Fact Check: Orem groups challenge CDA
Hans Andersen, of Orem, grabs a raspberry from Cheri White while collecting signatures for his petition in his Orem neighborhood on Oct. 10, 2014.
Hans Andersen, of Orem, watches as Kent Vorkink signs his petition while canvasing his Orem neighborhood on Friday, Oct. 10, 2014.
Constructions continues on new buildings at University Place in Orem, home of the University Mall, on Tuesday, Sept. 23, 2014. The Orem City Council met Tuesday night to discuss the planned Community Development Project Area that will see major development changes at University Place. SPENSER HEAPS, Daily Herald
OREM – If it’s unfeasible to build, don’t build it.
That is the mantra of Orem Councilman Hans Andersen when it comes to the proposed University Mall/University Place Commercial Development Area. He points to the various taxing entities such as the Alpine School District and its participation in the CDA.
If the district were to say it would not participate, then a good portion of the Woodbury Corporation’s University Place would be unfeasible. If it allows Woodbury to keep the $44 million it would otherwise pay in new property taxes, the company would invest $500 million and move forward for a full buildout of the 133 acres.
The district’s board of directors is expected to vote on the issue on Tuesday. At that time it will decide what its portion will be.
Before then, supporters of TransparencyOrem, a local group started by Andersen and Wayne Burr, will be going door-to-door seeking signatures on a petition calling for a referendum on the CDA. If they are successful in gleaning the 3,209 valid voter signatures, the city will either have to conduct a special election in June 2015 (at the cost of $35,000 to the city), or wait until the November 2015 elections.
Two years ago Andersen was able to garner nearly 8,000 signatures on a property tax referendum.
“All I want to do is let the people vote on it,” Andersen said. “Why can’t we let the people vote?”
Andersen and his group have passed out fliers, made automated phone calls and rallied listeners at Andersen’s and Burr’s Friday radio show to say that residents will be giving about $63 million to help Woodbury build its project.
In a mailer to residents, Woodbury said, “while some are circulating a petition to stop Orem from moving forward with this project, we believe you deserve to know the facts instead of being misled.”
However, Mayor Richard Brunst, the rest of the city council, and city leadership say its Andersen that is doing the misleading by saying $63 million will come out of resident’s pockets. They are asking residents to study the information and understand what the CDA is before they put their signature to paper.
That is as easy as going to the city’s website at www.orem.org and looking at the University Place CDA information.
“I’m not interested in innuendos or assumptions,” Brunst said. “Just facts.”
The fact is if Woodbury is allowed to participate in the CDA, there will be no new taxes or debt and no bonds. It is all on the backs of Woodbury to prove its project based on post-performance before they can receive the subsidy. It must then be used for infrastructure, roads, underground work, park land and parking.
Woodbury is even going beyond what is expected with its current tax bill. The mall has agreed to pay its full property tax base even after the portion of the Mervyn’s wing comes down. It will also continue to pay full franchise and sales tax throughout the CDA.
Woodbury says it is vested in the community, with the mall being its flagship project. That said, at least four other cities are courting Woodbury if the CDA falls through. Cities like Lehi have pulled more than 2,500 jobs out of Orem through CDAs. Brunst said any city would love to have a development like this in their city.
“We need a robust Orem,” said Councilwoman Margaret Black. “We’d be extremely unwise and irresponsible to not take advantage of this opportunity to invest in the future of Orem City.”
It was just more than 40 years ago the University Mall was turned down by Provo and was built in Orem. Since that time Provo has lost many businesses and is just now rebounding.
In the meantime, the University Parkway and all of the businesses along it have sprung up, as well as other businesses throughout the city and a university. The mall provides 22 percent of the city’s sales tax revenue. About 41 percent of the city’s sales tax comes from businesses along the Parkway.
Brunst points to that past and asks residents to consider the next 40 years and what could be if the CDA’s full value is realized.
Fact or Fiction
On the flier distributed with the petition from TransparencyOrem the group first looks at past issues.
— Andersen points to UTOPIA, Midtown Village and a previous mall subsidy luring Nordstrom to the mall to keep ZCMI in Orem. They were all unfeasible, Andersen claims.
“We want to fix things with tax dollars,” Andersen said. “Government goes where private enterprise will not go. If private enterprise says I will not do this without tax payers money, it’s unfeasible.”
