Forming a redevelopment agency would open new sources of funding and make the city more competitive in its bidding for commercial development, the City Council was told Tuesday.

Attorney William Oswald, who wrote the state statutes governing redevelopment agencies, explained to the council how a redevelopment agency works and how it uses tax-increment funds to aid new developments.Although appearing interested in the concept, the council took no action, preferring to study the idea.

City Administrator David Hales said Centerville wants to encourage development along Parrish Lane. But that requires large expenditures for curb, gutter and sidewalk, in addition to new streets and storm drains, he said.

Redevelopment agencies - known more commonly as RDAs - are generally used to improve blighted areas, Hales said, demolishing or renovating old commercial districts into more attractive areas that yield more tax revenue.

But Oswald, a consultant to cities forming RDAs, said the definition of blighted area in state law is broad enough that Centerville probably could include its Parrish Lane strip.

Hales and Oswald said RDAs can issue bonds to raise money to improve an area, then collect the higher property tax it generates to pay off the bonds and promote further development.

But there is a risk, they cautioned, that the city could be responsible for paying off the bonds if the development doesn't work.

Hales said several other cities in Davis County, such as Bountiful, Kaysville and Clearfield, have RDAs, which give them an edge when talking to potential developers.

Centerville is trying to sell the land it owns along Parrish Lane, where the current City Hall is, and most of the potential buyers have asked about RDA or other city assistance in developing a commercial site, Hales said.

Oswald said he's been working with RDAs since 1969 and if carefully handled they generally are successful.

"The concept is an economic tool to handle blight, which is an economic cancer," Oswald told the council. "It is designed to replace aging businesses not producing revenue with new ones that do, enhancing the tax base."

The attorney said he believes Centerville has the potential for redevelopment, although it may not be on par with Salt Lake City or Bountiful's recent efforts.

In addition to financial risks, Oswald said, redevelopment efforts always have political overtones, which usually surface at the public hearings required before approving projects.

But he also pointed out the potential rewards to the city, using what he said is an actual block of commercial property as an example.

The block contained seven businesses, ranging from a tattoo shop to a burned-out grocery store, with a total assessed valuation of $58,200. After replacing it with a high-rise office building, the valuation increased to $860,000, Oswald said.

That increased the city's property tax revenue from $3,783 to $55,900, Oswald said.