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Dover officials are considering a TIF district to incentivize development in the future - with downtown Dover potentially one of its main targets.| DBT PHOTO BY KATIE TABELING[/caption]
DOVER — Dover officials are working on new legislation that would give the city and potential developers a major tool that could incentivize a new future for its downtown district.
The Dover City Council is set to vote on an ordinance that would enable the city to create tax increment financing (TIF) districts on Monday, Dec. 12. If approved, city officials already have a potential use in mind: redevelopment for its downtown.
Mosaic Development Partners, a Philadelphia development firm, has been drafting a 2030 master plan for the Downtown Dover Partnership all year. As many city and business leaders await the final map of the downtown’s future, Mosaic Chief Operating Officer Leslie Smallwood-Lewis advocated for TIFs as a way to incentivize redevelopment for the city in October.
“In this particular town, we see it as a retail destination and supporting additional restaurants. But for the TIF district infrastructure, the buildings would not be able to draw the level of density you’re looking to bring in Dover … a great portion of development would not be attained, as well as the business use that would generate more jobs,” Smallwood-Lewis told the council on Oct. 11. “That’s the kind of analysis that Dover needs to do for the downtown Dover district.”
The DDP contracted with Mosaic last year in part because of its history of investing in redevelopment projects, particularly in distressed areas of Pennsylvania.
“Mosaic has been exposed to TIF in their past work, and when they spoke with us about potential funding tools for redevelopment, this was high on the list,” City Manager Dave Hugg told the Delaware Business Times. “This is more intended for the Mosaics of the world, who are looking for ways to finance parking garages, hotels and the like.”
TIF districts capture increases in property taxes and other taxes spurred by new development to pay for that development. These districts are approved by city officials, once a project and geographic parameters have been determined.
When a TIF district is created, property taxes are frozen at that time, and any increases to the property tax are sent to a special fund. The municipality would continue to collect the taxes at the amount it was frozen at when the TIF began, while any additional tax revenue would go into the special fund.
That special fund is restricted to use of improvements within the TIF district. Alternatively, the Delaware law allows these projects to also be financed through bonds.
This funding mechanism is not only geared for redevelopment. It can also be generally used for public infrastructure, planning studies, surveys, property acquisition and rehabilitation and more.
TIFs are popular in the Midwest, with states like Illinois, Ohio and Wisconsin each having around 1,200 districts, according to the Lincoln Institute of Land Policy. Delaware has not used TIFs as frequently, and a 2002 state law enables municipalities to use them, as well as setting a cap for 30 years.
Dover itself was exploring TIF districts for a power center project near Bay Road and the Route 1 interchange. But by the time Dover had gone through the General Assembly to change its charter to enable it to do so, the retail corridor took a turn for the worse, Hugg said.
The resolution drafted by the city in 2017 for that project stipulated that the TIF would capture toll revenues by the nearby toll pledged by the Department of Transportation, property taxes in Kent County as well as the Capital School District and Polytech School District.
The ordinance before the Dover City Council this month would essentially solidify its power to establish a TIF district, as well as issuing bonds to fund it. If a TIF district is proposed, the council would have to pass another measure to outline the geographic boundaries of it, as well as issue a report of the assessment of property values within it.
“I would be very surprised if we got a lot of action out of this,” Hugg said. “Delaware property taxes are not so high that in a TIF, there wouldn’t be a wide delta of conditional value and developer costs.”
If Mosaic Development Partners does move forward with requesting a TIF District for downtown Dover, it is likely an measure will come before the city council in the spring, the city manager said. Mosaic is still working on the final draft of the master plan, which could serve as the hard proposal for the TIF district.
In 2018, properties in the Downtown Development District — which encompasses downtown Dover — and some surrounding properties were valued at least $42.5 million and paid roughly $180,300 in city property taxes.
