Pleasant Valley school officials are raising a red flag over Riverdale's plan to include the ALCOA plant in its first-ever Urban Renewal Area, the initial step in making the multi-million-dollar manufacturing facility eligible for Tax Increment Financing (TIF) rebates on future expansion and renovation projects.
Granting TIF incentives for future plant renovations could cost the district millions in school taxes, funneling those monies instead to either city coffers, back to the plant or into contractor/developer pockets.
In LeClaire, more than $1 million in school taxes are kept by the city and rebated to developers each year under TIF projects. The school district has objected to LeClaire's continued long-term use of TIF for residential and commercial developments, but the city has ignored its objections.
"ALCOA has the second largest amount of property tax valuations in the Pleasant Valley Community School District," Supt. Jim Spelhaug wrote in the letter to Riverdale officials last week objecting to creation of the Urban Renewal Area. "Therefore, ALCOA’s property taxes comprise a significant portion of the school district’s property tax revenue and overall revenue.<!--break-->
"It is our understanding that some city representatives believe that the school district is 'held harmless' by tax increment financing (TIF)," the letter, signed by the PV Board of Education, stated. "That belief is not accurate.
"While the school district will continue to receive property taxes on the base valuations included in the proposed urban renewal area, property taxes on the incremental valuations created in the proposed urban renewal area will be diverted from the school district, county and city to the developers," the letter to the Riverdale City Council said.
"Because of how the State Foundation formula works for school districts in Iowa (which determines how schools General Funds are funded), property taxpayers in all of the Pleasant Valley Community School District, including those not living in Riverdale, will have to pay more in property taxes than they would otherwise have to pay (a higher property tax levy rate), to make up for the property taxes from the increased valuations in the TIF area being diverted to the developers.
"As the proposal now stands. . . the Pleasant Valley Community School District objects to the creation of this urban renewal area," the school board letter concluded.
Under a TIF project, the firm building, expanding or renovating its property still must pay property taxes (school, city and county) on the total value of the property.
However, the "incremental" value – the difference between the old assessed valued before the construction project and the new assessed value after completion of the improvement – is rebated back to the city, which can keep the TIF revenue, or rebate the money to the developer or property owner.
The city, consequently, receives not only the the incremental taxes from the municipal tax levy, but also the incremental taxes from the school and county tax levies.
In the case of a TIF project in Riverdale, the city would get its property tax (currently $12.22 per $1,000 assessed value) on the project's "incremental" value, plus the school district's tax of $14.49 per $1,000 valuation on the incremental value, and Scott County's property tax of $6.13 per thousand assessed value on the incremental amount.
If ALCOA were to receive a TIF incentive for a plant expansion with an assessed value of $10 million, the city would receive $122,200 in incremental taxes annually, plus $144,900 in incremental taxes under the school levy and $61,300 in incremental taxes under the county levy. (The school district would receive a small amount of the incremental tax under the TIF to pay for its debt service and Physical Plant and Equipment Levy, and the state pays schools district $5.40 per thousand assessed valuation as "backfill" payment on TIF projects.)
Just two years ago, ALCOA completed a $300-million expansion the Riverdale facility to increase its ability to provide aluminum for cars and trucks.
TIF incentives on "economic development" projects are now limited to a 20-year life under current Iowa law, but can be granted for less than that duration. In Bettendorf, the city now limits TIF incentive deals to 10 years or less. Urban renewal areas founded on the finding of "blight" have no duration restrictions. Once the TIF period expires, the school district and county then receive the full amount of the taxes on the total property valuation.
In LeClaire, however, the TIF in place there was established prior to the term limitation rules and can be continued indefinitely. The city in its 2012-13 fiscal year received more than $3.5 million in TIF revenue, with more than half of that amount collected under the school tax levy.
Under current state law, the school districts and county have no vote whether a TIF incentive is approved by the city. Bettendorf has made a practice of "consulting" with school and county officials prior to taking action on TIF's.
Riverdale owes its founding to the construction of the ALCOA plant in the late 1940's.
Bettendorf contested the incorporation of Riverdale, claiming it was to avoid annexation and property taxes of Bettendorf. After a three-year court fight, the Iowa Supreme Court ruled in 1953 to allow Riverdale's incorporation. It now has a population of 400 and is surrounded by the City of Bettendorf.
A lingering reflection of the early turmoil over annexation and taxes is the name used yet today for the aluminum plant. Company brochures and signage refer to the facility as the ALCOA Davenport Works.
