Delaware House of Representatives on June 21 passed House Bill 211, making an amendment to the charter of the Town of Millville, to allow the town council to create special tax districts.
The council, at their June meeting, requested that such an amendment be introduced by state Rep. Gerald Hocker (R-38th) and by state Sen. George Howard Bunting Jr. (D-20th), so that the town could obtain the power to create such districts.
Already, Seaford, Millsboro and Georgetown have the ability to create special tax districts, in addition to the City of Wilmington, which first was granted the power. Laurel recently had its own charter change signed into law. And Bridgeville led the way with the movement in 2005, when it requested a similar charter change and became the first municipality in the state to employ the new power.
Bridgeville Mayor Joe Conoway was one of those who appeared before the Millville Town Council in recent months to discuss the benefits of special tax districts, for his town and potentially for Millville.
Special development districts, as they are most frequently called in Delaware law, or SDD’s, allow for the assessment of a special tax on properties within districts designated by those towns.
The concept is to finance infrastructure and other related costs not through direct municipal expenditures (via borrowing or dipping into savings) or out of the pockets of developers, but instead to ask property owners in the development district (usually a new development) to take on an additional annual burden so that money can be borrowed from investors to perform needed infrastructure upgrades at the start.
The Millville Group, developers of Millville By the Sea, has encouraged the town to pursue the special power — preferably in time for sales in the nearly 4,000-unit community to be completed with a special tax district in place.
Also speaking on behalf of the move was former Sussex County Administrator Robert L. Stickels, who now works in the private sector with an engineering firm connected to a number of projects in the area.
Developers see the benefit of SDD’s in that they do not have to lay out, up front, the entire cash cost of improvements such as roads, sewer or water, or, alternatively, to spread such improvements out over many years, as cash becomes available.
In the town’s favor, the creation of a SDD allows the town to borrow money for improvements to the district — or to townwide services impacted or newly required because of the new development — without the town itself being responsible for repaying the money. Instead, the property owners in the designated district have an added tax on their regular annual tax bill, through which the investors fronting the money for improvements are repaid.
Buyers in the development may pay the cost of the financing from investors, but they can also likely expect to see a more advanced level of infrastructure at settlement or when they move in, as well as some public services they might not ever have gotten otherwise.
Their purchase prices on their homes will likely also be less than they would have been had the developer been asked to pay for infrastructure costs up front and passed along that cost to the buyers. That could enable them to buy a larger home, or make the entire prospect potentially affordable for those on the cusp of being able to buy in the area.
Thus, the concept of the SDD has been presented as a win-win situation for everyone involved, including the large-scale investors who typically front the money.
In Bridgeville, Conoway told Millville Town Council members, SDD’s have not only allowed for the improvement of streets and other core infrastructure but also for a new library and other less critical needs. In Millville, such funding could help not only with roads and sewer, but with creation of a town police department to serve residents both current and future, as well as the services provided by the increasingly taxed Millville Volunteer Fire Company.
Millville council members have not yet committed to creating any districts, and indeed, not all of the other area municipalities that have obtained the power through a charter change have yet used it. Bridgeville stands out in that regard.
But if the state Senate passes the charter changed passed by the House on June 20, and it is signed into law by Gov. Ruth Ann Minner, the town could potentially soon create a financing mechanism by which its planned rapid growth could partly be financed.
Also included in the charter change is something that seemingly goes hand-in-hand with SDD’s: the power to institute municipal tax increment financing (TIF).
This element raised concerns for Millville Town Council Member Joan Bennett during the council’s latest discussion on and eventual vote to request the charter change, as it had largely been excluded from mention during previous presentations on the notion of SDD’s.
TIF banks on anticipated future increase in value of property — and resulting tax revenue increases for a municipality — to finance the projects, such as infrastructure improvements, that will result in that future increase in value for the properties.
TIF is designed to “capture” a portion of that future property tax revenue to be targeted at infrastructure projects. And it allows municipalities to fund these projects without a general property tax increase.
Most often, TIF is used to make redevelopment of blighted sections of a town or city more attractive or more workable for developers, but it is also used to help develop previously undeveloped land at the fringes of existing developed areas.
Municipal TIF has been included with the bulk of the charter changes already passed for the towns requesting the power to create SDD’s.