Tax Increment Financing Workshop AUGUST 7 T H , 2014 JOLIET - - PowerPoint PPT Presentation

AUGUST 7 T H, 2014 JOLIET COMMUNITY CENTER

Tax Increment Financing Workshop

August 2014

Brought to you by…

August 2014

AICP Certification

August 2014

Our Contributors

August 2014

 Montana Department of Commerce  The Governor’s Office of Economic Development  Montana Economic Developers Association  Montana Association of Planners

Presented by

August 2014

 Janet Cornish, CDS of

Montana

 Lanette Windemaker, AICP  Robin Rude, Montana

Department of Revenue

 Erin McCrady, Dorsey  Chris Behan, Missoula

Redevelopment Agency

Today’s Agenda

 Welcome – Luke Walawander, Beartooth RC&D  Seminar Overview  Tax Increment Financing “101” – Janet  Land Use Planning and TIF Districts – Lanette  LUNCH  Calculating and Predicting the Increment – Robin  TIF and Debt Financing – Erin  Managing TIF Districts – A Brief Overview – Janet  Program Design and Implementation – Making TIF

Work in Your Community –Chris

 TIF and Economic Development – Wrap-up – Janet

August 2014

PRESENTED BY JANET CORNISH CDS OF MONTANA

Tax Increment Financing 101

August 2014

What is TIF?

 Tax increment financing (TIF) is a state authorized,

locally driven funding mechanism that allows cities and counties to direct property tax dollars that accrue from new development, within a specifically designated district, to community and economic development activities within that district.

 The laws governing TIF can be found in Montana’s

Urban Renewal Law, 7-15-4201 et. Seq. MCA

August 2014

BASE

Declining or Stagnating Property Values TIF Start Date Increment for Development TIF End Date Tax Value for Distribution Tax Value for Distribution Taxable Value Time

How a Tax Increment Finance Provision (TIF) Works

Base + Increment

August 2014

History of TIF in Montana

August 2014

 TIF districts were first authorized in Montana in 1974.  Beginning in 1989, the use of TIF was expanded to

include Industrial Districts.

 Aerospace, Technology and Transportation Districts

and Technology Districts were added in 1999 and 2005 respectively.

 In 2013, the Legislature replaced all non-urban

renewal districts types with one type – Targeted Economic Development Districts or “TEDDs”

 Today there are about 48 TIF Districts in the state,

having a total incremental taxable value of over $50,000,000

 To date about 10 districts have sunsetted with an

incremental taxable value of $15.3 million

What is the financial effect of TIF

• n individual property owners?

August 2014

There is no effect…

 TIF does not increase property taxes.  Tax payers located within a TIF district pay the

same amount as they would if the property were located outside the district.

 TIF only affects the way that taxes, once collected,

are distributed.

August 2014

August 2014

It Takes a Big Private Investment



Assume: $1,000,000 dollars of net New Appraised Value



Assume: Class 4 (residential, commercial and some industrial) property @ 2.47% (2014)



Taxable Value = $24,700



Assume: A total mill levy of .600



Tax Increment Increment = $14,820

TIF may be used in…

 Urban Renewal Districts-

URDs (authorized in cities, towns and consolidated city-county jurisdictions)

 Targeted Economic

Development Districts - TEDDs (authorized in cities, towns, counties and consolidated city-county jurisdictions)

August 2014

Fort Benton, MT

Montana’s Urban Renewal Provision (1959)

August 2014

 It is hereby found and declared that blighted areas

which constitute a serious and growing menace, injurious to the public health, safety, morals, and welfare of the residents of the state, exist in municipalities of the state … and that the prevention and elimination of such areas is a matter of state policy and state concern….” 7-15-4202 MCA

Targeted Economic Development District Act of 2013

 Removes all references to Industrial, Technology and

Aerospace Transportation and Technology Districts from the Montana Urban Renewal Law

 Authorizes the creation of Targeted Economic Development

Districts or “TEDDs” by local governments (cities and counties)

