A ‘Build It And They Will Come’ Scheme in Chelan

The City of Chelan is proposing to use tax increment financing or “TIF” to build water infrastructure in east Chelan with the goal of enticing new development. Basically, this scheme is a way to fund new water infrastructure by promoting new development. The City will issue bonds to build the improvements to the water system, and as the new private development occurs, property values will rise and Chelan will use the property tax generated by that development to pay back the bonds.

The improvements to the water system have a price tag of $18 million and will increase water storage, build a booster pump station, and extend new water mains to several locations in eastern Chelan.

The development that the City aims to attract with the construction of this new infrastructure is overwhelmingly new housing. In fact, a whopping 868 new homes are proposed to be constructed in Apple Blossom Center and the HiLand Farms subdivision in North Chelan. At 2.4 occupants per residence, this housing would add another 2,100 people to the City’s population. Without the new infrastructure the City wants to build, the City estimates that only a fraction (35%) of this development would occur (or about 300 new homes).

There are four big concerns with this proposal:

  1. It is risky. Chelan is betting that development will occur at a certain level and within a certain time-frame, thus creating the tax revenue that will enable the City to repay the debt. If those conditions fail to materialize, and either the development is not as intensive as assumed, or does not keep pace with the debt service obligation, the City would need to resort to other resources to pay the bond debt, raising utility rates, or taking other drastic measures. Further, a default on the bonds could prompt a legal claim against the City’s general funds.
  2. The way the TIF is structured, the increase in property taxes is diverted directly to pay back the bonds. Meanwhile, essential public services such as Fire, EMS, Hospital, and the Library are penalized because they must serve the new residents but will not receive the increased revenue that will flow from the areas where these residents will reside.
  3. There will not be a vote by residents on this proposal.
  4. The City’s plan to attract new residents to Chelan comes at a time when many residents have very serious concerns about whether the City’s infrastructure, in particular its road system, is adequate to meet the needs of the existing population, much less all the new residents that this plan would add.

We urge residents to contact the Mayor and members of the City Council to register their alarm and ask them to slow this process down so that the tax payers and residents of Chelan can have meaningful participation in this decision.