Residents in northwest Farmington still aren't sure what they think of the proposed formation of a redevelopment agency to improve the Shepard Lane-U.S. 89 area.

But they are sure they don't want their property to be declared blighted, a requirement under state law for formation of an RDA.The City Council held a public hearing Wednesday to explain how RDAs function and what the city hopes to accomplish in the area - if one is formed and when the council decides what area it will include.

The city is committed to about $275,000 in capital improvements in the area, including widening and improving Shepard Lane west of U.S. 89, upgrading water lines and installing storm drains, City Manager Max Forbush said.

The improvements have been needed for a long time, he said, but are being given a higher priority because of commercial development in the area. Developers have paid their share through impact fees, he said, and now the city needs to come up with the rest.

Farmington has between $100,000 and $150,000 available annually for capital improvements, Forbush said, but its priority list of parks, streets, water projects and other improvements already stretches over the next five years.

Committing that money to the Shepard Lane improvements would push the rest of the projects back two to three years.

Another alternative is a property tax increase, he said. But the city only raises about $275,000 a year in property tax revenue, so an increase large enough to fund the Shepard Lane improvements would require a doubling of the city's tax rate.

The final alternative is formation of an RDA, with improvements funded by bonds issued by the RDA board - which is the City Council - and repaid through property taxes generated by improvements within the RDA boundary.

The city is limited to 100 acres in an RDA under state law, Councilwoman Marda Dillree explained, but about 400 acres in the northwest quadrant is under consideration.

A study will be done by an outside agency to determine how much of the area, if any, is eligible for RDA designation under the state law, she said.

Dillree and Councilman Greg Bell both stressed that the city is considering, but has not made a final decision on, the formation of an RDA.

Other taxing entities affected by formation of an RDA, such as the school district, have expressed some concerns, Bell said.

There are seven existing RDAs in the county, and Forbush said school officials are concerned about the overall effect on property taxes.

Creating an RDA does not decrease the amount of tax generated by a piece of property or reduce the amount that goes to the school district, county or other taxing entity, Forbush said.

But for the first five years, any increase in property tax that development generates on the property goes to the RDA to pay off the bonds sold to finance the improvements.

After the first five years, the increased tax revenue begins to be shared with the rest of the taxing entities until the bonds are paid off.

Some property owners in the area, especially homeowners, fear that declaring any of the area blighted would decrease their property values.

"The word `blight' may be unfortunate," said Bell. "It's not just urban slums being razed and new buildings being put up in their place. It can help on undeveloped land that is plagued by problems."

Bell said an RDA may be the best answer for financing the improvements needed in the area.

"It's easy money in a sense for the city. The city can take the tax money generated by development and improvements, by the increase in property value, without raising taxes," he said.