 Authorizes the Use of Tax Increment Financing or TIF in

TEDDs

 Clarifies the steps that must be taken by a local government

in creating a TEDD that will use TIF

CDS of Montana - 2014

TEDD Provision

August 2014

 infrastructure-deficient areas exist in the local

governments of the state and constitute a serious impediment to the development of infrastructure- intensive, value-adding economic development in Montana… The creation of infrastructure in support of value-adding economic development is a matter of state policy and state concern because the state and its local governments will continue to suffer economic dislocation due to the lack of value-adding industries; and the state's tax increment financing laws should be used to encourage the creation of areas in which needed infrastructure for value-adding industries could be

• developed. 7-15-4278 MCA

What is Targeted Economic Development?

 The development of secondary value-adding industries in

areas with infrastructure deficiencies

 Secondary value-added products or commodities are those that are

manufactured, processed, produced or created by changing the form of raw materials or intermediate products into more valuable products or commodities that may be sold or traded in interstate commerce.

 A secondary value adding industry means a business that produces

secondary value-added products or commodities or a business or

• rganization that is is engaged in technology-based operations that

through the employment of knowledge or labor adds value to a product, process or export service resulting in the creation of new wealth

CDS of Montana - 2014

Allowable Uses of TIF Funds

August 2014

 Land Acquisition  Rehabilitation and

Renovation

 Demolition and Removal

• f Structures

 Planning, Marketing and

Analysis

 General Redevelopment

Activities

 Constructing, improving

and connecting to infrastructure

Potential Funding Strategies

 TIF dollars can be used to:

 Directly fund projects and programs  Retire debt  Leverage other funding sources, both public and private.

 Funds may be used to establish a revolving loan fund

to provide financing to property owners within the district to make improvements to private infrastructure.

 Interest rates can be set based on project feasibility  The revolving fund may continue in perpetuity, even after the

district has “sunsetted”.

August 2014

Other Important Provisions

 Sunset  Provisions for

Returning Funds

 Bonds

August 2014

The Players

August 2014

 Governing Body for the applicable jurisdiction  Property Owners and Developers  The Local Planning Board  Affected Taxing Jurisdictions  The Montana Department of Revenue  Program Staff (in-house, contracted)  Financing Professionals

 Bond Counsel  Underwriters  Banking Institutions

August 2014

Creating a TIF district – A step by step approach

August 2014

Establish a Reasonable Boundary

Establish a Reasonable Boundary

August 2014

The area must have the following characteristics:

 Be blighted and/or infrastructure deficient  Does not overlap another TIF District  Be correctly zoned in accordance with the Growth

Policy for the Jurisdiction

 Be located entirely within one jurisdiction  Include entire parcels

What does the law say about size?

August 2014

 Montana Statute does not establish a minimum or

maximum size for a TIF District.

 A district must, however, be contiguous and cannot

• verlap an existing district

 TEDDs, in particular, however, “must be large

enough to host a diversified tenant base of multiple independent tenants” - 7-15-4279 (2) (b) MCA

Suggested Criteria for Setting Boundaries

August 2014

 Ability to generate revenue (increment) – Will enough

development occur in the area to generate an adequate increment?

 Feasibility of improving, installing or replacing

infrastructure – can affordable infrastructure improvements be made within the boundary?

 Proximity to services – is the area close enough to

emergency, utility and other services and/or is the area close enough to reasonably connect to existing infrastructure?

 Fairness – is the proposed district taking advantage of

new investment that will not benefit from the TIF district? (more)

Boundary Criteria (continued)

August 2014

 Reasonable Benefit – is the area large enough to

accommodate more than one business enterprise/ tenant/property owner?

 Effects on Taxing Jurisdictions – does the size of the

district put a strain on the other taxing jurisdictions in providing services?

 Opportunities for Success – is the district sized so

that the local government can meet its revitalization and/or development goals?

Property Information Required

August 2014

 A Map of the District showing the boundaries  A legal description of the district  A list of geocodes for all the properties within the district  A list of assessor codes for personal property and mobile

homes

 A list (and description) of centrally assessed properties  Names and addresses of persons owning property in the

district

August 2014

Determination of Blight or Infrastructure Deficiencies

Adopt Resolution of Necessity

August 2014

 Must be adopted by the governing body prior to

embarking on the creation of an urban renewal or TEDD program.

