Town and school officials, who met for two hours Tuesday to discuss a plan to redevelop the town's Main Street neighborhood, remain polarized over the plan to fund the project.
But despite protests from school officials, redevelopment leaders said Wednesday they plan to move ahead with their proposal.
The Green Valley Redevelopment Committee, a 13-member group that has spent six months developing a comprehensive revitalization plan, wants to reshape Payson's Main Street district into a cultural showcase complete with gift shops, restaurants, green belts, historic buildings and movie theaters.
They want to create a triangular-shaped redevelopment district ranging from Frontier Street on the north, Oak and McLane streets on the west, to the Beeline Highway on the south and east.
"This area accounts for 5 percent of the town's total assessed value, but it's the cause of 47 percent of our police calls," Committee President Dick Wolfe told school officials and the Payson Town Council Tuesday. "Additionally, 159, or 47 percent of the houses in the area, are considered to be deteriorating."
Town and committee leaders want to use town money, grants and increment financing to provide housing grants, low-interest business loans and street and parking improvements to stimulate development in the area, which has stagnated for more than two decades.
School officials support the goals of the project, Payson School Superintendent Russ Kinzer told the Town Council Tuesday. The sticking point is the way redevelopment leaders want to fund the plan.
"We have always supported the project," he said, "but we have serious concerns about one of the proposed financing methods -- increment financing."
The state's increment financing law allows towns to raise money to help revitalize blighted areas by creating special districts that affect sales taxes or property taxes.
Town administrators want to do both, but it is the property tax proposal that has moved school officials to protest -- both locally and to the State Legislature.
Payson school administrators initiated a bill during this legislative session to repeal increment financing throughout Arizona. As of Wednesday, the bill, HB2026 was awaiting a hearing before the full Senate.
If the bill fails this session and the town enacts increment property tax financing, Kinzer said Tuesday, the Arizona Tax Research Association, which verified PUSD's research on increment financing, plans to sue the town and test the constitutionality of the law in court.
School officials contend that redevelopment leaders want to use increment property tax funding to finance the plan because it will allow them to raise taxes and skim money out of the school district's budget without a public vote.
School district budgets are set by the State Legislature and school officials depend on state aid and a local property-value formula to meet them.
Here's how school officials said increment property tax financing would affect the school district and property taxes:
- The town's redevelopment efforts would cause property values in the Main Street redevelopment district to increase. The state would use this added valuation to calculate how much money the school district should collect through property taxes and contribute to its budget, which is established by the legislature based on a standard student-population formula.
- But due to the redevelopment-district "freeze" on property-value tax collections on anything above the $3.995-million base, the school district would not actually collect extra property taxes from the added valuation, causing a spending-limit shortfall.
- By law, residents have to pay for any shortfalls in the school district's budget, so school district property taxes would automatically go up.
Arizona Tax Research Association President Kevin McCarthy explained it this way last week: "School districts don't control their spending levels, the State Legislature does. State law says school districts can spend their total budgets regardless of revenue, and the expectation is that they will spend their limits.
"The way school finance works, schools lose local funding (through increment financing) that the state won't offset. That leaves a hole in the district's budget that has to be made up through property taxes."
Town officials argue, however, that their projections indicate a minor school-district tax increase -- $1.91 the first year and $4.72 by the fifth year for the owner of a $100,000 home -- followed by a drop in property taxes.
"Nobody's saying this isn't going to impact the school district," Payson Chief Fiscal Officer Glenn Smith said, "but our calculations show it probably won't be a big impact. We need seed money to get this (Main Street redevelopment) project going and we're hoping (the school district) will invest with us."
School officials, however, said they put more stock in their own figures than those generated by the town, and they're not willing to gamble with school funding.
"Are we going to raise school taxes when the schools aren't going to get the revenue and the people won't even get to vote on it?" Payson School Board President Kristi Ford asked the council Tuesday. "...If this is a good project, then let it stand on its own merits."
When all was said and done, Kinzer said he thought school representatives had made an impact on the council.
Council Member Jack Monschein said during the meeting that he thinks "increment financing is just a facade to get around a vote of the people."
Council Member Hobby Herron said, "In principal, I'm against spending public money for private profit. This country has been built on the private-enterprise principle that if there's a need, industry will move in to fill it. I'm inclined to think that if there's a need down there, private development will take care of it."
Mayor Vern Stiffler said he thinks the redevelopment project is important for the community, but he would prefer to have the school district's blessing before enacting increment property tax funding.
"I have confidence in Mr. Wolfe and his committee that they will present us with a project that isn't going to hurt anyone," he said.
Council member Ken Murphy was enthusiastic about the redevelopment plan and unwilling to dismiss increment property-tax financing out of hand.
"Government has in essence caused that problem down there," he said. "When we relocated the highway (away from Main Street), we orphaned that area. We don't have any heart in this community, and I think that's what the idea of redevelopment is all about.
"If taxes go up $500, everybody's going to say 'That council, what a bunch of jerks.' But if it's just $5 a year for a beautiful redevelopment area, maybe they won't."
Council member Jim Spencer said after the meeting, "I'm totally behind the project. It will have tremendous economic benefits for the town, and it will give us back the heart and soul of Payson
"There's no easy fix. That's why nothing's been done for 20 years. We have to have the courage to make this work and I think we can do that without hurting our kids. It will take political will to make it happen, and I think the council has it."
Council member Barbara Brewer did not comment during the meeting and could not be reached for comment afterward.
The Green Valley Redevelopment Committee will hold its next meeting at 5:15 p.m., April 15 in the second-story exhibit hall of the Rim Country Museum near Green Valley Park. The public is invited.
"I see this as a golden opportunity -- maybe the only one we'll have -- to take this blighted area and make it economically viable and safe for everyone," Wolfe said during the council meeting. "We must not miss this opportunity. We must work in harmony, not in opposition, to make this thing work. I hope we can do that."