The push to create residential tax increment financing districts in Portage kicked off Thursday with both the Redevelopment Commission and Plan Commission approving the necessary paperwork.
Next up is an Oct. 14 City Council meeting to do the same, followed by a Nov. 6 RDC meeting to finalize the deal.
The five subdivisions participating in the plan will bring a total of 1,206 homes to the city when the last lot is developed.
“Not to be too excited, but we invented something,” Mayor Austin Bonta said, with developers eager to deal with the city over the way the tax incentives are being structured.
Redevelopment Director Dan Botich said he has been contacted by Hobart, Michigan City and other communities interested in setting these up for new residential developments.
“In Portage, we think this is a responsible way to have public safety money coming in,” Bonta said.
For developers, the bonus is getting 75% of the revenue from bonds issued by the RDC, purchased by the developers, to repay the money borrowed to pay for infrastructure work. That saves the developers money, Bonta said.
For Portage, it’s a situation of “I’ve got a structured settlement, but I need cash now.” The city needs cash quickly to pay for public safety needs, including raises for police officers approved by the council earlier this year.
Bonta and Botich explained how it works. With a TIF district, the RDC captures the increase in property taxes brought in by developing the land and increasing its value. The developers have agreed to give the RDC an annual payment, over a limited number of years, as a cash advance on the money the RDC stands to gain once the subdivisions are completed.
The payments also would stop two years after the date the subdivision is expected to be completed. That’s a safeguard for developers in case the economy slows and the homes don’t sell as quickly as expected.
But developers could end the payments sooner if they are aggressive in selling lots and building homes. Once building permits have been issued for 80% of the lots in a subdivision, the developer can stop making the annual payments. By then, the city would be getting the same amount through the increased amount of taxes the homes are generating.
The first five subdivisions participating in the plan – Botich expects more developers will want this financing plan in the future – are Rivertrace, Providence at Farmington, Bauer Farm, Sandy Trail and Swanson Trails.
Together, they’ll bring the city 589 new single-family homes, 478 paired patio homes, 38 townhomes and 101 cottage homes, Botich said.
The annual payments will total about $622,000 a year for the first four years before dropping to $480,000 in the fourth year and $116,000 in the fifth year as subdivisions are completed and more homes are generating additional tax revenue.
Rivertrace is the smallest of the subdivisions, both in acreage and number of homes.
It’s nearly 33 acres south of Lute Road between Airport and Willowcreek roads. Olthoff Homes is building 90 cottage homes and 38 townhomes. That’s nearly $41 million in private investment coming to the city from the smallest of the five subdivisions.
Providence at Farmington, developed by Providence Real Estate, will include 128 single-family homes, 101 cottage homes and 80 duplexes on its 120 acres at the northwest corner of Airport Road and County Road 700 North. That’s $143.5 million in total private investment.
Bauer Farm, developed by Lotton Development, is nearly 53 acres on the city’s southwest side, south of County Road 700 N and east of County Road 700 W. It will bring 236 single-family homes. That’s an estimated $96.7 million in total private investment.
Sandy Trail, also developed by Lotton Development, is on nearly 53 acres south of U.S. 6 and west of Swanson Road. Lotton plans 308 paired patio homes. Estimated total private investment is $90.7 million.
Lotton drew attention earlier this year when investor Donald Trump Jr. visited Portage City Hall to sit in on a conversation with city officials about Lotton’s plans in Portage.
Swanson Trails is more than 80 acres south of U.S. 6, west of Swanson Road. Lennar Homes plans 225 single-family homes, with a total private investment of $100 million to $110 million.
Together, these five subdivisions are expected to bring an estimated 3,062 new residents to Northwest Indiana’s third-largest city, behind Hammond and Gary.
They could also increase enrollment at Portage Township Schools by about 600 students, which would generate about $5.6 million to $5.7 million in new revenue over five years, Botich said. Indiana pays a set amount per student for instructional purposes. School districts use property taxes to pay for buildings and grounds.
The district has more than enough capacity to handle that many new students, Bonta said. Portage Township, like other districts, has seen enrollment decline along with the birth rate.
Bonta said a state law allowing residential TIF districts was passed in 2019 but didn’t get much traction. “Come 2023, very few communities anywhere in Indiana had taken advantage of this,” he said.
So in 2023, the state sweetened the pot for municipalities by allowing them to use the money for police and fire as well as infrastructure.
“Portage has never needed to incentivize a developer to come to Portage,” Bonta said, but the public safety money made it more attractive for city officials. “There are challenges with residential growth” because it means needing more police and firefighters, he said.
So last year, Bonta began working with Botich on this plan. SEA 1, enacted this year, “is a very dramatic shift in how cities are funded in Indiana,” Bonta said. It’s accelerating the shift toward income taxes from reliance on property taxes. But even then, municipalities could be losing money under the new state law.
These residential TIF districts are a workaround.
“Developers know that Portage is open for business,” Botich said, by offering tax incentives for residential developments as well as others.
Doug Ross is a freelance reporter for the Post-Tribune.
