Rock Hill leverages tax district, utility funds to invest in development

adouglas@heraldonline.comSeptember 4, 2013 

About $2.6 million from Rock Hill’s utility account was used to help pay down the nearly $17 million in debt the city took on to establish its TechPark business center near York Technical College.

The City Council recently voted to dissolve the tax district that supported public investments at TechPark, saying the special district had served its purpose.

City finance officials say using the money from the utility account has not affected what Rock Hill customers pay for water, electricity and sewer service.

The utility account was leveraged to finance the creation of TechPark – as is the case for the majority of the city’s project debt – similar to co-signing for a loan.

Using the utility account as a secondary pledge for paying back loans is one way Rock Hill secures a better interest rate when it borrows money, said Anne Harty, chief financial officer for the city.

The co-signing custom is a standard practice, she said, and aids the city’s healthy credit rating.

Using Rock Hill’s utility money to pay down debt related to economic development has happened only once – in the case of TechPark – since the city began using special tax districts to spur growth.

Rock Hill has three other special tax districts: one for its downtown, one for its Riverwalk projects and one for its “Textile Corridor,” which supports redevelopment efforts such as Knowledge Park.

Created in 1988 for TechPark, the special district was the city’s second tax increment finance – or TIF – district.

A city can create special districts to redirect property tax money to pay down debt taken out for economic development purposes.

As long as the special districts are in place, local schools and the county government forego some property tax revenue from the specific area.

The city collects all of the incremental tax money from the designated area, meaning the schools and county government only receive tax money from property that existed before the special tax district was established.

When Rock Hill financed TechPark, it created the Manchester tax district, intending to repay the debt and related financing costs with property tax money from businesses in the new business park, located off Dave Lyle Boulevard.

City finance records from 1988 show that officials estimated that TechPark would bring in about $3.4 million annually in property tax.

Nearly 25 years ago when TechPark opened, about $8,000 from property taxes was divided annually among the school district, county and city of Rock Hill.

Now, because of the city’s investment, officials say the annual property tax collection totals more than $1 million.

Schools, county see tax boost

Although businesses have come to TechPark and only one prime commercial spot is undeveloped, the city needed the $2.6 million from the utility fund to satisfy its debt obligation and close out the special tax district.

The council’s vote to dissolve TechPark’s tax district paves the way for the Rock Hill school district to gain an additional $635,000 in property taxes.

In 1988, the business park’s immediate area was contributing about $3,000 a year to the school district through property taxes.

School board members have not yet designated a specific use for the extra money but may hear some recommendations from administrators, said Elaine Baker, district spokeswoman.

The board can decide to put the money away for savings, use it for capital projects or place it in the district’s general spending account, Baker said.

York County’s property tax coffers will see a boost, as well – about $177,000 annually.

County finance officials are reviewing whether the extra property tax money could be used this year to reduce the amount of reserve fund balance approved for operational use.

TechPark has created jobs in Rock Hill, attracted new businesses and spurred other growth along Dave Lyle Boulevard, Harty said.

And, by ending Tech Park’s tax district, she said, the school district and York County will see increased amounts of property taxes to use in their budgets which was not the case 25 years ago.

The property tax growth is a “nice return” in exchange for the city developing TechPark, Mayor Doug Echols said last month. And TechPark’s success is a “telling story” of the good work of special tax districts, he said.

City’s initial investment

Rock Hill purchased 250 acres for TechPark more than two decades ago, knowing that about 71 acres could not be used for economic development because some land was located in flood plains and some portions of it were needed for roads and other public uses.

The land, once owned by the Manchester Cotton Mill, may have had 40 homes that needed to be relocated after the purchase, old city records show.

At the time the city borrowed the money, officials committed to spending about $2.7 million of it on utility infrastructure in the park.

The $2.6 million eventually used from the utility fund covered the expense of utility projects in TechPark.

Another $2.12 million was budgeted for building roads, overhauling the landscape and installing a stormwater drainage system.

About $1.2 million was budgeted for “acquisition, relocation and demolition” and other administrative costs.

Property taxes from new development in Tech Park collected about $14 million over about 25 years.

By building its utility infrastructure, the city of Rock Hill added utility customers who located in TechPark and who pay into the same system as other commercial and residential customers, Harty said.

Without the city’s initial investment, she said, some of those businesses may not have opted to locate in the business park.

Rate increases

Although the special tax district’s property tax revenues fell about $2.6 million short to pay back the TechPark debt, city officials say the use of utility account money made sense to make up the difference because Rock Hill was investing in its water, electric and sewer system.

Normally, Harty said, the city would keep a tax district in place until property taxes brought in enough money to pay off the full amount of the debt.

In the case of TechPark, the city had struck a deal with the school district to dissolve the tax district when it created another special tax district for the Textile Corridor.

City officials expect that Rock Hill will see about $215,000 annually from property tax from businesses in TechPark. The money is not earmarked for anything specific and will go into the city’s general fund with other property tax money unless City Council members vote to change that.

The impact to Rock Hill’s budget of using money from the utility account was incremental, Harty said.

While the city’s electricity customers pay about 30 percent more for service now than they did 10 years ago, officials attribute the rising price to wholesale cost increases, not because of investments in projects such as TechPark.

Rock Hill’s power provider, the Piedmont Municipal Power Agency, has consistently raised its wholesale rates since the early 1990s. Over the past two decades, the city has absorbed more than $166 million in increases as it elected not to pass on, in full, the rate hikes to its customers until the early 2000s.

Earlier this year, the City Council unanimously approved a 6 percent electric rate increase, meaning that starting in July, the average Rock Hill customer paid about $6.59 more per month than in the first half of 2013 and the second half of 2012.

Other utility costs and property taxes in Rock Hill have remained steady. Over the past decade, property taxes have decreased by about 8 percent and sewer and water rates have increased on a limited basis to set aside money for improvement projects.

Anna Douglas •  803-329-4068

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