What's Next for Downtown, the DDA, and TIF?
Over the last 40 years, the City of Traverse City’s Downtown Development Authority (DDA) has been implementing a plan and has invested in numerous public infrastructure projects and services to protect, and improve, Traverse City’s downtown. City leaders established the Traverse City DDA in 1978 to combat a lack of private investment, job loss, empty storefronts, crumbling infrastructure, polluted properties, and underutilized parcels. Back then, there was an empty JC Penney store, gas stations at the corner of Front and Park streets, two iconic theaters with shuttered doors (City Opera House and the State Theater), and numerous vacant retail storefronts along Front Street. Fast forward to today: the DDA, teamed with a supportive City Commission who approves public infrastructure projects and the DDA’s annual budget, and other public, private, and nonprofit partners and volunteers, together, have flipped the script.
“TIF 97” is the name of the Plan that guided targeted public infrastructure improvements downtown for the past 30 years, using a financing tool called Tax Increment Financing (TIF). Thanks to TIF and other focused efforts, our downtown has rebounded. The State Theater and Opera House are back open, the gas stations are gone, locally-owned businesses and restaurants are rooted in, and people want to live downtown. These are all great, but fragile, accomplishments.
Downtown Traverse City and the Downtown Development Authority are at a critical juncture. Like many popular resort towns across the county, there is a shortage of affordable housing within the urban core. In addition, the significant increases in property value have forced many building owners to increase rents, which threatens to drive out small independent retailers. Although Traverse City weathered the COVID-19 pandemic fairly well, it is uncertain when (or to what degree) office workers will return. In addition, many downtown shops and restaurants are struggling to secure and retain workers. As a result, many businesses are operating with limited hours and service. The DDA’s recent public survey also identified climate action, including stormwater management and energy, as key priories. The DDA plays a role in creating solutions to these challenges, and TIF is an important tool to help address those needs.
In 2027, the TIF Plan that has guided past public investments downtown is set to expire. The DDA is moving forward to revise the Plan. As a community, we cannot afford to rest on the laurels of the past as we plan for the future.
How Does TIF Work?
The TIF tax is captured from Downtown property owners and only on the incremental increase in value of a property that’s located in the City-designated TIF district. For instance, if a property in the TIF district was worth $10,000 in 1997 and a developer later built on that same parcel with a new value of $50,000 the taxes on that $40,000 difference are “captured” and used to finance projects identified in the TIF Plan. By state statute, those captured taxes can then only be used for infrastructure improvements (e.g., snow-melted sidewalks, bridges, boardwalks, sidewalks, trails, parking decks, river restoration, parks, and attainable housing, etc) within the TIF district.
The growth is captured on local taxes from the City of Traverse City, the Recreational Authority, Northwestern Michigan College, Grand Traverse County, the Grand Traverse County Commission on Aging and Senior Center, the Traverse Area District Library, the Grand Traverse County Road Commission, Grand Traverse County Veterans, BATA, Grand Traverse County Animal Control, and the Grand Traverse County Conservation District. In practical terms, this is a way of sharing the cost of services within the City with those who live outside of the City. For the properties in the TIF district, the City contributes 53 cents on the dollar for TIF, with the remaining 47 cents coming from regional entities that benefit from having a strong and healthy downtown and are also sharing in covering the costs of those public infrastructure improvements. Without TIF, the costs for City infrastructure in the downtown TIF districts are the sole responsibility of City taxpayers.
Moving Downtown Forward
In 2022, the DDA Board adopted its Moving Downtown Forward plan. This plan outlines the strategic direction of the DDA. The plan’s Guiding Principles were informed by public engagement:
Design a great place for all ages and for future generations.
Protect and preserve small independent businesses.
Support job growth and varied career opportunities.
Champion the development of attainable and workforce housing.
Advance climate action, sustainability, renewable energy, energy efficiency, and resiliency.
Over the next 10 months, the DDA, through a public process, will develop a renewed TIF Plan for the next 30 years that aligns with the Guiding Principles. The Plan will be presented to the City Commission for approval. The DDA has been working with the City to advance planning, design, and engineering on two larger-scale public infrastructure projects that will be part of this renewed Plan:
- Lower Boardman/Oaway Riverwalk
- West End Parking Structure
The City will be releasing Requests for Proposals for design and engineering for both projects in mid-May. The City Commission will consider approving contracts with firms by July. Design, engineering, cost estimates, and impact assessments for the two projects are expected to be completed by December 2023.
Why Does the Lower Boardman/Ottaway River Project Matter?
