HERMITAGE — Hermitage commissioners on Monday took what an official called the final step in the process of creating a tax incremental financing district to help finance a retail development at the Shenango Valley Freeway and South Hermitage Road.

Commissioners officially created the 13.6-acre district and designated it as blighted, the action following Friday’s approval by Mercer County Industrial Development Authority.

“This is the final step in forming a tax incremental financing district,” said Sarah Davis Buss, the attorney advising the authority through the process.

Developer Levey & Co. of Akron has not waited for the approval to commence work, and the site has rapidly been transformed from a wooded dumping ground.

Under the TIF plan, the city, Hermitage School Board and Mercer County commissioners agreed to divert 69 percent of new taxes generated by the development to pay off a loan MCIDA will take out on behalf of Levey.

The $3.7 million generated will pay for what are considered public improvements, including widening the freeway between Hermitage Road and Maple Drive/Dutch Lane, installing a traffic signal on the freeway, improving storm water drainage and dealing with poor soil conditions.

The authority will take out a loan from Somerset Trust Co. at an interest rate of 3.99 percent. Levey had assumed it could get an interest rate of 4.5 percent, meaning paying back the loan could be accelerated by the lower interest rate, said Jill Newcomer, MCIDA assistant secretary and treasurer.

Final numbers as to how much debt service and interest would be paid each year and over the life of the loan will not be known until closing, she said.

Levey had assumed paying back principal and interest of $5.9 million over 20 years.

Buss said she expects the loan will close in the next 30 days.

Levey and MCIDA received a state guarantee on the loan, which officials said would drive down the interest rate, although Buss said she did not know how much the guarantee affected the rate.

Levey is still providing information to state officials to meet conditions placed on the guarantee by the Commonwealth Financing Authority, Buss said.

The city accepted the authority’s recommendation that the area is blighted. The state Urban Redevelopment Law states seven characteristics of blight. The authority and city accepted three, but only one need be present.

The blight characteristics of the Levey property are that the area “suffers” from “inadequate planning” in that it is in the city’s commercial district but does not have access to water or sewer service and “faulty street and lot layout,” and contains “economically and socially undesirable land uses,” in that it is a “primarily undeveloped” area in a commercial zone and generates no employment and minimal taxes.

City Commissioner Rhonda L. Paglia voted against the TIF plan and opposed the blight designation, arguing it is difficult to plan for an area that is undeveloped green space while being prime property.

“I feel this is a very poor argument to determine this area as blighted,” she said.

Commissioner Duane J. Piccirilli said he has seen few people at the Shenango Valley Mall and hopes the Levey development, which will be anchored by a Kohl’s department store, will bring “new people to the valley.”

“I think we need to move forward with this,” he said.

Commissioner William J. Moder III said people he has talked to generally are happy that something is happening on the property, the target of several failed development proposals over the years.

Noting the development of three restaurants on North Hermitage Road on the site of the former Hermitage Middle School, Piccirilli added, “I think it’s an exciting time for the city.”

Paglia added that she was disappointed at seeing Ohio contractors working at the site, which led to a discussion of what is “local.”

The outcome of Levey’s TIF request has been watched by other developers, but authority President Douglas Riley said there have been no formal talks about TIFs for other projects.

“I don’t think we could do more than one at a time,” he quipped.

“There had been some interest and I think it’s going to be wait and see on how this one ends up,” Riley said.