The $60 Million Question

At the May 9th Gig Harbor City Council meeting, we passed an ordinance creating a Hospital Benefit Zone tax credit, the final step to receipt of $60 million over the next 30 years in $2 million installments. While a huge step for the infrastructure needs of the northern half of the city, it does create some complicated issues to sort through.

Over the next couple of weeks I'll try to explain some of these issues and my own thoughts on how to move forward.

History behind the HBZ

At the end of 2005 and beginning of 2006, the City faced a serious crisis which I've written about previously. We had recently discovered some future traffic problems in the Burnham/Borgen interchange with Highway 16. To make matters worse, the land use changes needed to support the proposed St. Anthony's hospital required that we come up with the solution prior to approval. At the time, the fix looked to be $100 million replacement of the interchange which was on no state or local improvement list.

In short, we were stuck.

I proposed a hail mary to Sen. Derek Kilmer, then a freshman in the State House of Representatives. If we could use a form of Tax Increment Financing (TIF), the already in progress retail development in the area could provide us with enough revenue to move the project forward. Unfortunately it didn't look promising since the Legislature, particularly leaders in the House, were hostile to this sort of mechanism despite its use in virtually every other state.

However, it passed, thanks in no small part to some very hard work by Sen. Kilmer and then Rep. Lantz. In combination with recently completed short term improvements funded by the hospital, local developers, and a state economic development grant, St. Anthony's is now built.

How it works

In essence the idea is this, the City passes a new sales tax for the HBZ which is then credited dollar for dollar against the state's collections. The process is seamless since all sales tax is collected by the state so merchants and consumers won't notice a thing. Those funds can then be spent on approved projects within the zone like roads, water, sewer and even parks.

Since the original bill passed a number of modifications have been made to the bill to make it more workable for the City. Initially it anticipated a large bond based on expected revenue, however, thanks to the skittishness of the municipal bond market and unique nature of the bill, that won't work. As a result, we'll now receive the funds in a maximum of $2 million in installments.

In addition, this last session we were able to amend it to allow previously constructed projects in the zone to count as our local match. Construction of the new wastewater treatment facility, as an example, will therefore count towards years of match.

Perhaps even more importantly, we were also successful in amending it to allow unspent HBZ revenue to be carried forward. Whatever we don't use of the $2 million each year, is available later.

Without these two amendments the City would have been out millions of dollars and I can't say enough how important Sen. Kilmer's efforts were to this cause.

You can find a more detailed explanation of the HBZ here.

What should we spend it on?

This is where we get to the fundamental issue at hand. As the Peninsula Gateway has noted, "Found money" can result in a lot of outstretched hands with all sorts of groups and causes coming forward to share in the bounty. However, we have to acknowledge that there are some ideas that are worthier than others, the trick is figuring out a logical approach to sort through them knowing we can't meet all the wants and needs.

As a result we've created a matrix for the Council to score each proposal. Each project will be ranked on the criteria it meets to determine which ones get funded. Considerations to be made include:

• Meeting the intent of our Comprehensive Plan
• Fitting the spirit of the HBZ
• Urgency
• Value of project compared to cost
• Economic Development - Increase tax revenue
• Leveraging other grants or brings direct revenue to City
• Maintains or replaces existing infrastructure
• Increases infrastructure capacity

You can see the matrix with its comprehensive list of projects here.

My Approach

In terms of general prioritization I think it's important to keep in mind the original purpose of the bill. Traffic. It will take years to acquire the right-of-way, design and permit the Harbor Hill extension, but the traffic it keeps away from the interchange is critical to its continued function.

The other goal of the HBZ is to support economic development. Bringing family wage jobs to the peninsulas is critical to our long term economic viability. The Mayor has proposed the construction of a sewer lift station on Bujacich which will enable the development of our Employment District on the west side of Hwy 16 between the womens prison and Boys and Girls Club. Normally I'd be 100% opposed to using funds for private developers, but the cost is so high that no developer is able to make the improvements leaving ready to go projects sitting idle.

It's also important that we set aside some money each year for road maintenance. Although it's hard to tell, once past 7-8 years without chipsealing or some other form of life extension, the cost of preserving roads skyrockets, eventually resulting in costly replacement. It truly is a matter of spending a $1 today to save $10 tomorrow, but the financial crisis has made it impossible to keep up with. Setting aside an amount each year for maintenance will actually save money in the long run.

In Part 2 of this series, I'll get into more detail on the various projects and where I would rank them.

Follow me on Twitter or visit my blog www.derekmyoung.com.