New plan encourages growth in DaybreakMay 30, 2022 05:26PM ● By Collin Leonard
By Collin Leonard | [email protected]
South Jordan has approved and adopted a Community Reinvestment Project Area Plan as part of its strategy for growth in Daybreak. According to the general plan, using tax increment financing “will lead to significantly more capital investment and commercial and office development within the city than would otherwise occur.”
Daybreak, originally known as Sunrise, was a potential Superfund site for Rio Tinto. According to Brian Preece, Director of City Commerce, it was “their flagship model for how to revamp mining properties all over the world.” Though the vision for the planned community started with Rio Tinto, it is now being carried out by the Larry H. Miller group.
TIF is an umbrella term for a variety of methods a city can use to invest in projects up-front with minimal negative fiscal impact. The general principle is, a municipality will issue a bond backed by a portion of projected future taxes. In this case, the bond is estimated to 75%, and has a time period of 20 years.
South Jordan will stop increasing a percentage of the property tax for this zone, though development will significantly increase the value of the area. The assumption here is that the other taxable revenue from this development will make up for the revenue lost by this financing.
By 2054, the city predicts the annual revenues from this area to increase from $1 million to $32.2 million. The plan also forecasts that “the estimated uninflated Taxable Value will be $2.9 billion which compares to the 2021 Taxable Value of $91 million.” If realized, the city will be in no danger of defaulting on the issued TIF bonds.
All parties remain bullish about the investment. The city’s redevelopment agency believes the move “will attract private capital investment, contribute to the tax base and otherwise contribute to the economic vitality and prosperity of South Jordan.”
The danger in using TIFs lies in the uncertainty of future economic conditions. According to The World Bank organization, the TIF “is most appropriately used when land uses are up-zoned and when there is strong market demand.” These conditions appear to be met in South Jordan, though it is worth noting that the municipality bears the risk of repayment in a bond financing situation.
Trust is extremely important in a plan such as this. The master development agreement originally negotiated with Rio Tinto provides lots of flexibility to the developer. Preece believed the previous owners of the land, Minneapolis-based Värde Partners, “lost sight of what the vision was.” He explained that residential rarely pays for itself as a taxable entity.
South Jordan and LHM have had a very positive working relationship since the property was purchased six years ago. Though the city did not have a say in who would develop the land, Preece said “I’d like to think this is who we would have chosen; we couldn’t have done better.”
The LHM Group is also very positive about the partnership. Brad Holmes, the president of their real estate division, said South Jordan is “a wonderful city to work with. They're visionary, and they have a great team.” He believes the project could take up to 30 years, and will feature a “substantial amount of office and retail development, especially along the mountain corridor.”
During the presentation in April, the entire council agreed this plan will help achieve the vision of an urban center in South Jordan. LHM will be responsible for building the dream, creating a place where residents can “live, work, and play” without leaving the area.