City officials are considering a plan that would redirect property tax dollars toward mammoth road and infrastructure repairs sorely needed by residents.
The plan would not raise property taxes, but re-invest any increases due to valuation into a special Tax Increment Fund. That fund could be used only for street and road repairs and other infrastructure improvements in the zone where the property sits.
The so-called Tax Increment Reinvestment Zones (TIRZ) would have to be drawn up by members of the city council.
Alex Clamon, of CVC Homes, with nine home-building projects in the city, told the Herald-Press the plan could spark growth in Palestine and give residents housing they could afford.
Tax Increment Reinvestment Zones would lower housing costs because they would pay for infrastructure improvements – sewer, water lines, fire hydrants, road repairs – that would otherwise be tacked onto the cost of the house.
With Tax Increment Reinvestment Zones, Clamon said he would strongly consider building full housing projects in the city.
“Right now, when I build a home for $100,000, any cost of water, sewer, or road repair goes to the customer,” Clamon said. “The cost of the home goes up to $150,000. If these infrastructure issues were taken care of through TIRZ, the homeowner would pay the actual $100,000 cost of the home.”
Such plans, which include businesses, have worked to expand home building and tax bases in municipalities around the state, including Bryan and several Houston suburbs.
When a tax increment zone is formed, the valuation of properties in that area are recorded. If property values go up, any money over the original valuation would go into the TIRZ fund for infrastructure improvements in that zone.
For example: If a property valued at $500,000 pays 68 cents for every $1,000 of valuation, the total tax would be $340. If valuation on that property goes up to $700,000, the property tax at the same rate would be $476.
Under a TIRZ plan, the city's general fund would get only the original $340. The remaining $136 would be placed in a Tax Increment Fund.
Money from the TIF could be spent only in the zone it came from.
The plan could help the city, which faces a housing shortage, and tens of millions of dollars worth of infrastructure and road repair .
The initial process is slow-building, Mayor Steve Presley said. At the start, the city might have to pitch in, until the TIF grows. Once it has enough money to function as intended, however, it is a self-sustaining, and constantly growing source of infrastructure funds.
“If contractors and businesses build within these zones, then they are added to the next year's collection for the TIF,” Presley said. “More money comes in, and we are able to do more repairs than the year before. The next year, it's the same thing, and so on.”
Presley said city council members asked the Economic Development Corporation to look into such zones two years ago.
“That was under Tom Manskey's leadership,” Presley said. “He hired a firm to look into setting one up, but after he resigned in 2017, it was never brought back to council.”
Those interested in the Palestine homes Clamon has already built can contact Christie Scroggins at 903-948-7140, or Gina Carano at 903-373-1587.