How the planned Fairpark redevelopment project could divert money from Salt Lake City schools

The redevelopment district would benefit from ‘tax increment financing,’ which the Salt Lake City School District feels could divert property tax revenue from public education,

(LHM Company) A rendering of the Larry H. Miller Company's plans for the Power District development on Salt Lake City’s west side. The 100-acre site along North Temple is where the proposed Major League Baseball stadium would be built.

Salt Lake City may one day see major league home runs, but the city’s school district feels the state is pitching it a financial curveball.

The plan to redevelop and invest in a swath of the Fairpark neighborhood that could include a potential Major League Baseball stadium flows from HB562, a measure state lawmakers passed this year that also aims to issue up to $900 million in bonds toward such a stadium in an attempt to lure a team to the city.

But the way that lawmakers intend to help incentivize developers to invest in the area is concerning to the Salt Lake City School District, which benefits from property tax revenue that can go toward teacher salaries and more, an official said.

That’s because the restoration district created by the bill will receive “tax increment financing” — or TIF — which essentially offers developers a tax rebate in exchange for the projected boost in taxable land value that their development stands to bring to the area.

The bill’s sponsor, Rep. Ryan Wilcox, R-Ogden, told The Salt Lake Tribune on Thursday that no property tax increment funds will go toward the stadium’s development, as a stadium would become state property once it’s built.

“We are not financing the stadium at all on the backs of the people who live around it by their property taxes,” he said.

The TIF model is often favored by governments, because while governing agencies forfeit immediate tax revenue, they don’t technically lose money should developers not deliver, said Christopher Collard, research director with Utah Foundation, an organization that studies issues including public finance.

Collard added there are two ways people tend to look at the TIF model in terms of public education funding: that it takes money away from schools, or that schools stand to miss out on extra property tax revenue that new developments can bring.

“It’s really more like a delayed benefit,” he said.

How does tax increment financing work?

The Salt Lake City School District is not “anti-development,” spokesperson Yándary Chatwin said.

She noted Superintendent Elizabeth Grant has emphasized creating college and career pathways that involve local business partners. And Chatwin said redevelopment projects like the potential MLB stadium also stand to bring opportunities to the city and its students.

“But the reality is, that there is a financial impact to school districts,” Chatwin said of the TIF model. “And while entities like the city are at the table, no one really remembers to check in with school districts.”

Under the model, school district business administrator Alan Kearsley explained, property values would be frozen at a baseline in the redevelopment area planned for the stadium, with the city, school district and other taxing districts continuing to draw tax revenue based on those frozen values.

Additional tax revenue generated as actual property values grow above the baseline becomes the tax “increment.” Once land values increase to a certain threshold, the government offering the TIF can use the extra tax money for rebates to developers or to cover costs related to the redevelopment.

But during the period where those property values are growing, other taxing entities such as school districts would be giving up their share of the extra tax monies and only receive tax revenues based on the frozen baseline.

TIF districts, Kearsley said, usually have an end date — potentially around 20 to 40 years later — and then that baseline approach goes away. After that, taxing entities such as school districts then begin to receive the full value of property tax revenue generated by the redeveloped area.

Collard noted that if a development stood to happen regardless of whether the government offered incentives, “then definitely TIFs are taking money away from schools.” But if a development was unlikely to move forward without those incentives, “schools wouldn’t have this money anyways.”

Kearsley countered that if a project is valuable enough for the city, “it’s going to happen anyways.”

He added that while redevelopment or other community investment projects are typically planned by committee — and the school district has a seat at the table — he argued in this case, the district feels it does not have a say.

“Once they’re done,” Kearsley said of the area’s planned redevelopment, “that money will come to us, but that’s years and years and years down the road, so we can’t use that money to address today’s needs.”

Wilcox countered Thursday that the school district can create a participation agreement for revenue sharing with the redevelopment district, and that “anything they are worried about, they can agree to or not.”

Tax revenue could go toward teacher salaries, more

Utah Gov. Spencer Cox signed the redevelopment plan that could result in an MLB stadium into law this month. Legislators have touted it as vital to reviving the Fairpark area and its surrounding neighborhoods.

Rep. Sandra Hollins, D-Salt Lake City, told lawmakers in February that the investment is exciting for the city’s west side, regardless of whether a baseball team comes.

“We know this is going to be a good thing,” she said at the time. “This is going to have a major impact on an area that has been neglected. ... It is beyond Major League Baseball, which we absolutely welcome. This is about the economic impact and what it’s going to mean for the people I represent.”

A spokesperson for the Larry H. Miller Company, which has said it plans to invest $3.5 billion in the restoration district, told The Salt Lake Tribune that they are “incredibly excited” about the transformation the company plans to bring to the city’s west side.

“Part of the project will include residential [development] that we hope will continue to bring families back to an area that will have improved public safety and 365-day-a-year activation, where families can thrive, where they can work, where they can play, and hopefully, we can add more schools back to the west side,” the spokesperson, Amanda Covington, said.

She added that the bill “contemplates” an interlocal agreement with the school district, “and we’ve had a conversation with the school district, and we want to be at the table with them as we work through planning and establishing this [restoration] district.”

Kearsley said that while the district doesn’t know how much potential tax revenue could be delayed by the Fairpark redevelopment project, it is already missing out on an estimated $20 million a year on current redevelopment projects in the city that have been given similar tax incentives.

That amount of money could go toward hiring about 166 more teachers, when considering that an annual teacher salary, plus benefits, on average costs the district around $120,000, Kearsley said.

It could also go toward the district’s capital improvement projects — like repairing and remodeling buildings.

And property taxes, in combination with income taxes, are used to determine “weighted pupil units,” which is how the state decides how much money public schools need.

“Whether [tax increment financing] makes things worse, I don’t know. But it clearly wouldn’t make them better,” Kearsley said. “... Our financial situation will not improve because of it.”

Correction • March 28, 3:10 p.m.: The story has been updated to add context and correct that no property tax increment funds will go toward the development of a potential MLB stadium in the Fairpark restoration district. Instead, the funds could go toward the greater district’s redevelopment, excluding a possible stadium.