A closer look at funding for the Canyon Centre
May 08, 2018 03:10PM
By Cassie Goff
The Canyon Centre will have at least two different restaurants with retail space. The project will be funded partly with tax increment financing. (Brian Berndt/Cottonwood Heights)
By Cassie Goff | [email protected]
The Canyon Centre, a development project between Wasatch Boulevard, Fort Union Boulevard and Racquet Club Drive (7323 S. Canyon Centre Pkwy.), is finally under construction after 10 years of planning.
When completed, this development will include a parking structure for business and public parking. The parking structure will have 287 parking stalls for public use, some being limited to nights, weekends and holidays. Additionally, the project includes a hotel with over 100 units, a 65,000-square-foot office building, retail space at least two restaurants, and living spaces of 112 rental apartments and 17 single-family dwellings. There will also be a one-acre park in the middle of the development. (For more information on the site plan, see the Canyon Centre story found in the March edition.
In 2011 (March 8), the Cottonwood Heights City Council, acting as the Community Development and Renewal Agency (CDRA), formed the Canyon Centre Community Development Area (CDA). With the formation of the CDA, Cottonwood Heights is allowed to dedicate a portion of the future increased property tax generated by the Canyon Centre project to the development of public amenities, including a park, parking improvements, street improvements and trails.
“We get a lot more public and economic benefit from just allowing it to develop traditionally without a CDA,” City Manager John Park said.
Many different entities are participating in the CDA, including Salt Lake County, Canyons School District, Cottonwood Heights Parks & Recreation Service Area, Cottonwood Heights City, Central Utah Water Conservancy District, South Salt Lake Valley Mosquito Abatement District and Salt Lake County Library. These entities consent with their participation to a portion of the property taxes generated by the project being used to fund some of the public improvements.
Coordinating with so many entities is one of the main reasons this project has taken a decade to plan. The documentation for this project has been complex, requiring years of drafting to ensure all elements of the development are addressed in an acceptable manner for all parties. Some of those documents include a Parking Easement Agreement, Master Parking Agreement, Office Parking Easement Agreement and other various inter-local agreements.
A portion of funding for this project is based on tax increment financing (TIF). TIF is a public financing tool widely used by local governments and municipalities to promote economic development and redevelopment. Tax increment dollars are property tax dollars received above and beyond an established baseline level of property taxes, typically the level of property taxes generated from the project area prior to creation of that area.
The first step in developing a TIF is to establish a project, or development, area. The CDRA created the project area that is entitled to receive all or a portion of the tax increment dollars generated from the project for a specified period of time. They use those dollars to incentivize development, which typically increases property values, and also the total amount of property tax revenues generated from that area.
The TIF budget for the Canyon Centre will draw on property tax increments. The property tax increment will begin to be generated in the tax year following the completion of construction and be paid to the development agency in the spring after collection.
Currently, the expected assessed value for the Canyon Centre is $53.6 million, based on the multiyear TIF. The budget for this TIF will have a 25-year duration, beginning with the first tax increment receipt. The collection of the increment money is triggered at the discretion of the development agency for when they intend to collect money from the increment. The original plans for this project were anticipating completion of construction by 2015 at the latest.
“Since we are already four years into the drafted collection period, we need to restart the trigger date,” said Councilmember Mike Shelton.
Salt Lake County has agreed to help monetize the expected tax increment with a loan to the CDRA of $6 million, which will be repaid by the tax increment over 20 years. In addition, Salt Lake County granted $1.9 million to the CDRA to help with the construction of the parking facility. By monetizing the tax increments, it allows for higher taxable value development, which in turn generates more taxes than would be generated by an alternative development plan not covered by a CDA. All taxing entities that receive property tax generated within the CDA will allow a portion of the incremental property tax dollars to be used by the CDRA for purposes of developing the public amenities previously mentioned.
Additional taxing entities will be contributing a percentage of their tax increment for differentiating amounts of time. Salt Lake County and the Salt Lake County Library will contribute 100 percent of their respective tax increment for 18 years. Cottonwood Heights Parks & Recreation Service Area, Central Wasatch Conservancy District and South Salt Lake Valley Mosquito Abatement District will contribute 75 percent of their respective tax increment for 25 years. The Canyons School District will contribute 100 percent of their respective tax increment over 20 years, but 30 percent of their increment will be remitted back to them each year by Cottonwood Heights City over those 20 years.
“The tax increment for this project is going to benefit the public with shared use of the parking structure for public parking and a one-acre park. Various committees and agencies have found that the need for parking near the mouths of the canyons is dire. The CDA project is one small step toward addressing the public parking shortage that now exists for those who recreate in the Canyons,” said former mayor Kelvyn Cullimore.
Funding for the parking structure is being provided primarily by a $6 million loan to the CDRA and a $1.9 million grant from Salt Lake County. The $6 million loan will be repaid from tax increment. In addition the parking structure, the parking committee will be considering parking fees intended to build a fund for doing maintenance and repairs to the structure.
The parking committee will be created to address concerns with the parking structure that will be used jointly by the public and the developer. It will be a five-member committee made up of one member appointed from a public entity, Cottonwood Heights City, the hotel unit and the office building and two additional members selected by the appointed members.
“The county assumes most of the risk here in the event there is insufficient tax increment to repay the $6 million loan. Neither the city nor the CDRA have any obligation to make the county whole on their loan. With that said, projections show there should be ample increment to service the loan,” Park said.
As for Cottonwood Heights, “Jason (Burningham, the city’s financial advisor) really feels comfortable that the structure of the CDA and associated documents shields the city from risk and liability as much as legally possible,” Park further explained.
“That’s a long time to turn dirt,” Councilmember Christine Mikell said after hearing about the duration of the planning procedures.
“After 10 years of legal structure, finances and negotiations, we are finally to a good point. We have attended over 100 meetings on this particular project,” developer Chris McCandless, managing member of Canyon Center Capital, LLC said. “It’s all the taxing entities. It’s a complicated project. It will be a great gathering place for the community as a whole. That’s why we stuck with it for 10 years.”
For further information, the site plan is referred to as CUP-13-011 CUP-14-009 in Cottonwood Heights Development Activity Records. The Canyon Centre is mixed-use development, which means it includes commercial and residential elements.