City plans to create Reinvestment Zone downtown



The work needed to turn downtown Liberty Hill into a lifestyle neighborhood, as the City envisions, could prove expensive. Designating a special tax district could help.

Last week, the City Council authorized staff and a financial advisor to begin planning for a Tax Increment Reinvestment Zone (TIRZ) inside the city limits.

“We know that there are some major expenses that need to be taken for our downtown to be successful, and the TIRZ is the most logical avenue for us to do that,” City Administrator Greg Boatright told The Independent.

Creating a TIRZ is a way for cities to secure an additional revenue stream for an area without raising taxes. Any value generated inside the district is kept inside the district, and reinvested for improvements there.

Chief among the City’s goals for downtown is to create more public parking.

“We want to move forward with that as quickly as possible,” Boatright said. “It’s needed now.”

Businesses interested in the downtown area have repeatedly brought the matter up to city staffers, he said.

The City hopes to partner with downtown businesses and landowners to create backside parking spaces.

Between the vacant lots and an alley, Boatright says those alone could “probably develop 20-25 spaces.”

Acquiring the property and building a lit and landscaped parking lot could cost anywhere from $300,000 and $400,000, he estimated.

Improvements would not be limited to parking. Boatright said another important development would be the creation of attainable housing downtown.

“The exciting thing about the TIRZ is that it gives you that steady stream of revenue you can budget, plan out, and really do things with,” he said. “Ten years from now the Council and city staff will be in a good position to really make a difference downtown, and to improve it on an ongoing basis.”

Drafting the TIRZ plan will be Boatright, city staffers, legal counsel, and city financial advisor Jim Sabonis, who gave an hour-long presentation at the last council meeting on the benefits of using TIRZ.

Sabonis, who works for securities firm First Southwest, provided the Council with a number of examples of Texas cities that have successfully used TIRZ districts to generate economic development.

Tax increment financing, as the mechanism behind TIRZ is called, has been used by Leander to spur development around its HEB on 183A. High-growth cities in the Dallas area, such as Irving and Grapevine, have similarly used TIRZ districts to revitalize their downtowns.

Sabonis also gave a detailed explanation over how tax increment financing typically works.

The designation would “freeze” the amount of property tax revenue that the given area contributes to the City’s General Fund. As property values naturally increase inside the district, the additional money garnered from property taxes goes into a separate fund. That fund can only be used to pay for improvements inside the district, which in turn raises property values there and generates more income for the separate fund the next year.

Unlike a Public Improvement District, also called a PID, a TIRZ is more flexible after it is created. The designated area can be expanded, and the time table for its expiration can be extended.

“It may take 3-5 years for it to start generating revenue, but at least we can get these projects started,” Boatright said.

Going forward, any TIRZ plan must pass through several more stages before final adoption.

Once a preliminary plan is settled, the Council must approve another resolution in support of it and decide who will sit on the district’s Board of Directors.

A public hearing on the creation of the TIRZ must be called, and notice about the public hearing must be published in the newspaper at least a week before it is set to occur.

The TIRZ must then be created by ordinance, and the final version of its project and financing plan has to be approved again by both the district’s board and by the Council.

This is the stage where other tax entities, such as the county, the school district or the emergency services district, could partner with the city.

Boatright says the county is likely the only entity the City will talk about a partnership with.

“It’s not any benefit to the school district,” he said, referring to state law regarding school finance.

Once in its final form, the project and financing plan has to be approved again by the zone’s appointed board, and then again by the Council.

The TIRZ will terminate on the date specified in the ordinance or when all project costs are paid. During this time, the Council can amend the TIRZ to increase or reduce the area of the TIRZ or add or modify projects.

Going forward, Boatright said the district to be created downtown would likely not be the last.

“This will probably be the first of many,” he said.