You might think giving away millions of dollars a year to help make downtown Waco more vibrant and beautiful would be a fun job.
But for the Tax Increment Financing Zone board lately, those decisions have been a headache.
The downtown TIF Zone was set up 35 years ago to reinvest a portion of tax dollars back into downtown improvements. Tax base growth has swelled its coffers in recent years, with more than $10 million expected in revenues this fiscal year.
That success has posed new questions, such as which developments still need incentives now that much of downtown has moved from blight to boom.
The TIF board stopped giving a blanket 15 percent incentive to developers in 2013, but the complex scoring system that replaced it has gotten out of sync with the TIF board’s priorities.
“It appears to me we’re in a transitional period,” said Waco Mayor Kyle Deaver, who sits on the TIF board. “Some things that we have been doing that may have worked at one time may need to change to reflect our priorities.”
The TIF board has created a task force to explore a new system that focuses less on incentivizing individual businesses and more on creating pedestrian connections and public infrastructure for the whole area.
Reframing the question
“It’s a real reframing of the question,” said Megan Henderson, executive director of City Center Waco, which helps score projects for the board. “Previously, the TIF tried to incentivize projects based on individual projects. Now the question is how to incentivize downtown itself to develop.”
With that goal in mind, the TIF board has already been setting aside its own scoring criteria in recent months in favor of working with city staff to estimate how much in sidewalk, street, lighting and landscaping funds projects need and deserve. At its March 6 meeting, the board used those calculations to recommend three projects:
- $3.5 million to Shane and Cody Turner for the West Village project at Interstate 35 and Cleveland Avenue, which will include $36.6 million worth of stores, hotels and restaurants.
- $301,345 to TFNB Your Bank for Life for a two-story bank at South 10th Street and Cleveland Avenue that will involve $3.5 million of construction.
- $216,863 to Brotherwell Brewing for a new brewery in an East Waco building that will involve a total construction cost of $284,584.
All three recommended projects will go to Waco City Council on April 4 for approval.
In each case, most of the money goes to help build extensive 6-foot-wide sidewalks, with trees and decorative lampposts. In the case of West Village, the Turner brothers are planning to build about a mile of such deluxe sidewalks, which city staff pointed out would not be necessary to make a development work.
The sidewalks in the development are a general benefit because they connect the hotels to the rest of downtown, said Melett Harrison, the city’s deputy director of economic development and housing.
“Downtown is developing and gaining momentum in different ways than we would have predicted five years ago,” Harrison said. “We’re now starting to think about the importance of the 11th Street entrance into downtown, and we have to put our best foot forward.”
Meanwhile, the bank building didn’t originally score well enough to qualify for TIF funds, but staff and board members agreed that the landscaped sidewalks in the plan are important enough to warrant public money.
In the case of Brotherwell Brewing, the TIF grant for sidewalks, ramps and fences accounts for the majority of the capital expenditure for the project, but TIF board members said they see value in building out the pedestrian network in the Elm Avenue area.
Malcolm Duncan Jr., a former Waco mayor and now member of the TIF board’s task force, said the old scoring system tended to arbitrarily favor some projects over others that were equally worthy. For example, a spec retail building would score low on “economic impact” because its future use was unknown.
“There was a general discomfort with the way recommendations were coming forward,” Duncan said.
He said he would like a more predictable set of rules that would let developers know upfront what they need to do to get funding help.
Henderson, the City Center Waco official, agreed with that.
“We need to be clear, transparent and accountable in how these funds are invested with criteria that are seen as objective,” she said.
But she said the scoring system may not need to be abolished, just “re-balanced.”
Henderson suggested creating a map of high-priority sidewalks throughout the zone, then creating a policy guaranteeing adjacent developers TIF money to build those sidewalks, provided that their capital investment is enough to bring in additional tax revenue to repay the public investment over time.
But she said a scoring tool somewhat like the existing one could be added on top of that to incentivize certain types of projects that have special value to downtown’s future. For example, the current tool gives weight to historic preservation and cultural and entertainment opportunities. Henderson also said it makes sense to prioritize certain areas, such as the Elm Avenue corridor, that languish behind hot development areas such as the fast-food row around Sixth Street and I-35.
Duncan said the TIF board already gives preference to areas such as Elm Avenue, as with the Brotherwell project, and he thinks it makes sense to continue doing so.
Harrison said it may appear that the I-35 frontage area is beyond need of incentives, but she noted that the Turner brothers spent years assembling scores of properties to make it possible, and part of their calculation was the possibility of getting TIF funds.
“You could extrapolate that back six or seven years ago when they started assembling property, and it wasn’t inevitable that the momentum was going to be there,” she said. “Some say that the same inevitable development is poised for Elm Avenue.”