2007-10-10 Appropriation Committee Report

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APPROPRIATION COMMITTEE REPORT, OCTOBER 9, 2007 TO STM interval of FY 2009 through FY 2028. In each of these fiscal years, the property tax would be reduced by a percentage given in a table in the agreement applied to the incremental assessed value that is defined as the actual assessed value of the property less the current base value. For the parcel containing the yet -to- be constructed building at 400 Patriot Way, the initial base value would be the assessed value of the land in FY 2009, and the schedule would cover the 19 -year interval of FY 2010 through FY 2028. The agreement details certain conditions to the Town's granting of the tax exemption. These include commitments from Shire to: • create a minimum of 600 permanent full -time jobs • make a minimum of $300 million in capital improvements on the site • contribute $250,000 to the Cary Memorial Library Foundation • contribute $150,000 to the Town ( "for a use recommended by the Board of Selectmen ") • pay $2.6 million to the Town for infrastructure improvements (subject to the Town's obligation to seek State grants for such projects; Shire's $2.6 million obligation will be reduced by any amounts the Town receives from the State) Additionally, the agreement is conditioned on a contribution to the Town from Patriot Partners of $100,000. Appendix A details the expected pay -out schedule for the mitigation payments described above (which total $3.1 million). Our analysis is predicated on Shire developing all three of the 200, 300 and 400 parcels as outlined in the TIF agreements. We are seeking clarification that the $3.1 million mitigation payments must be paid in full even if Shire chooses to proceed with only the 200/300 parcels or only the 400 parcel. Analysis In our analysis, we examine the financial benefits to the town (from property taxes and the potential $3.1 million in mitigation payments) under various scenarios /assumptions to answer the question "Is the Town likely to be better off financially if it approves the TIF agreement or if it votes it down ?" For all scenarios, we compute FY2009 net present values assuming a 4% or 5% deflator consistent with the recent history of implicit price deflators for state and local government services. The scenarios, illustrated in detail in Appendix B, differ according to two main variables: • Time to build -out, and • Magnitude of tax revenues (tax revenues are a function of both assessed values and property tax rates). Since the parcels relevant to the TIF agreement are those at 200, 300, and 400 Patriot Way, these are the only parcels considered in this analysis. The parcels at 125 Spring St. and 500 Patriot Way are currently occupied (by Shire and CBSET, respectively) and are outside the scope of the TIF agreement. The scenarios can be described as follows: 1) TIF is approved, and Shire follows projected build -out. Four scenarios that each includes both tax revenues and the $3.1 million in mitigation payments stipulated in the TIF agreement: a) The tax revenue follows the model presented by the Town Manager and the Assistant Town Manager; Page 5 of 18