Monday, December 17, 2007
Opelika learns new ways to recruit industries
The Opelika City Council is educating themselves about new ways to entice industries to the area.
November 7, 2007
The Opelika City Council is educating themselves about new ways to entice industries to the area.
In a presentation to the Opelika City Council, Attorney Frank D. McPhillips of Maynard, Cooper and Gale PC talked about alternative economic development tools in luring new industry such as tax increment districts, improvement districts, cooperative districts and shared revenue arrangements.
When sharing revenue, McPhillips said there must be a cap.
“That’s what’s been done with the new phase IV addition to TigerTown,” McPhillips said. “There’s a $6 million cap payable over ever how many years it takes.”
Tuesday the council entertained first-reading of an ordinance authorizing a “project development agreement” between the City of Opelika and TigerTown LTD. The ordinance will be up for a second-reading at the council’s next meeting Nov. 20. The council could then vote the measure up or down.
If approved, a “validation order” would then be sent to the Circuit Court of Lee County, validating and confirming a “Limited Obligation Project Revenue Warrant,” which states that the City of Opelika would be indebted to TigerTown LTD for an amount not to exceed $6 million.
“We spent $10 million for TigerTown, which was our original investment,” Opelika Mayor Gary Fuller said. “We have reduced that amount over the past three years, but it is still a large sum when you add the interest to the principal. TigerTown tax revenue is not ‘clear profit’ for the city. Certainly it is a plus for us and has helped provide the funds to resurface many streets which is just one example of how the extra money, the amount over debt service, is being invested for the benefit of our citizens and visitors.”
Meanwhile, McPhillips said improvement districts serve as an alternative way of financing public infrastructure. He says Chapter 99A of Title II of Alabama Code 1975 authorizes Alabama cities to form special improvement districts where bonds are payable out of special property assessments levied on the owners of the land within the district based on the estimated increase in value of the land.
McPhillips said improvement districts are often important vehicles to facilitate the development of public infrastructure for new residential and mixed-use developments, like the new residential developments in Valley and Lanett built to accommodate incoming Kia workers.
In Chapter 99B of Title 11 of Alabama Code 1975, McPhillips said it authorizes Alabama cities to form cooperative districts that can issue bonds to finance improvements of “any” nature - not limited to public infrastructure. He said bonds are typically payable out of revenues from fees or charges for the use of financed improvements. This structure produces new sources of revenue without a general tax increase. He added that cooperative district bonds are not considered a city “debt;” examples being Bass Pro Shop in Prattville and the “Celebrate Alabama Project.“
Amendment No. 772 is what McPhillips called, “A new hammer in the economic development tool kit.” The amendment, which was adopted in late 2004, permits cities to incur debt for economic development purposes in a principal amount of 50 percent of assessed value of taxable property, which is a far cry from the 20 percent of the assessed value the city can incur under Section 225 of the Alabama Constitution.
“Opelika’s remaining debt margin under Section 225 is only $33.5 million but the debt limit under Amendment No. 772 is over $130 million,” McPhillips said. However, he says Amendment No. 772 is just “not clear enough” yet.
City Attorney Guy Gunter said McPhillips’ presentation was a way to inform the council of what the city can and can’t do when it comes to attracting new industry.
“You’ve got to be willing to re-invent yourself,” Gunter said.