Concord expands a TIF district to lure Market Basket; how does that work?

  • A map shows the expansion of the Penacook TIF district. The current district is on the left, outlined in red; the expanded district includes the area covered with red cross-hatchings. City of Concord

  • Construction for the future Market Basket off of exit 17 near I-93 in Penacook has started with the site work around the area on Thursday, April 8, 2021. MELISSA CURRAN

  • Construction for the future Market Basket off of exit 17 near I-93 in Penacook has started with the site work around the area on Thursday, April 8, 2021. MELISSA CURRAN

  • Construction for the future Market Basket and Liquor and Wine Outlet off of exit 17 near I-93 in Penacook has started with the site work around the area on Thursday, April 8, 2021. MELISSA CURRAN

Monitor staff
Published: 4/18/2021 9:00:12 PM

The City Council’s decision Monday to expand an existing TIF District is the latest step in bringing a Market Basket to Penacook near Exit 17, but it raises a question that often comes up: What is a TIF District and why is Concord using it?

So while we wait for Arthur T. to show up and cut the ribbon of the new store, here is a basic TIF explainer with help from Matt Walsh, Director of Redevelopment for the city.

TIF stands for … ?

Tax Increment Financing. Unlike the graphics format known as GIF, there is no debate how the acronym is pronounced; it’s “tiff.”

TIFs have been legal in New Hampshire since 1979, thanks to RSA 162-K. Concord has had five TIF Districts, two of which have been paid off.

This district was created in 2010 to cover 47 acres around the former Allied Leather Tannery in Penacook. On Monday the council expanded it to 242 acres stretching north to the Canterbury line and Exit 17 of I-93.

And a TIF does what?

It’s basically a way to store extra property tax payments from development lured by building infrastructure such as roads, water lines or parks, so it can be used to pay off the debt taken on to build that infrastructure plus associated costs.

In this case, the TIF District involves turning the intersection of Whitney Road and Hoit Road, also known as State Route 4, into a roundabout as well as widening or improving associated roads, all to enable traffic to get to an expanded Concord Crossing development in Penacook.

Allowing more cars to safely go through that intersection has been part of the city’s capital improvement plan since 2004 and the state transportation plan almost as long, “but has never risen to the level that it actually gets funded,” said Walsh.

The proposed development, which could have a liquor store open next year and a long-sought grocery store open by early 2023, provided the spur. “But for the TIF you would never get to the Market Basket, the liquor store, and everything else that comes to the district over time,” Walsh said.

Why not just pay for it in the usual way?

Turning the intersection into a roundabout with associated improvements will cost approximately $4.78 million. That’s a lot to toss onto everybody’s taxes, even if spread out over a 20-year bond.

The goal of a TIF is to take extra taxes created by private improvement spurred by the TIF development and use it to pay off the debt, rather than taxes from everybody else.

It works like this: For a given property the current assessed value is calculated and property taxes on that value continues to go into city and school coffers as before.

Any increase in assessed value due to the development is also calculated, but property taxes associated with that extra value don’t go into the general fund. They are kept separate and used to pay off the bonds and operating costs for the extra development.

What are the figures in this case?

According to numbers crunched by the city staff, turning the intersection into a roundabout with associated improvements to Hoit Road and Whitney Roads leading into the new development will cost $4.78 million.

Of this total, the city’s share is $4.33 million, financed with $4.24 million in TIF bonds and $90,750 from impact fees associated with other recently completed developments in Penacook. The remaining $449,250 will be covered by Interchange Development LLC., and used to pay for those portions of the roadway improvements to be built by the city in Canterbury, since the TIF District ends at the town line.

Both the city and the developers can pull out of the deal if the actual cost exceeds their respective budgets. Bids are due on May 10.

Despite owning Hoit Road, the state is contributing nothing to its widening and other improvements, nor work required to straighten the Exit 17 northbound on-ramp. They will continue to plow the state road but the city will have to maintain the sidewalk, perform landscaping within the Hoit/Whitney roundabout, as well as other components of the roadway improvements, Walsh said. The estimated annual cost of this is $24,000.

Separately, Interchange Development will maintain landscaping in a smaller roundabout on Whitney Road at the entrance into its development, as well as some sidewalks.

The current assessed value of the parcel where the Market Basket and state liquor store will go is $2.72 million. The property currently pays $84,649 of property taxes annually, which will continue to flow to the city, Merrimack Valley School District, county and state.

Once the stores are built the assessed value of the property will increase to $12.145 million. The property taxes associated with that $9.43 million increase in value are estimated to be $293,500, which will be kept by the TIF District and used to pay for debt service and operating costs of the roadway improvements.

The $4.24 million in debt for the roadwork, probably split between 5-year and 20-year bonds, is estimated to cost $320,000 a year in debt payments, although until bonds are actually sold the figure isn’t certain. Including the $24,000 of operating costs, the total annual cost of the roadway improvements is around $345,000, which is more than the estimated taxes from the new development by about $50,000 a year.

That shortfall will be covered by money accumulated in the TIF District in past years.

“After debt service and operating costs, the Penacook TIF District has generated a small annual surplus for the past few years, which the city has been saving,” Walsh said. “At the end of the city’s current fiscal year, the TIF will have approximately $190,000 in the bank.”

This is an example of how TIF districts can spur development, because without these funds to cover the shortfall this project might not have been approved, but also one reason why they raise some people’s hackles. If not for the TIF District, that $190,000 would have been going into the city coffers all along; on the other hand, if not for the TIF District the assessed value being taxed might not have existed.

Are TIF districts eternal?

Under state law, once the debt is paid off and its purpose fulfilled, it is wound up. The life span depends in part on whether new tax-paying development is created, which is the goal. Walsh said this TIF “could be in existence until 2044, but new development could pay it off around 2037.”

(David Brooks can be reached at 369-3313 or or on Twitter @GraniteGeek.)

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