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P&Z chairman questions use of Dike's TIF money
By TOM BARTON, Courier Staff Writer
DIKE --- It's been nearly a decade since the city negotiated a tax incremental financing agreement with a local developer to build Fox Ridge subdivision.
Since then, the value of residential land within the city has more than tripled, from approximately $2 million in 1996, a year before the TIF district started, to $6.3 million in 2005. And its overall tax base has nearly doubled, according to Grundy County records.
Now, 10 years after the fact, one staunch critic has alarmed many by speaking out against the TIF district and calling it a misuse of public funds.
Dike Planning and Zoning Commission chairman Wayne Paige, a former mayor, said the city's agreement with Fox Ridge Development Co. is improper, and he's threatening to call for a state audit into the matter.
Under the TIF agreement, the city agreed to fully reimburse the housing developer for infrastructure costs up to an estimated $2.5 million, payable over 15 years. Money to repay those costs comes from the additional property taxes generated by the new homes.
But Paige said he and other older Dike residents wind up paying more in property taxes because the new addition has caused a ripple of increasing property values throughout the community.
"This is the most God-awful agreement I've seen," Paige said. "This is a one-sided contract. This program is not meant to enrich the developer, but be an aid to the community."
John McKinney, bonding attorney with Ahlers & Cooney of Des Moines, who drafted the agreement for the city, said the agreement is legal and is typical of most TIFs.
Most cities in Iowa use similar approaches and it's a fairly common practice, according to the Iowa League of Cities.
"It puts the risk on the developer and not the community. It encourages the developer to make the investment," said Susan Judkins, director of government affairs for the Iowa League of Cites.
City Attorney Gerald Monk said he is "amazed" by Paige's arguments.
"(The agreement) was done in a very careful, established procedure through public hearings and at the time there was no objection from the council or residents," Monk said. "Some of his allegations have been wildly in error."
Paige said he is unhappy with the city's agreement to accept promissory notes from the developer, Dennis Kruger of Kruger Seed Co., for low- to moderate-income (LMI) housing. The city is holding notes totaling $240,000.
"This appears to be a misuse of funds and a violation of state law," Paige said.
State law requires a percentage of the TIF funds from the project to be used to provide LMI housing. State law also allows for the use of proceeds from loans and any other "alternative sources legally available," including promissory notes, to meet the LMI requirement.
Other Dike residents said they've mostly been pleased with the project.
"One hundred percent may have been a lot to give back to the developer in costs, but he should get a fair return on his investment," said Roger Hickins, 66, of 931 Fox Ridge Road.
Residents and officials said the city had little choice.
"The city of Dike was suffering," said Joe Becker, Dike resident and manager of Iowa operations for Earth Tech. "The tax base was staying flat and this was really the only avenue the city had to grow that tax base.
Dike-New Hartford Community Schools have also been pleased with the growth the city has seen. Dike-New Hartford Superintendent Lindsey Beecher said it's been a "magnet."
Paige has contacted the State Auditor's office, but he has not filed a complaint.
Contact Tom Barton at (319) 291-1570 or newsroom@wcfcourier.com
Since then, the value of residential land within the city has more than tripled, from approximately $2 million in 1996, a year before the TIF district started, to $6.3 million in 2005. And its overall tax base has nearly doubled, according to Grundy County records.
Now, 10 years after the fact, one staunch critic has alarmed many by speaking out against the TIF district and calling it a misuse of public funds.
Dike Planning and Zoning Commission chairman Wayne Paige, a former mayor, said the city's agreement with Fox Ridge Development Co. is improper, and he's threatening to call for a state audit into the matter.
Under the TIF agreement, the city agreed to fully reimburse the housing developer for infrastructure costs up to an estimated $2.5 million, payable over 15 years. Money to repay those costs comes from the additional property taxes generated by the new homes.
But Paige said he and other older Dike residents wind up paying more in property taxes because the new addition has caused a ripple of increasing property values throughout the community.
"This is the most God-awful agreement I've seen," Paige said. "This is a one-sided contract. This program is not meant to enrich the developer, but be an aid to the community."
John McKinney, bonding attorney with Ahlers & Cooney of Des Moines, who drafted the agreement for the city, said the agreement is legal and is typical of most TIFs.
Most cities in Iowa use similar approaches and it's a fairly common practice, according to the Iowa League of Cities.
"It puts the risk on the developer and not the community. It encourages the developer to make the investment," said Susan Judkins, director of government affairs for the Iowa League of Cites.
City Attorney Gerald Monk said he is "amazed" by Paige's arguments.
"(The agreement) was done in a very careful, established procedure through public hearings and at the time there was no objection from the council or residents," Monk said. "Some of his allegations have been wildly in error."
Paige said he is unhappy with the city's agreement to accept promissory notes from the developer, Dennis Kruger of Kruger Seed Co., for low- to moderate-income (LMI) housing. The city is holding notes totaling $240,000.
"This appears to be a misuse of funds and a violation of state law," Paige said.
State law requires a percentage of the TIF funds from the project to be used to provide LMI housing. State law also allows for the use of proceeds from loans and any other "alternative sources legally available," including promissory notes, to meet the LMI requirement.
Other Dike residents said they've mostly been pleased with the project.
"One hundred percent may have been a lot to give back to the developer in costs, but he should get a fair return on his investment," said Roger Hickins, 66, of 931 Fox Ridge Road.
Residents and officials said the city had little choice.
"The city of Dike was suffering," said Joe Becker, Dike resident and manager of Iowa operations for Earth Tech. "The tax base was staying flat and this was really the only avenue the city had to grow that tax base.
Dike-New Hartford Community Schools have also been pleased with the growth the city has seen. Dike-New Hartford Superintendent Lindsey Beecher said it's been a "magnet."
Paige has contacted the State Auditor's office, but he has not filed a complaint.
Contact Tom Barton at (319) 291-1570 or newsroom@wcfcourier.com
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