Mountain View Voice

News - March 5, 2010

What happens when tax district sunsets?

Council discusses effects on downtown after revitalization district expires in 2011

by Daniel DeBolt

The city's "downtown revitalization district," a special tax district created to give that neighborhood a boost, is set to expire in 2011, which means the city will lose millions per year in revenue designated for downtown improvements. On Tuesday, city officials held a study session to discuss how this will affect the downtown's future.

During the meeting, economic development director Ellis Berns gave some background on the tax district, explaining that Mountain View's is one of the first such districts in the state to expire, so there is little to learn from other cities' experience. He also said the city looked into extending the district, but concluded that it would be difficult, partly because the downtown is no longer blighted.

The tax district was started in 1969 to fund revitalization of what was then a downtown known for its empty lots and storefronts. Using the new income, "Basically the entire Castro Street was rebuilt," said city manager Kevin Duggan.

Illustrating just how far the area has come, the 16 blocks in the district — which is located between Mercy, Franklin, Evelyn and Hope streets — were valued at $21 million in 1969 ($122 million in today's dollars) but have since grown to be worth $418 million in 2009.

Tax revenue from the district, $4.7 million this year alone, has been used to attract downtown businesses, plant trees, acquire property for parking and numerous Castro Street improvements. About 20 percent goes to the city's affordable housing fund, which currently is paying for a 51-unit family housing project on Evelyn Avenue. It also paid for part of the city's new $18 million parking garage on Bryant and California streets.

Tax districts like this one siphon property taxes away from schools and other services — and when they finally sunset, those funds begin flowing back to local schools, and to the city's general fund. But although the downtown tax district is set to expire in 2011, it may not be until 2019 that local schools get their share of downtown property taxes.

That's because, after 2011, the city will continue to receive its "tax increment" from the district until $25 million in debt is paid off, which is expected no later than 2019.

Once the debt is paid, the Mountain View Whisman School District will receive 17.7 percent of the newly released property taxes. That would have amounted to $832,000 this year, according to a March 1 presentation by Craig Goldman, the school district's chief financial officer. Similarly, the city's general fund would have received $700,000 this year.

Local high schools, community colleges and the county will also begin to get a portion of downtown property tax revenues, once the debt is paid off.

On Tuesday, the council briefly considered how to spend the district's remaining funds before it expires. They brought up a longstanding proposal, using $1.5 to $2 million of the tax district's revenue, to subsidize a grocery store downtown. And city staffers proposed several studies be conducted with the funds, including one on the impacts of high speed rail downtown, one on downtown parking needs, and others.

Staffers also proposed that the city allow Castro Street businesses and property owners to apply for funds for building facade improvements, which council member Margaret Abe-Koga said can be an expensive city requirement on a new business.

Mayor Ronit Bryant said that a study on downtown high speed rail impacts should be a top priority. The city will only have 45 days to comment on the project's draft environmental impact report once it is released by the California High Speed Rail Authority, she said, and right-of-way maps which would show the impacts of running two additional tracks up downtown's Caltrain corridor may be released within the next month.

Council member Jac Siegel echoed the concerns of downtown businesses that the grade-separated crossing required for the high speed train at Castro could shave severe impacts on downtown, especially the historic 100 block.

Staff writer Kelsey Mesher contributed to this report.

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