City of Midland TIRZ #1 has gotten a bit of ink and criticism which has stemmed from their filing of their annual report and the use of MDC funds to finance a utility infrastructure project in the heart of downtown.

As a bit of history, Midland created the TIRZ while in the throws of our depressed economy in 2001. Which is also around the time the MDC started picking up steam. I can't say I blame our City Fathers for creating the TIRZ. At the time, they were desperate for some kind of economic shot in the arm, and were willing to try any club in the bag, regardless of the past performance of other TIRZ's in communities our size. Truthfully, the concept of a TIRZ is appealing, because the TIRZ only goes if the property values in the TIRZ go up.

The flaw in the logic, is that rising valuations are supposed to be caused by the spending of private money on public projects, or the spending of public money on TIRZ specific public projects. Then the "increment tax collections" generated by the TIRZ would re-imburse the property owner for their public improvements or re-imburse the City or County for pumping extra money into the TIRZ infrastructure.

I don't think anyone figured out how that is supposed to work when valuations go up by virtue of rising oil prices combined with the removal of structures from the tax base by demolition or public purchase.

For those who don't know, Chatper 311 of the Tax Code, is the section of the Texas Statutes that govern Tax Increment Reinvestment Zones. Basically a TRIZ can pay for, or reimbuse an entity for Project Costs which are defined as follows:

(1) "Project costs" means the expenditures made or estimated to be made and monetary obligations incurred or estimated to be incurred by the municipality or county establishing a reinvestment zone that are listed in the project plan as costs of public works or public improvements in the zone, plus other costs incidental to those expenditures and obligations. "Project costs" include:

(A) capital costs, including the actual costs of the acquisition and construction of public works, public improvements, new buildings, structures, and fixtures; the actual costs of the acquisition, demolition, alteration, remodeling, repair, or reconstruction of existing buildings, structures, and fixtures; and the actual costs of the acquisition of land and equipment and the clearing and grading of land;

(B) financing costs, including all interest paid to holders of evidences of indebtedness or other obligations issued to pay for project costs and any premium paid over the principal
amount of the obligations because of the redemption of the obligations before maturity;

(C) real property assembly costs;

(D) professional service costs, including those incurred for architectural, planning, engineering, and legal advice and services;

(E) imputed administrative costs, including reasonable charges for the time spent by employees of the municipality or county in connection with the implementation of a
project plan;

(F) relocation costs;

(G) organizational costs, including the costs of conducting environmental impact studies or other studies, the cost of publicizing the creation of the zone, and the cost of implementing the project plan for the zone;

(H) interest before and during construction and for one year after completion of construction, whether or not capitalized;

(I) the cost of operating the reinvestment zone and project facilities;

(J) the amount of any contributions made by the municipality or county from general revenue for the implementation of the project plan; and

(K) payments made at the discretion of the governing body of the municipality or county that the governing body finds necessary or convenient to the creation of the zone or to
the implementation of the project plans for the zone.

When the TIRZ had no money, everybody could look at the plan and say "someday.". However now that the TIRZ has submitted its latest annual report (which isn't on their website) which reportedly shows a bank of around $785,000, one has to wonder what the TIRZ board is waiting to spend this money on?

To date, the TIRZ could have refunded to the City of Midland the cost of TIRZ Planning which was paid from a 1998 GP Certificate of Obligation, or the TIRZ could have refunded some dollars for City Staff salaries to administer the TIRZ, or the TIRZ could have participated in the City's rate modifications for the disposal costs of the demolition debris, or the cost of City installed infrastructure in Wall Street, but there is no evidence that they have in the Annual Audit or Current City Budget.

To be fair, since September of 2007, some of these things could have been done, but since the required annual report has not be posted on the TIRZ or City websites, we must rely on the media and snippets from the City Council agendas to flesh out the operation of the TIRZ and nothing in the audits or City Budget seem to indicate any expenditures of TIRZ funds.

Exit Question: What is the TIRZ waiting to fund, and when will the City of Midland general fund be "refunded" for planning and infrastructure projects already completed in the TIRZ?