New Castle County Council is mulling over a financing proposal for a Claymont redevelopment project that would lead to an additional property tax for those who buy houses there.
The developers of the 1,226-unit, 66-acre Renaissance Village – being built on the former Brookview site in the heart of Claymont – are asking the county to sign off on the financing plan, which they say will help them cover many of the infrastructure expenses redevelopment projects entail.
The Commonwealth Group and Setting Properties, Wilmington-based developers who are partnering to build the mixed-use town center, are asking the county to take out an $18 million bond that can be used to cover many of the up-front costs associated with the project. The interest on the bond would be paid down by a percentage of the new property taxes the county would bring in from the rehabilitated site.
“This kind of redevelopment project is different than a ground-up development,” Brock Vinton, chief executive officer for Commonwealth, told the council’s Finance Committee Tuesday. “After a year-and-a-half of demolition, asbestos removal, the removal of roads…we’re now looking at 66-acres of prime land in the heard of Claymont that we hope will lead to reinvestment in the surrounding area.”
The proposed funding mechanism is called Tax Incremental Financing (TIF), and it’s a new tool made available to local governments through a state law passed earlier this year. Delaware was one of only two states – along with South Dakota – to not offer TIF prior to the legislative change.
Rep. Greg Lavelle (R-Sharpley), who led the push for TIF in the General Assembly, said it is a financing strategy that made perfect sense for projects like Renaissance Village.
“As a government, we provide lots of subsidies or incentives for all types of things,” he said. “Here we have a project where we’re simply capitalizing on a growing tax base. The county continues to get every dollar it would have earned before the project, but the new revenue will be split, with a portion going to pay off the bond.”
The Brookview site and its 633 rental units created only $34,000 in annual property tax revenue for the county. The developers paid $32 million to purchase the site in 2005 and Vinton said he’s sure Renaissance Village’s annual tax revenue will shatter Brookview’s. With a variety of dwelling types selling between $190,000 and $350,000, he estimates the site will yield $1.3 million in annual tax revenue by 2036.
Councilman John Cartier (D-Penny Hill), whose district includes Renaissance Village, said using TIF to encourage redevelopment there made good sense for the county.
“When we were collecting $34,000 a year from Brookview, we were spending a lot more on public safety and code enforcement issues there,” he said. “This project is going to pay off for us, simply because we’re no longer going to expending all those resources. But it’s also going to pay off because it’s going to create a much more significant tax base for this county.”
If the funding plan is approved, Renaissance Village will be designated as a Special Development District, which will allow officials to levy a special property tax there.
William Rhodunda, the attorney for Commonwealth-Setting, estimated the average additional tax burden on each homeowner would be $700 annually for 30 years, which would go directly toward retiring the bond debt. They would also pay the normal school and New Castle County property tax rates.
“We don’t think there’s going to be any negative impact to marketing these units with the additional tax,” Rhodunda said. “The extra tax shouldn’t push anyone out of the market for these homes.”
While several council members have already indicated their support for granting TIF financing for the project, others still have questions.
“I feel like I'm in the master sales pitch today,” said Councilman Jea Street (D-Wilmington South). “I feel like I need to hear from the critics, from those who don't support this about what their reasons are.”
Nicole Majeski, chief of staff for County Executive Chris Coons, said the administration wanted to study the revenue projections provided by the developers before taking a position.
“We want to see this project succeed, but TIF is new territory for this county’s government and our finance and land use departments are reviewing these numbers,” she said.
