For the last eight years, property tax dollars from two Fulton properties meant to go toward repaying a tax increment financing (TIF) have wound up in the wrong place.
That's according to Callaway County Commissioner Gary Jungermann, whose office has been working to help untangle the financial confusion. The issue was uncovered this year by the county assessor's office.
"We're trying to get it straightened out," Jungermann said.
Several public taxing entities - including the Fulton school district and the library - are now required by statute to repay the last three years of TIF #3 dollars mistakenly disbursed to them. The amount to be repaid totals about $95,000, Jungermann said.
What's TIF #3?
This TIF was established in 2006 to fund development on the south end of Business 54, including the addition of a turning lane, other infrastructure improvements and "approved eligible developer expenditures," according to Fulton Chief Financial Officer Kathy Holschlag.
The TIF works by using future property tax and half of sales tax revenue from a particular area to fund developments. The initial Retail Project Area - the area from which tax revenue is dedicated toward the TIF - was expanded in around 2009.
Jungermann said this particular TIF is unusual in that only some buildings inside the RPA are included. For example, Fulton Ford is not included, while Orscheln Farm & Home is. He was unsure what thought process went into choosing which were included because those decisions were made long before his time and not by the county.
Holschlag said the original TIF bond issuance was $8.77 million. About $6.47 million of that debt has not yet been retired. The TIF expires sometime around 2030, Jungermann said.
"The annual debt service payment increases each year," Holschlag said.
Disbursement error
In 2010, someone made a mistake.
Instead of going toward the TIF, tax revenue from Orscheln and what was then the Saddle Saloon were disbursed like all the other taxes: to the school district, county, library and so on.
"The county collector sends out the money," Jungermann said. "But the assessor should have made it clear to the office which buildings were included in the TIF."
No one caught the error, so in subsequent years tax dollars from the two businesses continued to be disbursed in the same way.
This year, after the assessor reassessed several buildings within the TIF area to bring their assessed value in line with their appraised value, the city noted the tax check it received was about $40,000 lower than in previous years and asked for an explanation.
In the process of responding, the assessor's office went digging through TIF-related records and discovered the old error.
Now, the county and the city are working together to recoup the money wrongly disbursed over the last three years. (During some of that time, the Saddle Saloon building was vacant; it's now A-1 Rental.)
"We're being told by the assessor that, statutorily, you can go back three years to fix a tax issue," Jungermann said.
Money disbursed to taxing entities from 2010-15 apparently is unrecoverable; neither Jungermann nor Holschlag could clarify how much was lost.
"The good news is that there's no money missing; it's just been allocated wrong," Jungermann added.
He has been meeting with the various tax entities that wrongly received the money and plans to issue invoices to each by the end of next week.
Fulton Public Schools received the lion's share and now must pay back about $69,000.
"(That) is slightly more than the cost of one faculty member and paraprofessional, both direct student services providers," Superintendent Jacque Cowherd said. "Yes, the reduced funds will affect the district."
He said TIF #3 likely will be on the agenda for the June 13 Board of Education meeting.
The county received about $9,000 total during the last three years; the library, about $3,000; Callaway County Special Services, about $1,700; the ambulance district, a tiny $25. The city also received part of the money.
Daniel Boone Regional Library representatives expressed concerns about the situation.
"I would really like to know that we're not going to be surprise again in another couple of years," DBRL Executive Director Margaret Conroy said.
While $3,294.12 is not a massive amount, it still has an impact on the budget, she said. It will be a topic of discussion during the June 14 library board meeting.
"We budget our Callaway money very carefully," Conroy added. "We're almost totally dependent on property tax."
Even with this problem caught and soon to be corrected, it's unclear whether the TIF will be repaid fully by the time it expires. Jungermann pointed out the occupancy rate of buildings within the TIF area is much lower than originally hoped.
"If those revenues are insufficient to satisfy the debt, then the bond holders bear the risk," Holschlag said.