Clayton — The Town Council has backed a program to encourage building on empty lots downtown. The Downtown Development Association presented a tax-rebate program to the council earlier this month.

Here is the way the program would work: Say an empty lot had a property-tax value of $10,000, but after a project was done, the value increased to $100,000. The property owner would pay taxes on the full $100,000 but would receive a rebate for taxes paid on $90,000, or the difference between the pre- and post-development value.

(In Clayton, that bill would be $486 at the current tax rate.)

The town would return that $486 to the property owner. The next year, he would get $486 again. The rebate would fall to 75 percent, or $364.50, in year three; 50 percent, or $243, in year four; and 25 percent, or $121.50 in year five.

“There are areas that need to be developed in downtown Clayton,” said Bruce Naegelen, director of downtown development. “The [tax] incentive will give property owners and developers the opportunity to take an updated look at downtown Clayton and could provide the necessary gap funding to make a successful project.”

More important, the program will not cost taxpayers a dime, Naegelen said. “All of the infrastructure is already here, so in general, the town doesn’t have to provide much in that regard,” he said.

“A vacant lot doesn’t provide much tax base or economic development, but a new project will improve the tax base, as well as the local economy by providing new or expanding business and residential opportunities.”

Town Manager Steve Biggs said the grant made a strong statement of commitment to new investment downtown.

“Often times, the single biggest hurdle to new investment is cash flow during the first years of a project,” he said.

“This program will improve cash flow for new businesses and landlords. That can enhance access to capital for them and improve on success in those first few critical years when businesses are most likely to fail.”

To reap even more benefits, Naegelen plans to present the rebate program to Johnston’s County Commissioners for their approval.

“What the council did was for the town portion of property-tax values, but in order to get the county portion of the value of the grant, we want to partner with the county, so we’re hoping they will adopt the policy as well,” Naegelen said.