Brunst is quick to point out that UTOPIA was a bond, Midtown Village was a special improvement district that is nearly paid off, and the earlier mall subsidy is totally then the CDA which was approved by Governor Gary Herbert and the Utah State Legislature and is in common use across the state.
— Andersen claims the subsidy would place the mall above the needs of school children.
Alpine School District has estimated that the project will not increase the number of school students. Therefore, all new revenue will supplement existing revenues to serve the same students. Property tax revenue for the next 40 years for the district with a $100 million Woodbury investment and no CDA is $75.4 million. Property Tax revenue for the next 40 years with a $500 million investment including the CDA is $129.4 million. That is a total of $53.9 million of lost revenue if the CDA doesn’t go through.
— Andersen claims that residents will pay an average of $4.53 a month for the next 20 years on the subsidy.
Brunst says this is completely untrue. There is no tax increase on residents or businesses. There is no tax mechanism for a business to pass its property tax bill to residents. The city would also have to pay infrastructure improvements of up to $9.3 million with the CDA.
— The net increase in revenue to the five taxing entities over the life of the incentive is approximately $35 million.
In fact, Orem would get $13.1 million; Alpine School District would see $13.2 million; Utah County would receive $7.8 million; Orem Metro Water District would see $31K; Central Utah Water Conservancy District would get $719K.
— Andersen said that Orem should not subsidize one business over another.
The city says to associate the incentive to a per business charge is misleading. There will be no new charge to any business and businesses all over the state are receiving incentives to grow or locate in Utah. Information by Lewis Young Robertson & Burningham says that for every two jobs created within the CDA, a third indirect job is anticipated to be created in Utah County.
“For every dollar created within the CDA, an additional $.46 of economic activity is anticipated to be created,” the analysis said. “When complete, the University Place CA is expected to create more than $280 million in direct economic activity and nearly $130 million in multiplied effect throughout Utah County each year, for a total of more than $410 million in direct and multiplied economic activity.”
What about the little guy
“The city should worry about being just and fair to the 2,533 businesses in the city,” Andersen said. “There should be a level playing field, no favorites.”
He points to subsidies for housing units, parking structures etc. “There are about 8,000 rental units in the city that are not getting subsidized. The mall gets an unfair advantage. And, any business would love to have a parking structure.”
Brunst said there are many incentives and tax credits in place for the “little guy” already. In fact a number of businesses, including Blend Tec, Jive, Oracle and others, are using state-approved incentives to help build their businesses.
There are tools for small business just like the CDA that can be used if the business meets the qualifications. Included in those programs are the following:
1. Economic Development Tax Increment Financing, a post-performance refundable tax credit.
2. Industrial Assistance Fund, a post-performance grant for the creation of high-paying jobs in the state.
3. Renewable Energy Development Incentive, a post-performance, refundable tax credit for up to 100 percent of new state tax revenues.
4. Recycling Zone. More than 20 Utah communities have been designated as Recycling Market Development Zones. It’s meant to encourage businesses to use recycled materials in their manufacturing processes and create new products for sale.
5. Research Tax Credits. Companies doing qualified research in Utah may be eligible for a non-refundable income tax credit.
6. Custom Fit Training. This program provides specialized training for companies to train their employees.
7. Sale Tax Exemption for Manufacturing Equipment.
8. Industrial Revenue Bonds. Used to promote industrial development and manufacturing facilities.
10. Rural Fast Track Program. A post-performance grant available to small companies in rural Utah.
11. Enterprise Zone Tax Credits. An area identified by local elected and economic development officials and designated by the state.
12. Motion Picture Incentive Fund. A post-performance rebate of production dollars spent in the state.
13. Tax Increment Financing. In part, all public entities entitled to property tax agree to rebate their increment back to the new development for a specified period of time to encourage development.
14. Revolving Loan Fund. Numerous RLF programs have been established in the state to promote economic development.
15. DWS Small Business Bridge Program. Provides a limited reimbursement opportunity for training costs from the creation of new jobs.
16. DWS Project Restart. This creates an opportunity for individuals with felony backgrounds to reclaim their potential while benefiting local business.
The list goes on. Either through the Department of Workforce Services, Governors Office On Economic Development, Tax Commission or other entities, programs like the CDA University Mall is seeking are in place for business growth and expansion in the state.