Spring Hill Industrial Development Board FAQ
Tonight, the Board of Mayor and Alderman is considering an item on our agenda to approve the creation of an Industrial Development Board (IDB). I’ll explain what an IDB is later in this post, but an IDB will only solve a sliver of the larger problem that we have in Spring Hill. Our local business economy is grossly underdeveloped for a city the size of Spring Hill. We know that this is true because:
Spring Hill has a reputation as a “bedroom community” because a large portion of its residents drive north to areas like Franklin, Brentwood, and Nashville for employment even though we have a strong, well educated workforce.
Spring Hill has a lack of diversity in employment opportunities with jobs primarily focused on restaurant, retail and manufacturing.
Because of the lack of industry in Spring Hill, 86% of Spring Hill’s property tax income comes from residential property tax while only 14% of revenue comes from commercial property. That means that if we ever need to raise more revenue for things like roads, we as citizens will primarily bear that burden rather than having a strong local economy that balances out our contribution.
Just last week, the US Census Bureau released data from the 2020 Census that shows that Spring Hill eclipsed 50,000 residents. Based on the 2018 special census, Spring Hill has grown by almost 10,000 residents in just two years. Spring Hill is well past the point where we need to be focused on building rooftops- we need to be focused on two things simultaneously: solving the problems of our past by moving our infrastructure from deficient to robust and creating the opportunities of our future through developing a strong local economy. This post will focus on creating opportunities of our future but Spring Hill must do both things for us to reach our potential as a city.
Smart, strategic thinking about economic development is necessary for Smart Growth.
I was struck by a conversation that I had a few months ago with an Economic Development expert who said that based on property values and how quickly the residential market is moving, taking a laissez-faire, hands off approach to economic development will lead to more residential property being built with retail to support those residences. In the absence of a strategy for economic development, we will simply get more of the same that we’ve gotten over the past few decades. That’s gotten us to where we are today with a lot of opportunity but also a lot of issues to solve. We know that what got us to this point certainly will not get us to creating the kind of city that we want Spring Hill to become.
In the budget session in May and June, I proposed a plan to start the process of creating a Comprehensive Strategic Plan for Economic Development in Spring Hill. The plan was voted down by the board 3-5 in our June voting meeting. The lack of economic direction has been highlighted in the IDB discussions because it has made it blatantly obvious that we lack strategic direction in how we want to attract businesses to Spring Hill to both create strong, well paying jobs for our citizens but also generate revenue for our city that is reinvested into things like roads, parks, fire and police services and libraries.
To be fully transparent- I’m not advocating for my own agenda for economic development in Spring Hill. I certainly have thoughts on what I think is a wise path forward (which I will be sharing soon), but our BOMA needs to lead and create a process by which we gather the input of our stakeholders like our citizens, our business community through the Spring Hill Chamber of Commerce, Williamson Inc, and Maury Alliance, and our board on how we want Spring Hill to develop and what we want our city to look like in 20 or 30 years.
Even if you’re skeptical of one alderman stating that economic development is urgent, the Spring Hill Chamber of Commerce, a collection of over 400 business owners that serve Spring Hill, wrote a letter (seen at the link here) to the Board of Mayor and Alderman urging us to develop a comprehensive strategy for Economic Development in Spring Hill. The time is now and the need is urgent.
An IDB provides us a strong tool to bring jobs and businesses to Spring Hill.
An Industrial Development Board serves as a tool to be used to spur economic development in Spring Hill. An Industrial Development Board is a non-profit corporation that is able to acquire land, procure bonds and develop buildings and sites for economic development (here’s a link where you can learn more about IDBs). It is used as a tool to attract economic development projects to the city. For example, the GM site is actually owned by the Maury County Industrial Development Board. GM pays the Maury County IDB for use of the site. The reason this is done is because IDBs are able to obtain incentives that reduce the overall cost of a project. Those incentives typically come in two forms (descriptions drawn heavily from this article):
Revenue Bonds. The issuance of industrial development/revenue bonds- often of the tax exempt variety to make financing more attractive to the bond market.
Sale-leaseback structure. Under this framework, property or equipment is purchased by the IDB (using revenue bonds) with funds provided by the entity seeking the tax incentives. The IDB, as the owner of the property, leases the property back to the company at a rate sufficient to retire the debt. Since the non-profit IDB owns the property, the IDB owes no property tax on the project. Because of this, state law requires that sale-leaseback transactions involve a Payment-in-Lieu-of-Tax (PILOT) where the business using the property pays the city a fee in lieu of the property tax that would be generated by the project. Often, there is a break in the fee initially that escalates after a few years until the entity is paying 100% of the tax burden.
An IDB has its own board of directors made up of seven members that are appointed by the Board of Mayor and Alderman for six year terms. Per state law, board members must be taxpayers and eligible voters in Spring Hill to serve on the IDB Board. This board acts and makes decisions on behalf of the IDB. A couple other important things to note:
Most cities and counties have an IDB- this would be a step towards Spring Hill catching up to where most cities already are (including Mt Pleasant, Fairview, Columbia, Franklin, and other neighbors).
An IDB has no authority to spend taxpayer dollars on any project. Any project requiring a PILOT agreement must be approved by the Board of Mayor and Alderman before that project can move forward, which provides a check on non-elected individuals being able to choose how a project is funded using tax payer monies.
Most IDBs in Tennessee follow a process that has a great deal of public visibility and input into the process. For example, in Nashville, any project wanting IDB involvement must complete a detailed application that describes the project and the public benefits of the project (like jobs created, etc.) along with a non-refundable fee that is used to hire a financial analysis firm that evaluates the merits of the claims made by the entity requesting IDB involvement, which are submitted to the IDB and BOMA as public documents. I commit to ensure that Spring Hill follows this model.
As you can see- an IDB serves as a strong tool in our tool belt to be able to use to attract jobs and opportunities to Spring Hill that we might not otherwise be able to attract. Moreover, elected governmental officials remain involved in determining whether opportunities actually benefit the city by approving agreements that come through an IDB.
When can an IDB start acting?
The vote tonight would simply be the first step in implementing a functioning Industrial Development Board, which we have now been discussing for a month. If the Board approves the incorporation of an IDB, we would then move on to recruiting and evaluating board members for the IDB. This will be a lengthy, thoughtful process.
The IDB can not act until it has a board that is appointed and seated. Regardless of the vote tonight, we have a long road ahead of us in actually having a fully functional IDB. Moreover, the quality of the IDB board in large part determines the quality of the work that the IDB is able to perform on behalf of our city. In order for an IDB to be an effective tool for economic development in Spring Hill, we need to be focused on appointing the best board possible.
The Board of Mayor and Alderman owe it to the IDB board that we appoint to have a robust economic strategy for the IDB to pursue- these goals should be pursued in tandem with one another.
Why should I care about all of this?
How the Board of Mayor and Alderman pursues economic development in Spring Hill will affect every single citizen. Having more businesses in Spring Hill generates more tax dollars (through commercial property tax and increased sales tax revenue that businesses generate) that we are able to use to invest into our city for things like parks, roads, infrastructure, library, and police and fire services. It provides an alternative to having to rely on property tax revenue to fund additional services that our city needs to support the rooftops that are already here. Strategic economic development is ultimately a “Smart Growth” strategy that expands the resources that serve our citizens.
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