they asked Mayor Lewis Billings.

Billings pointed out that Provo will surrender 96 percent of its share of the new property taxes for 12 years, a total of $1.05 million.

"We're giving everything," Billings said. "Everything. We're asking you to give, too."

Property tax revenue is split between school districts, which get the majority of the money, cities, counties and water conservancy districts. The counties and water districts also must opt into CDAs under the new law. The water districts involved in the Provo, Pleasant Grove and Spanish Fork deals have agreed to surrender 100 percent of new property taxes for the time specified in each deal.

The school districts, on the other hand, get to keep a percentage of what is known as the tax increment — the difference between the tax revenue before a new development is proposed and after it is completed.

Provo, Alpine and Nebo will keep some of the increment from the start, meaning they'll see an increase in tax revenue immediately, even though they are surrendering millions over the first 12 to 23 years of the projects. For example, Alpine was collecting just $232 a year from 50 acres of farmland near the new Pleasant Grove I-15 exit. The hotels and convention center are expected to raise that to $104,000 a year, even though most of the new tax revenue they create will go to pay bonds financing the project.

Additionally, Alpine is counting on the project drawing new developments to 200 nearby acres. Estimates are they would generate another $1.4 million a year for the school district.

Developers and the cities said the projects wouldn't have happened without the tax incentives, or other, smaller projects might have taken their place. They argued that the tower, hotels and convention center and windmills stood to make the most money for the school districts, cities, counties and water districts.

Wasatch Wind plans to construct nine windmills, Nebo School District attorney Reed Park said.

"Often school districts aren't too interested in these deals because they get the majority of the property tax and believe the property will develop on its own," Park said. "This is one that's a gravel pit, where we never anticipate commercial or residential development, and it's actually in a wind tunnel in the mouth of the canyon."

Some Provo school officials remain frustrated about existing redevelopment zones in the city that were grandfathered under the new law. Board member Richard Sheffield, who voted against providing the incentive to the office tower, said it is difficult to know whether an incentive is really necessary to get a developer to build a project.