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Colby looks to cash in on TIF 2 development

Colby’s planning committee voted last week to close the city’s TIF district next year in a way that will lower taxes for local residents and provide a boost in revenue for the city’s general fund.

TIF is short for tax-incremental financing, which allows the city to capture all of the tax revenue on any new developments in a given area and set it aside for public infrastructure and development incentives. Normally, those property taxes would be shared with the local school district, technical colleges and county.

After 26 years of growth, Colby’s TIF district 2 has expanded by over $20 million and is currently generating almost $500,000 per year in revenue to pay off debts incurred to develop the city into what it is today.

First created in 1993, TIF 2 started with a base value of about $4.8 million in total property value. The district was expanded in 1999 in order to encompass what was then newly annexed land south of the Highway 29 bypass.

City clerk Connie Gurtner told committee members that they have three options to consider when TIF district 2 expires next year.

One of the three options presented by Gurtner would be to keep the TIF district open an additional year and use that extra revenue to support a new housing development in the city. Ald. Todd Schmidt said recent housing developments have gone up without the need for incentives from the city.

“From some of the feedback I’ve been getting, I think we should just close it,” he said.

If TIF 2 is closed next year as scheduled — and all of that extra property value is added to the city’s tax base — the city will be able to lower the rate per thousand dollars of property value paid by city residents. Under one option, the entire benefit of closing the TIF would be passed onto taxpayers with a lower mil rate; under another, the city would be able to add $54,000 to its tax levy and still lower the mil rate, but not as much.

“The taxpayers would still see a significant decrease in their taxes, and it would give the city an additional $54,000 in tax revenue,” Gurtner said.

Mayor Jim Schmidt said the city’s general fund could really use the extra revenue.

“Our budget is really tight, there’s nothing for capital improvements,” he said. “We need that money for capital projects.”

While TIF 2 will officially close in September of 2020, the city will continue to collect revenues for the TIF account for one more year in 2021, so the impact on the tax levy and mil rate won’t be felt until 2022.

Gurtner noted that $54,000 is the maximum amount that can be added to the tax levy, but the city can pick any number below that in exchange for more tax relief.

“We don’t have to take the full allowed amount and we don’t have to take zero,” she said. “We can take it anywhere in the middle.”

When council members asked Gurtner for her recommendation, she suggested taking the full levy increase of $54,000, which will still result in a roughly $200 tax decrease on a home valued at $100,000.

“The purpose of the TIF is to increase the equalized value in our community,” she said. “The city of Colby’s general fund has sacrificed all these years because of that TIF fund. And the school districts and everyone else has.”

Gurtner said the council doesn’t have to decide on the issue until next September, but committee members were ready to accept her recommendation. They passed a motion to take the maximum levy increase allowed after TIF 2 closes.

Once the motion is approved by the council, Gurtner said she would contact the city’s financial advisor, Sean Lentz, so he can provide some exact figures for the city.