For as long as Traverse City has existed the Boardman/Oaway River has been an integral part of the beauty and vitality of our Downtown. It is a fragile ecosystem, and it hasn’t always been stewarded well. The long-term health of our community requires us to think about the detrimental impact of both cars and stormwater pollutants to the economic and social and ecological vitality of our Downtown. The proposed Riverwalk project site is currently used as a parking area. There are erosion issues on the north side of the river. The stormwater management system on the south side of the river at this location has been identified as in need of updates and upgrades by the City. The redesigned space will relatively dramatically change the uses of this downtown public riverfront area by turning it from primarily a paved space for vehicle storage into a place for people. The design of the space will also address stormwater management and water quality protection needs through investments in green and grey infrastructure. Given the location and potential scope, the Riverwalk has the potential to be a truly transformational project for the river and the community. This will be a place where we can celebrate our outdoor identity as a community in our downtown. The Riverwalk will also connect to Front Street and the rest of downtown through the existing network of city streets and sidewalks and will connect with existing riverfront boardwalks. It will support efforts to create a great place for people of all ages downtown. This will help attract or keep more people, and more small, local merchants, downtown.
What Are the Goals for the West End Parking Structure?
Parking is a critical service that everyone seems to expect, but few are happy with. To some, it might seem the “easy” solution to a “parking problem” is to blacktop large portions of Downtown and make parking an anytime, anywhere, service provided by the city. The downside to this approach is that land is dedicated to parking instead of other, more optimized, uses; your taxes increase (since parking lots don’t generate property tax revenue) since the lowest property values Downtown are assigned to vacant land; new retail and residential units aren’t built; your taxes could increase (since parking lots don’t generate property tax revenue); and, most importantly, the character and vibrancy that Traverse City is noted for starts to unwind. The most cost-effective municipal approach to parking is stacking cars in strategic locations around town that are close to publicly used spaces, shopping, entertainment, recreation, and dining options. This frees up vacant land and surface parking lots to be developed and placed back on the tax rolls. City leaders recognized this back in 1997 when they included a parking deck on the west side of downtown in the TIF97 plan, and it still makes sense today. The complement to this approach is to develop a robust, clean, safe, and enjoyable public transit system that provides easy access to downtown amenities. In close collaboration with our local public transit authority, BATA, we have already begun discussions on a dedicated downtown public transit loop that will serve the needs of our downtown visitors, whether they’re local residents or visitors.
What Else May Be in the Renewed TIF Plan?
The DDA will also be reviewing and considering other public infrastructure projects and services for inclusion in the Plan. These may include proposed investments in City streets and sidewalks, snowmelt systems, transit, bike infrastructure, parks and public spaces, boardwalks, bridges, landscaping, stormwater infrastructure, services to support local independent businesses, composting, and more. The DDA is in the process of exploring its potential future role related to housing and held a recent public study session to learn more and discuss opinions.
What Can the DDA Do About Attainable Housing?
With housing demands overwhelming supply and staffing shortages for our downtown businesses at a crisis stage, the DDA needs to play a role in addressing this issue and has been supportive of the City Commission’s goals and actions in converting city-owned parking lots in the Downtown to residential and commercial use. Within the DDA’s statutory limitations, there is also an opportunity for the DDA to partner with private developers to create or help to finance attainable housing units. This is something the DDA board is going to be exploring in the coming months, and years. The DDA can’t solve the housing challenges alone, but certainly aims to be a strong partner. The DDA also has a responsibility to manage employee and customer access to downtown. We are aware that the challenges of housing and parking access are complex, and that solving one problem could create new ones.
How Will the DDA Address Climate Impacts and Climate Change?
The effects of climate change are real and need to be addressed as Downtown grows. The city commission has pledged, along with Traverse City Light and Power, to be carbon neutral by 2030. As a component unit of the City of Traverse City, the DDA agrees with the need to address, and tangibly impact, the effects of climate change. The revised TIF Plan will incorporate specific actions and investments to address these needs. Future public infrastructure projects will focus on and measure carbon footprints and environmental impacts. The DDA is working closely to formulate steps and realistic and useful ways of measuring impacts in coordination with Traverse City Light and Power and the City of Traverse City.
The DDA is also considering whether to keep or change its service area boundaries. A request has been made by property owners in the North Boardman Lake District along East Eighth Street to include that area in the DDA’s service area.
In sum, the DDA has been implementing a City Commission-approved TIF Plan for the past 30 years. That plan had a certain timing horizon, but it does not mean our work is done in our downtown.
The DDA board meets on the 3rd Wednesday of every month in the Chamber Room of the Governmental Center at 9:00 AM. We hope you engage and share your thoughts as the process to revise the TIF Plan moves forward. More information is also available on the DDA’s website at https://dda.downtowntc.com/.