City says annexation no problem

SOUTH BEND — In the long run, property taxes generated by the proposed Portage Prairie development would more than offset the city’s cost of providing services to the area, city officials said Monday.

The Board of Public Works adopted a fiscal plan, drawn up by the city’s community development division, concluding that the project ultimately will benefit the city budget — even if that’s not true in the first five years.

The developer, Holladay Properties, has asked the city to annex about 227 acres near Adams Road and the U.S. 31 bypass for the multi-use project, which could include restaurants, high-end shopping, warehouses and distribution, assisted living units and medical offices.

The Area Plan Commission has given a favorable recommendation. The South Bend Common Council will conduct a public hearing April 25 before voting on the matter May 9.

Adjacent German Township residents strongly oppose the project, saying it will ruin their rural quality of life and drive up their property taxes by grabbing such a large chunk of their tax base.

The community development staff determined the city has sufficient capacity to provide street maintenance, water and sewer service, and police and fire protection to the area. After the end of five years, the project would send about $1.5 million in property taxes to the city, compared to about $153,000 in costs, the plan found.

But Larry Magliozzi, assistant director of the community development division, noted it is too soon to accurately forecast the city’s revenues and expenses related to the annexation. That’s because Holladay and the city have yet to sit down and hash out details regarding the types of infrastructure improvements, such as new road work, within and outside the area, that would be needed.

“It’s not unusual at this stage of the game for the city and developer not to have spoken in detail,” Magliozzi said. “There’s been a lot of controversy. I think the developer wants to get through this (annexation) first, then talk about some details.”

If the annexation clears the council, the city wants to finance that work by establishing a tax increment financing district, or TIF, which captures property taxes generated by new development and uses that money to pay for infrastructure needed to accommodate it.

Magliozzi said the city’s costs could well exceed its property tax revenues after the first five years. But by 2019, he estimates the development will create $1.3 million a year in city property taxes.

A major question mark remaining is who will pay to build an interchange on the bypass at Adams Road, a necessity for the project, according to Holladay. Mayor Stephen Luecke has said it could cost $15 million.

Richard Sheehan, a project opponent who lives on nearby Mayflower Road, said Magliozzi’s analysis mistakenly assumes that all of the economic growth created by the project will be new to the city. On the contrary, he believes it will drive out some existing businesses, lessening the net increase in property tax dollars to city coffers.

Proponents of building new sports arenas often have made the same mistake, said Sheehan, a University of Notre Dame finance professor. He stated his concerns in a report he has presented to the city.

Magliozzi declined to comment because he had not read Sheehan’s report.

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