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Panel backs effort to bring in more TIF?funds

August 2, 2011

SALEM - The Finance Committee of city council agreed Monday to fund a proposal aimed at bringing more businesses to the east and north ends of the city to help offset infrastructure costs in those areas.

The vote was 2-0, with committee member Councilman Dave Nestic abstaining since he's involved with the Salem Area Industrial Development Corporation and its offshoot, the Sustainable Opportunity Development Center.

SOD Center executive director Larry Kosiba explained the group's proposal at the Monday meeting and at a meeting of the Economic Development Committee of city council last month.

He asked for $24,500 to develop a plan addressing the Tax Increment Financing zones in the city, to target companies for each zone and market the areas and try to attract companies to locate in the zones, which could potentially bring more money into the city to pay for the infrastructure improvements in those areas.

During the meeting last month, Nestic explained that the city's debt payment for the street improvements in the Home Depot TIF was higher than the income from the tax payments through the TIF. Only Home Depot, Aaron's and Advanced Auto have TIF agreements requiring their property tax payments to go to the city instead of the school districts for a set period of time to pay back the infrastructure costs.

Nestic suggested the money to pay for the proposal be taken out of the interest income the city has been taking from the utility department, but fellow committee members Councilmen K. Bret Apple and Brian Whitehill agreed with the suggestion by city Auditor Betty Brothers to use other sources from the general fund.

She explained they overbudgeted for the property and vehicle insurance, with the cost lower than anticipated, leaving room to take at least $19,258 from that fund. The rest will come from the industrial park development fund.

Both Apple and Whitehill had concerns about tapping the interest money, since it was just supposed to be a temporary fix looked at on a yearly basis and now they're looking at a large loss in Local Government Funds.

Kosiba said the main emphasis of the proposal is to create jobs, noting "it's the one-on-one that gets the deal done."

The city will put in $24,500 for a one-year contract, with that funding matched at a minimum of 50 cents on the dollar with SAIDC private funding and funding sought from landowners in the TIF districts. Besides the Home Depot area, TIF districts are located along the Pershing Street extension and where the new Salem Chrysler-Jeep-Dodge is being built.

A volunteer planning group of city officials, community and business leaders will identify the market sectors and type of companies for each sector and make contact with at least 10 businesses/developers in an effort to get them to locate here, with Kosiba the main point of contact.

Kosiba said an effort would be made to get the new companies to sign TIF agreements so the majority of their property tax funds would go to the city to help repay the infrastructure costs.

In other business, the committee took no action on the proposed performance audit being sought to evaluate possible opportunities for saving money in city operations, pending getting answers to some questions regarding the city's liability for the bill.

Mate Rogonjic, assistant chief auditor with Auditor of State Dave Yost's office, tried to answer some of their questions during the meeting, but said he would get back to them on some of their questions regarding the payback terms.

The audit would cost an estimated $45,000 through the Leverage of Efficiency, Accountability and Performance program, which means the city would receive the money for the audit upfront, then repay the loan with any savings realized from any recommendations implemented as a result of the audit.

If no savings are found through the audit, the city will owe nothing.

For committee members, the major concern dealt with how much would have to be repaid if a recommendation can't be implemented due to contractual obligations, such as union contracts. Whitehill said the recommendation shouldn't count toward the savings, which the city would have to pay for.

Rogonjic said if cost is an issue, they can adjust the scope of the proposed audit. According to the proposal, the scope of the audit would include looking at: staffing levels in police, fire, streets, auditor's office and income tax departments; salaries and benefits, including reviews of select salary schedules and key provisions in the police, fire and AFSCME collective bargaining agreements and citywide medical and prescription insurance; and finances, covering reviews of revenues and expenses in the general fund, income tax costs and collection procedures and capital planning and funding sources.

"I want to make sure the loan agreement is pretty well-defined," Nestic said, questioning whether the payback period could be made over time because it might not be possible to get the projected savings in a one-year period.

Rogonjic also said most of the cost in government is people, so most of the savings would have to do with personnel. Nestic questioned how long the audit would take, noting the city's in open negotiations now with the unions and could use some of the information expected from the audit. Rogonjic estimated a seven-month window, but said the city officials would be made aware of the findings along the way and could be as involved as they want.

Apple also asked whether they would have to pay back the whole bill if they only implement part of the recommendations, such as eight of 10 recommendations. Rogonjic said that would depend on the money tied to the recommendations not implemented.

Once the state auditor's office answers the questions about the terms, the finance committee will meet again on whether to recommend acceptance of the proposal.

Mary Ann Greier can be reached at



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