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Tax Increment Financing A “Bottoms-Up” Approach to Financing Community Development The Concept A state authorized, locally driven funding mechanism for community and economic development A methodology for eliminating blight and infrastructure deficiencies

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tax increment financing

Tax Increment Financing

A “Bottoms-Up” Approach to Financing Community Development

the concept
The Concept
  • A state authorized, locally driven funding mechanism for community and economic development
  • A methodology for eliminating blight and infrastructure deficiencies
  • A strategy for stabilizing, diversifying and expanding the tax base in critical areas
what is tax increment financing
What is Tax Increment Financing?
  • TIF is authorized under 7-15-4282, MCA and enables communities to direct property taxes that accrue from new development within a designated blighted and/or infrastructure-deficient geographic area to various development activities. A base year is established from which incremental increases in property values are measured.
the calculation
The Calculation
  • Base Year Value

Taxable Valuation x Mill Value = Taxes Collected

Directed to All taxing Bodies (Local Gov, Schools, State)

  • Tax Increment Value

Incremental Taxable Valuation x Mil Value = Incremental Taxes Collected

All Directed to Tax Increment Program (except University Levy)

other important provisions
Other Important Provisions
  • Provisions for Returning Funds
  • Sunset
  • Bonding
it takes a big private investment
It Takes a Big Private Investment
  • Assume: $1,000,000 dollars of New Development
  • Assume: Class 4 property @3.01% (2007)
  • Assume: A mill levy of .500
  • Increment Value = $15,050
applications
Applications
  • Urban Renewal Districts
  • Industrial Districts
  • Technology Districts
  • Aerospace Transportation and Technology Districts
the steps
The Steps
  • Identifying a District
  • Determining Blight or Infrastructure Deficiency
  • Preparing a Plan
  • Determining Conformity with the Growth Policy
  • Providing for Public Notice and Hearing
  • Adopting the Plan
  • Notifying the DOR and other Taxing Bodies
allowable uses of funds public purpose
Allowable Uses of Funds (Public Purpose)
  • Land Acquisition
  • Demolition and Removal of Structures
  • Relocation
  • Planning and Analysis
  • General Redevelopment Activities
  • Improving or Connecting to Infrastructure
neighborhood planning provision urban renewal
Neighborhood Planning Provision (Urban Renewal)
  • Enables a Municipality to Focus on Neighborhood Planning Efforts through the undertaking of “neighborhood development programs”
  • Allows for Annual Evaluation of Renewal Efforts
some pitfalls to consider
Some Pitfalls to Consider
  • The “Slush Fund” Approach – What’s our plan…..really?
  • Overall Affects on the Tax Base – Are we really improving our community condition?
  • Changing Property Tax Climate in the State
a successful tif program
A Successful TIF Program
  • Provides Incentives to Businesses to locate in areas of greatest need
  • Improves the overall tax base
  • Enables locally driven economic development
  • Creates economic vitality
slide13

How a Tax Increment Finance Provision (TIF) Works

TIF End Date

TIF Start Date

Tax Value for Distribution

Taxable Value

Increment for Development

Base + Increment

Declining Property Values

BASE

Tax Value for Distribution

Time

creating an urban renewal district
Creating an Urban Renewal District
  • Establish Blight (42-15-4202, MCA) – Identifying the Urban Renewal Area
  • Identify the Need for Redevelopment in Response to Blight (43-15-4203, MCA)
  • Develop a Workable Urban Renewal Program
what is blight what are we addressing
What is Blight? – What are We Addressing?
  • Public Health Issues
  • Property Value Depreciation
  • Public Safety Issues
  • Community Growth
  • Substandard Housing
  • Traffic Problems
preparing an urban renewal plan
Preparing an Urban Renewal Plan
  • Prepare an Urban Renewal Plan which identifies the specific boundaries of the district
  • Include the TIF provision in the Plan
determining conformity with the growth policy
Determining Conformity with the Growth Policy
  • Submit the Proposed Plan to the Planning Commission to determine conformity with Growth Policy (60 Day Turnaround)
  • (NOTE: There must be a Growth Policy in place!)

(more)

holding a public hearing
Holding a Public Hearing
  • Set a Public Hearing
  • Mail Hearing Notice to ALL property owners in the District
  • Hold the Public Hearing
adoption requirements
Adoption Requirements
  • Finding of Blight – by Resolution which finds that:
  •      (1) one or more blighted areas exist in such municipality; and      (2) the rehabilitation of such areas is necessary in the interest of the public health, safety, morals, or welfare of the residents of such municipality.
adoption requirements continued
Adoption Requirements (continued)
  • Adoption of the Urban Renewal Plan – by Ordinance
    • A Resolution of Blight must be in place
    • The plan must conform to the Growth Policy
department of revenue notification
Department of Revenue Notification
  • 7-15-4284 MCA requires that a certified copy of each urban renewal plan, industrial district ordinance, technology district plan, or aerospace district ordinance or an amendment to any of them containing a tax increment provision with
    • the department of revenue
    • each of the affected taxing bodies
modification of urban renewal project plan
Modification of Urban Renewal Project plan.
  • An urban renewal project plan may be modified at any time by the local governing body.
    • By Ordinance
    • By the process established in the state statute for Urban Renewal Plans
    • By a procedure set forth in the plan itself
program management
Program Management
  • Local Governing Body
  • Separate Urban Renewal Agency
developing an urban renewal program
Developing an Urban Renewal Program
  • Programs
  • Mechanisms
  • Projects
programs
Programs
  • Infrastructure
  • Code Upgrades
    • Safety
    • ADA
  • Economic Development/Job Creation
  • Historic Preservation
  • Landscaping
  • Housing
mechanisms
Mechanisms
  • Grants
  • Interest Write-Downs
  • Revolving Loans
  • Technical Assistance
projects
Projects
  • Specific Activities
  • Initiated Externally or Internally
  • Must be in Conformance with the Urban Renewal Plan
creating a tif industrial district tifid
Creating a TIF Industrial District (TIFID)
  • TIF Districts can be created in areas that
    • Consist of a continuous area with an accurately described boundary;
    • Are zoned for light or heavy industrial use in accordance with the area master planning document; (more)
tifid s continued
TIFID’s (Continued)
  • Are deficient in infrastructure improvements for industrial development; and
  • Have as their purpose the development of infrastructure to encourage the growth and retention of secondary, value-adding industries.
creating a technology district
Creating a Technology District     
  • Technology districts:
    • Must consist of a continuous area with an accurately described boundary that is large enough to host a diversified tenant base of multiple independent tenants;
    • Must be zoned for use in accordance with the area growth policy, as defined in 76-1-103;
technology district cont
Technology District (cont.)
  • Must, prior to creation, be found to be deficient in infrastructure improvements necessary for technology development;
  • Must, prior to creation, have in place a formally adopted comprehensive development plan; and
  • May not be designed to serve the needs of a single district tenant or group of non-independent tenants.
creating an aerospace technology and transportation districts
Creating an Aerospace Technology and Transportation Districts    
  • Aerospace Districts must
    • Consist of a continuous area with an accurately described boundary;
    • Be zoned for use in accordance with the area master planning document; (More)
aerospace districts continued
Aerospace Districts (continued)
  • Found to be deficient in infrastructure improvements for industrial development; and
  • Have as their purpose the development of infrastructure to encourage the location and retention of aerospace transportation and technology infrastructure development projects in the state.