UPDATE: North Little Rock tax district settlement

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THE PRIZE: New property taxes on this complex, The Enclave, were the object of a tax district created by former NLR Mayor Pat Hays. New Mayor Joe Smith plans to undo the district.
  • THE PRIZE: New property taxes on this complex, The Enclave, were the object of a tax district created by former NLR Mayor Pat Hays. New Mayor Joe Smith plans to undo the district.

I mentioned earlier today that new North Little Rock Mayor Joe Smith had made news when he was sworn in yesterday by saying he intended to end a dispute with the North Little Rock School District over a tax increment finance district created by former Mayor Pat Hays to capture some school property taxes for downtown development projects. A parking deck for a new hotel was high on his wish list.

The TIF project was pushed through the City Council in the waning minutes of 2008 so as to get it on the books in time to capture the "increment" increase in property taxes on The Enclave, a new $30 million apartment project. The property went on the books as a completed project in 2009, after being taxed at its former mostly undeveloped rate. A lawsuit by the school district, joined by others, challenged procedures used to create the district by combining and expanding three existing districts by linking them via surface streets to reach the apartment project. The gerrymandered district was necessary to meet the required "contiguous" land requirement of Arkansas TIF law. The lawsuit has long looked like a winner, but Hays wouldn't let go, a factor in where some voters lined up in the recent mayoral election.

Smith brought in School Board President Scott Teague to participate in his inauguration and said he'd solve the issue, to widespread surprise, including on the part of other school board members. City Attorney Jason Carter tells me he talked to the mayor about the announcement this morning.

"The mayor expressed to me that he wants to end conflict with school district," Carter said. "I advised him the most direct course would be to repeal the project plan that diverts money to the TIF District and he directed me to begin work."

Carter said a proposal could be prepared for City Council consideration as early as next week. Plaintiffs in the lawsuit would have to sign off, though they'd undoubtedly not object to seeing a return of escrowed money to the schools and other taxing entities who's money has been escrowed.

There is a complication. In the course of the litigation, Carter has raised a question about how a recent School District vote to make all its millage available for dedication to bond issue repayment might affect another, unrelated TIF district in the Baring Cross area. As the law allows, school millage in excess of the 25-mill base state charge and money pledged to bonds has been diverted on increased property values in the district to infrastructure work. Carter's question is whether a change that makes all millage available for pledging to bonds puts that millage off-limits going forward to the existing TIF district. He said resolution of the pending lawsuit might have to leave that question open for guidance from the court, but that district has never been a source of controversy.

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