Developer, Danville agree to tax trade
DANVILLE – As contractors build the Social Security Administration’s new downtown site, the city has made an agreement to give back to the developer half of the property taxes collected, and in return, the developer will make some extensive exterior improvements, including sidewalks and drainage work.
According to the Tax Increment Financing agreement, which the city’s public services committee will consider Tuesday night, more than 50 percent of the property taxes collected over the next 10 years would be reimbursed to the developer, LGK Development in Boulder, Colo.
LGK purchased more than an acre on the northwest corner of Vermilion and Seminary streets for the approximately $1.1 million project, which includes building a stucco-type 7,500-square-foot facility and parking lot. LGK will lease the site to the federal government for its local Social Security office, which will move from its current location at 1001 E. Voorhees St. The initial lease, finalized in February, is for 10 years and construction should be finished by next summer.
The site falls within the city’s Midtown tax increment area, making it eligible for a redevelopment agreement with the city.
Chris Milliken, planning and zoning manager for the city, said property taxes on the vacant site are about $1,000 a year, and city officials estimate that taxes would increase to about $30,000 once the project is complete.
Based on that estimate, LGK would be reimbursed more than half of its property taxes, about $15,000, and the city would get the other half to make other improvements throughout the tax increment area.
Tax increment financing is a redevelopment tool that municipalities use to make improvements within a designated area to spur private development. The additional property taxes generated by a development project – the tax increment – are funneled into a special fund rather than being distributed to the various taxing bodies that normally receive property taxes.
That money can be used in various ways to support development and make improvements, but only within the tax increment area, which is designated by the municipality.
In this particular agreement, the tax increment is projected to be about $29,000 initially and the increment would be split between the city and the developer over the next 10 years.
The city has more than one tax increment district, but within the Midtown district this would be the third time the city has made an agreement on a development project. The previous two were Carle Clinic’s new site on Fairchild Street and the Marathon Mach 1 gas station and convenience store on South Gilbert Street.
John Heckler, public development director for the city, said some may question why the city would have a redevelopment agreement for a government project when governments don’t pay taxes. But the property and facility, he said, are owned by the private developer, who is leasing to the federal government and paying taxes, and the redevelopment agreement is with the developer.
Heckler added that city officials believe agreements like this and the previous two help development in the Midtown area.
“We think there will be other projects in the area to stimulate other development and investment,” he said.
If you go
The city’s public services committee meets at 6 p.m. Tuesday and will consider a redevelopment agreement with LGK Development, the Boulder, Colo., developer that’s building a new office at Seminary and Vermilion streets for the local Social Security offices. The committee meets at the municipal building, 17 W. Main St., Danville.