City officials could hire an outside consultant to study an economic development zone for downtown Odessa, after an internal study suggested such a strategy aimed at helping to pay for downtown improvement might produce modest returns to invest in the area.
For more than a year, city leaders have considered creating a tax increment reinvestment zone, or TIRZ, to help redevelop the long blighted area amid a series of other public investments. In a TIRZ, property tax revenues are frozen at a base level. Other taxing entities including the hospital, community college and county would be asked to join in.
Then, as property values rise as the area is developed, revenues collected above that base level can be channeled back into the zone for further projects. One of the goals is also to encourage more private development.
City staff has explored a series of downtown improvements, including Grant Avenue roadway improvements such as wider sidewalks, a narrower roadway to lessen traffic, a decorative intersection and better lighting.
All the infrastructure improvements, which would include work on other downtown streets, could total about $20 million.
But an internal study of a TIRZ, based on various growth scenarios for downtown, projected revenues well short of that amount over a 20 year period. The in-house figures estimated a TIRZ would bring in about $1 million over 20 years, based on a total downtown property value of about $426 million that grows at an annual rate of 1 percent. In other words, city staff found, the TIRZ would not be profitable.
If property values increased by 5 percent, the city projected the TIRZ would bring in about $8.1 million.
But Interim City Manager Michael Marrero said a professional hired by the city for a more detailed study might find greater revenue that the city could capture and reinvest. He estimated the cost of the study of about $47,000.
“The last thing we want to do is implement a TIRZ and it not work,” Marrero said.
As planned, the TIRZ would follow the same boundaries the Odessa City Council set for downtown: First Street, Adams Avenue, 10th Street and Bernice Avenue.
It would be part of the city’s strategy to spur development in downtown Odessa.
Construction is underway on a downtown hotel and convention center supported by a more than $30 million public investment. If the hotel is profitable as projected, the city will get state and local hotel occupancy taxes that the city could invest in other downtown projects.
The city has also invested more in building purchases and improvements, which includes a grant program to incentivize fixing up downtown buildings.
District 2 Councilman Dewey Bryant said the city should fund the TIRZ review if it could mean finding a way to bring in closer to the $20 million.
“That’s an area that really needs some help, guidance, and direction,” Bryant said.