ASK ELi: Nearby TIF?

Image: The Lodges of East Lansing, a student rental complex near MSU whose real estate taxes actually go to Meridian Township; the large project was built without TIF.

An ELi reader asked, and other ELi readers also want to know: "Do surrounding municipalities provide as many TIF or other tax incentives to developers as EL? I don't understand why incentives are needed to construct apartment buildings when it appears the these units cannot be built fast enough in the region."

Much more background on TIF and facts about East Lansing’s use of TIF is provided here. Just a quick reminder: TIF can be used to reimburse a developer for eligible expenses on a redevelopment project. It can also be used to reimburse a municipality for eligible expenses. And it can be used more generally to support a downtown development zone by supporting a Downtown Development Authority (DDA).

TIF plans divert captured real estate taxes away from a city’s general fund, away from CATA and Lansing Community College, etc., in order to support a particular local development project. TIF is a tool municipalities can use to do targeted development support. In East Lansing, City Council approves TIF. Lately many of the split votes in Council have been over TIF plans.

Comparison points: I tried to gather information from a series of directly neighboring municipalities. None is anything like a perfect equivalent to East Lansing.

To state the obvious, the City of Lansing is a much larger city than the City of East Lansing, and it has a different tax system, including an income tax; Lansing Charter Township is an unusual township, heavy in commercial operations and made up of five non-contiguous pieces of land; Bath Township is quite rural by comparison; and Meridian Township doesn’t have the kind of downtown that East Lansing does, although Meridian has lately had a lot of large student-heavy apartment buildings constructed, including “mixed use” commercial/residential buildings of the kind supported by TIF in East Lansing.

Here are populations according to the 2010 census, listed smallest to largest:

• Lansing Charter Township:             8,126
• Bath Township:                              11,598
• Meridian Township:                       39,688
• East Lansing:                                48,557
• Lansing:                                      114,297

East Lansing’s approach: Based on my research, East Lansing has a relatively large number of active TIF programs for a municipality of its size. This article shows that the total TIF plan capture in East Lansing currently comes to about $20 million, and for the fiscal year 2015, a total of about $830,000 of real estate taxes is being diverted to TIF reimbursements in East Lansing.

The reader who asked today’s “Ask ELi” question is correct in understanding that many of East Lansing’s TIF plans relate to new “mixed use” apartment buildings that house mostly student renters. Some of the TIF in these cases went to build municipal infrastructure (like sewers) and some went to build visible public amenities (like the Ann Street Plaza redevelopment outside St. Anne’s Lofts). Some went to reimburse developers for eligible expenses. (Read more here.) The Gateway Project TIF, for example, will reimburse the developer for the cost of building private underground parking for the renters (read more).

Lansing Charter Township: Lansing Charter Township has created an Eastwood Downtown Development Authority to capture taxes associated with properties in and around the mall known as Eastwood Towne Plaza. (Read the plan here.) As I read their numbers, in 2015 the DDA tax capture there will be about $1.3 million. It appears from their plan that a sizable chunk of that will go to reimburse developers for eligible expenses.

Bath Township’s numbers: According to Jeff Garrity, the Treasurer for Bath Township, in tax year 2014, Bath Township’s TIF tax capture came to a total of $384 (rounding to the nearest dollar). He is projecting $1,481 for Bath for the 2015 tax year.

Garrity confirmed that, in Bath, TIF is being used to capture incremental taxes that would otherwise go to Bath Township’s general fund and to Lansing Community College (LCC); those funds instead go to the Bath DDA for purposes of improving their downtown. Again, that comes to about $1500 per year right now, with none of it reimbursing developers.

Bath’s DDA TIF uses a base year for 2013, meaning that the incremental taxes above that base year are what is being “captured”—diverted from the Bath general fund and from LCC to the Bath DDA. (The taxes for the school districts are not diverted, and according to Garrity, other public entities that could opt out of the TIF plan, including Clinton County, did opt out.) So 2014 was the first year of tax capture for Bath.

You can read more about the Bath DDA here.

Meridian Township’s numbers: According to Julie Brixie, Meridian Township Treasurer, in response to an inquiry from me, Meridian Township’s only TIF is like Bath’s; that is, it goes to fund their Downtown Development Authority, not to reimburse developers.

How much does it capture in taxes? According to Brixie, “Last year our DDA captured $16,349.41. It is tiny.”

Brixie says Meridian Township also has one Brownfield plan (a TIF type used for environmental cleanup in redevelopment), and that that captured a total of $2800 last year.

So the total TIF tax capture for Meridian comes to $19,149 for the year.

Lansing: I tried to ascertain the amount of tax capture occurring in the City of Lansing (which is separate from Lansing Charter Township), but the Lansing treasurer is not as forthcoming with this information as the treasurers of East Lansing, Bath, and Meridian.

Supporters of TIF in the City of Lansing see it as supporters of TIF do here: as a powerful and important economic and urban development tool. It is used there to reimburse developers for eligible expenses in some cases. You can read more about Lansing’s TIF here.

Upcoming TIF discussions in East Lansing: A number of developers are about to ask East Lansing’s City Council to approve TIF plans for their new projects. All of them are for downtown mixed-use buildings with rentals likely to be occupied by MSU students.

At the moment, PDIG’s TIF plan request for the big corner downtown is on hold.

A planned eastside six-story mixed-use project involves a TIF request including a Brownfield cleanup of an old gas station and an attempt to save an old oak tree; read more.

The developer of a planned five-story mixed-use building downtown, kitty-corner from the Broad Museum, is asking to be reimbursed with about $1.2 million in TIF over 12 years. The whole project will cost the developer about $8 million. The project aims to include a public plaza that may be used in part by a restaurant. Read more.

Many projects built downtown and elsewhere in East Lansing have not been funded through TIF. In those cases, any tax increases that occur as a result of the redevelopment go into East Lansing’s general fund and to the other designated tax channels, including the East Lansing Public Library, CATA, Lansing Community College, etc.

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