The Provo School District decided Tuesday to join a public financing effort that would help the developers of a large project in downtown Provo.

On a 6-1 vote, school board members opted to participate in what's known as a tax increment financing arrangement, in which a portion of the property taxes on the project are rebated for a set number of years.

The project is guided by new redevelopment agency legislation that was adopted in 2006. What's being called for is a "financial center community development project area" on 1.4 acres on the east side of University Avenue at 200 North in downtown Provo.

That would allow public dollars to be used in the construction of an office and retail project that would encompass most of the block, along with a parking structure.

Provo city leaders are excited about the potential for more downtown development, but the developers say they need help to make the location work.

The value of the project stays the same -- about $37.2 million -- whether it's located in downtown Provo or in a suburban area. It's more expensive to build downtown, though, in part because of a parking structure that would be needed.

Construction costs downtown would be $38.1 million, or about $1 million more than the project's value, according to figures presented by Paul Glauser, director of Provo's Redevelopment Agency. Building in the suburbs would cost $34.5 million, leaving a potential profit for the developer of about $2.7 million.

If Provo city, Utah County, the Provo School District and the Central Utah Water Conservancy District agree to participate in the tax increment financing -- about $3.2 million in property taxes over 12 years -- the downtown location's profit potential improves to about $2.3 million.

"It puts it in the ballpark," Glauser said.

There's also a property tax benefit, he said. Without the development, Provo would collect about $8,300 a year in property taxes in the area. With the development, after the 12 years of reductions is over, the city would collect $105,000 a year in property tax revenue.

"I think it's very persuasive as to why we should do the project," Glauser said. But, he added, all the involved agencies need to be involved to make sure the public financing reaches $3.2 million: "It's an all or nothing thing."

A public hearing on the project has been scheduled at 7 p.m. Sept. 4 in the Provo council chamber, 351 W. Center St.

Impact of tax increment financing

Downtown Suburban site

Project value $37.2 million $37.2 million

Construction $38.1 million $34.5 million

Profit/(Loss) ($944,500) $2.7 million

Tax financing $3.2 million N/A

Profit w/tax financing

$2.3 million

Though the value of the project remains the same whether built in downtown Provo or in a suburban area, downtown construction costs are higher. The proposed tax increment financing -- a diversion of property tax revenues -- offsets those higher construction costs.

Source: Provo Redevolpment Agency. Some figures have been rounded up or down.

This story appeared in The Daily Herald on page D5.