Friday, January 21, 2022

CRA – Fact v. Fiction



Guest Commentary.

If the State were to tell you that you could, for a limited number of years and with an approved plan, have a portion of your Ad Valorem taxes returned to you for the purposes of improving your own property, you would gladly accept that funding.  On a larger scale and in it’s most basic form, that is exactly what a Community Redevelopment Area (CRA) allows the City to do.

In it’s most simple form, it is a funding mechanism – no more, no less.  Simply, a CRA allows a community to utilize funds that would otherwise not be available, to accelerate the implementation of projects designed to improve infrastructure and safety within the proposed CRA District.  It brings the control back to the City with NO additional cost to the taxpayers.

Here are some real answers to some of the concerns I have been hearing in the community, in the press and in private community publications:

Myth: The CRA is a new concept, one that has not yet been tested.

Fact: CRA’s were adopted by Florida Statute over 40 years ago.  CRA’s have been implemented in 144 communities around Florida over the past 30 years.  Successful CRA’s are the product of careful scoping and planning of the projects.

Myth: Implementation of a CRA is a new idea on Marco Island.

Fact: The concept of a CRA on Marco Island was introduced almost 10 years ago.  The Planning Board did an analysis of three (3) areas – the current Esplanade, Veterans Park and the Elkcam Circle C-5 District.  The CRA, along with some other options, was presented to City Council at that time.  Due to changes that took place, the CRA became unnecessary.

Myth: By adopting a CRA, as determined by the Finding of Necessity, we are somehow maligning our community and minimizing the stature of Marco Island.

Fact: The Finding of Necessity is part of the process required by Florida Statute.  Simply, it says there is a need for improvement.  Yes, it uses words like “blight” to demonstrate that need, but we cannot and should not take it “personally”.  Blight, in this case is used simply to define an area that will benefit from the implementation of an alternate funding mechanism – a CRA.  It is not personal and should not be interpreted (and will not be by anyone reviewing the Finding) to be anything more than a technical definition.

Myth: By agreeing to adopt a CRA, the City and the taxpayers are bound to the process.

Fact: This is a complete misunderstanding of the process.  Once a Finding of Necessity has been completed, the next STEP in the process formulated by State Statute is to adopt the CRA.  All this means is that the City has chosen to go forward with 1) Creating a re-development plan and 2) Developing a financial analysis to accompany that plan.  If either the plan or the analysis does not make sense, the process can be stopped at that time.

Myth: The economy is bad, everyone is hurting, so this must be a terrible time to implement a CRA.

Fact: The complete opposite is true.  The CRA uses Tax Increment Financing (TIF) to fund the program.  In order to take full advantage of the TIF, it imperative that the baseline tax level be established at as low a level as possible.  We are at or near the “bottom” of the property market. It is unlikely that the Ad Valorem tax level will get much lower than it is now.  This provides the greatest opportunity for a positive return over the lifetime of the CRA.

Myth: The CRA allows the City to circumvent the Spending Cap.

Fact: The CRA uses the TIF to return funds to the City.  Here is how it works:

1) A baseline Ad Valorem tax level is established for each property within the proposed CRA District.

2) The Ad Valorem taxes generated by that base taxable value continue to go to the City and the County in their allocated share.  These funds are not affected during the life of the CRA.

3) This portion of the taxes continues to go into the City’s General Fund and continues to be subject to the Spending Cap.

4) The incremental taxes, generated over time by the increase in taxable values, both the parts that are generated for the City and those that are “returned” by the County, do not fall under the Sending Cap.

5) Neither the City nor the County “loses” the Ad Valorem taxes that are generated by the established baseline tax level.

Myth: Implementation of a CRA on Marco Island will cost the County $50,000,000 in Ad Valorem tax dollars over 40 years.

Fact: ABSOLUTE FICTION! The County’s calculation was done utilizing an old formula and, in addition, assumes incredibly ambitious growth during the life of the CRA.  The truth is, using the correct parameters for calculation for the money returned to the City over that 40 year period, we can anticipate, at best, a return of around $20,000,000..

Myth: By implementing a CRA, Marco Island would cripple the budget of the County for the next 40 years.

Fact: Incorrect.  Even if we assume the County’s original calculation was correct and if we assume that the County’s overall Ad Valorem tax dollars would not increase on an annual basis (both unlikely), the amount of relative dollars “taken” from the County are miniscule.  So, if we assume that the $311,721,400 currently received by the County in annual Ad Valorem taxes would not increase, that means, over the next 40 years, the County would generate $12,468,856,000 in Ad Valorem taxes.  So, if $50,000,000 were diverted over the next 40 years, that amounts to .4% of the Ad Valorem taxes generated.  If the more accurate figure of $20,000,000 is used, it represents .16% of the Ad Valorem taxes generated.  The assertion that a CRA on Marco will somehow cripple the County is just utterly and completely false, especially since the term and scope of the proposed CRA has not been finalized.  The County’s calculations are an unrealistic, worst-case scenario.

Myth: Creating a CRA, somehow, gives the City and/or the City Council some extraordinary level of control on planning or spending.

Fact: A CRA has to have a governing body.  The governing body of 85-90% of all CRA’s is the governing body of the community as a whole.  If the governing body is the City Council, how is that any different than it is now?  The City Council CURRENTLY has the power and discretion to control how money is spent to improve infrastructure and public safety in the community.  The CRA does not provide them with any new powers.  All the CRA does is give the City Council additional funds to implement and accelerate the process.

Myth: A CRA can be used to implement the power of Eminent Domain.

Fact: Simply and absolutely untrue.

Myth: The CRA will be used to “move off” unwanted commercial operations.

Fact: This is just a fear tactic. It has not been demonstrated, in any CRA District, that this has happened by design.  Some businesses have seen significant growth in their property values and have chosen to sell their property or their business because it made financial sense for them.

Myth: A CRA will result in an inordinate increase in taxes for those outside of the proposed district.

Fact: An analysis of any of the previous CRA Districts does not provide any proof that this happens.  Assume $20,000,000 is diverted from the City’s General Fund, over 40 years. That represents 3.6% of the annual Ad Valorem taxes over that same time period.  If the average resident pays $1,000 in Ad Valorem taxes to THE CITY (the overall Ad Valorem taxes have no bearing on this calculation), that means each residence may pay an additional $36 a year in taxes to the City over that same time frame. For those citizens that have been here for many years and have homesteaded their property, the number is likely to be significantly less – for some people it would be a little more.  Also, let’s remember that the money being diverted, although not going into the City’s General Fund, is being used on the Island.  As a result, monies from the General Fund, that might otherwise have to have been used in the CRA District are not and, therefore, can be used elsewhere on the Island.  The lack of need to use General Fund money in the proposed district will likely offset much of the diverted Ad Valorem tax dollars.

For all those Island organizations that have incessantly bemoaned the fact that Marco Island is a “donor community”, paying much more in taxes to the County than it should, you should be at  the front of the line supporting the implementation of the CRA.  The CRA is a tool that can be utilized to improve the infrastructure and safety of our Island at virtually NO expense to the taxpayer.  A CRA is a funding mechanism – no more and no less.

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