The Cumberland County commissioners approved a resolution formally supporting Carlisle’s tax increment financing (TIF) plan, paving the way for the creation of a TIF zone at the former Masland industrial site.
The commissioners voted unanimously to support the plan, which requires consent of all three taxing entities that hold jurisdiction over the proposed redevelopment site, the other two being the Borough of Carlisle and the Carlisle Area School District.
Although the county is the largest of the three entities, by both geographic area and budget size, it holds the least stake in the TIF, Commissioner Jim Hertzler noted.
“Cumberland County’s vote is still the smallest of the three jurisdictions,” Hertzler said, noting that the proposed marginal gain in property tax revenue being sacrificed for the TIF will amount to $2.1 and $2.9 million each for the county and borough over the next 20 years.
CASD, given school districts’ inherent reliance on high property tax rates, will be impacted to the tune of $11.8 million over the period.
Carlisle’s school board voted last month, however, to give support to the TIF plan, reasoning that new development would be a positive, even if it came without any gain in property tax income for the first two decades.
A TIF, in essence, is an action whereby local governments sacrifice future unrestricted tax revenue gains on a real estate development in order to devote those incremental increases toward the infrastructure improvements necessary to support the development.
The TIF mechanism would take the marginal increase in tax value from the Masland site over the next 20 years, created by the increased assessed value of the new construction, and place it into a designated account. This account would be used to repay a bond, borrowed by the local government in order to help pay for infrastructure improvements needed to facilitate the development.
Under the Carlisle TIF plan, that bond is estimated at $12.9 million, assuming a favorable interest rate of around 3 percent for the 20-year payoff.
The Masland site, located between Carlisle Springs Road and Fairground Avenue on the north side of the borough, previously housed an automotive carpet factory that operated under the IAC and Lear flags at various points. The now vacant lot is owned by Carlisle Events, which intends to subdivide the property into several parcels containing a hotel, retail space, and housing.
However, the development – which officials hope will bring an economic stimulus to the surrounding area – will not be viable without significant road improvements to the neighborhood around the property, including a major reconfiguration of the intersection at Carlisle Springs Road and North Hanover Street and the extension of several cross streets, particularly B Street, over the site from east to west.
The TIF would help cover these costs, and would be overseen by the Cumberland County Industrial Development Authority. Other funding sources, including a $5 million federal transportation grant, are also in play.
The TIF zone itself, by Pennsylvania law, would need to be created by the Borough of Carlisle via ordinance of the borough council. A public hearing on the ordinance is schedule for Sept 20 at 7 p.m. at Borough Hall.
Carlisle resident Don Smith was the only citizen to raise questions to the commissioners Monday about the resolution. Smith noted that, although TIF plans are relatively new in Pennsylvania, they have been used for development in other states for many years, where pitfalls have arisen.
If the development fails to generate the expected tax value growth, Smith noted, the TIF may have to be extended beyond 20 years in order to pay off the bond.
Smith also questioned why local governments were putting their infrastructure efforts at the Carlisle Springs intersection, when Smith believed the primary effort should be made on the Route 74 corridor further west.
Attorney Jonathan Cox, the Industrial Development Authority’s bond counsel, said the TIF plan calculations were intentionally conservative. The Masland site is currently valued at $1.2 million as bare land, but will rise to an estimated $61.8 million in real estate assessment once all of Carlisle Events’ plans are built out. This growth would likely pay off the $12.9 million principal, plus interest, faster than 20 years.
“It’s a conservative plan in that the payoff of the bond could just as well come sooner and that money would go onto the tax rolls faster (than the 20-year timeline),” Cox said.