 The resolution is accompanied by a statement of:

 Infrastructure Deficiency (TEDDs)  Blight (URDs)

 Urban Renewal must identify at least three blighted

conditions as listed in 7-15-4206 MCA (2011 Legislative change)

A Sampling of Blight Criteria

August 2014

 The substantial physical dilapidation, deterioration, age

• bsolescence, or defective construction, material, and

arrangement of buildings or improvements, whether residential or nonresidential

 Inadequate provision for ventilation, light, proper

sanitary facilities, or open spaces

 Defective or inadequate street layout  Faulty lot layout in relation to size, adequacy,

accessibility, or usefulness or improper subdivision or

• bsolete platting

 Conditions that endanger life or property by fire or other

causes

 Any combination of these factors

August 2014

A Sampling of Infrastructure Deficiencies

August 2014

 Absence of streets, curbs

and gutters

 Inadequate lighting  Little or no access to

utilities

 Electrical service  Rail service  Natural Gas  Broadband

 Lack of water and sewer

services

 Faulty lot layout

U R B A N R E N E W A L P L A N S T E D D C O M P R E H E N S I V E D E V E L O P M E N T P L A N S

August 2014

The Plan

TIF District Plans

August 2014

 Contents

 a description of blighted and/or infrastructure deficient

conditions

 a plan for addressing these conditions  a map and legal description  references/linkages to the jurisdiction’s growth policy and

zoning, and other related plans as appropriate (economic development, historic preservation, transportation, public health)

 a management strategy  a statement of intent to use TIF and an associated base year.

August 2014

Planning Board Review

Planning Board Role

August 2014

 Reviews the proposed plan for the district  Makes a determination of conformance of the plan

with the growth policy and whether the district is zoned in accordance with the growth policy

 Provides the governing body with its findings of

conformance in writing within 60 days of receipt of the plan

(Lanette will be covering this in more detail.)

August 2014

Public Hearing on the Plan

Hearing Notice Requirements for District Plans …The notice must:

August 2014

 describe the time, date, place, and purpose of the hearing  specify the proposed boundary of the urban renewal area

affected (2011 Legislative change)

 outline the general scope of the plan under consideration  specify the goals the municipality has in the

rehabilitation and renewal of the area

 indicate the method of financing the district and whether

the municipality intends to use tax increment financing and bonds to be paid from tax increment financing. (2011 Legislative change)

Public Hearing Requirements

August 2014

 10 days notice  Certified letters to

property owners within the proposed district

 Legal Ad in the

newspaper

August 2014

Plan Adoption

Adoption by Ordinance

August 2014

 Ordinance must state all findings with respect to

 Infrastructure deficiencies and/blight  Plan conformance and zoning accordance with Growth Policy  That the district does not include any existing district

 Ordinance must also include

 A legal description  An indication that TIF will be used  An effective date no later than December 31st of the base year (30

days after adoption)

 Attachments include

 The hearing notice  The plan

August 2014

Certification by the Montana Department of Revenue

Certification Documents

August 2014

 Documents are mailed to DOR and all affected taxing

jurisdictions no later than February 1st of the year following the district’s establishment.

 The ordinance adopting the district plan and TIF

provision must have an effective date no later than December 31st of the year of establishment of the district (its base year).

 The DOR may request additional information or ask

for clarification prior to certifying the district.

Rationale and Feasibility

August 2014

The Rationale

August 2014

 TIF provides a tool that can encourage and support

investment in areas where growth has been stymied by the lack of sufficient infrastructure and/or the presence of blight.

 If development is going to occur, regardless of these

• bstacles, the argument for TIF becomes less

compelling.

 The rationale for using TIF should be directly tied to

documented need that must be addressed in order for the development to occur an/or to occur in an

• rderly and sustainable fashion.

Feasibility

August 2014

 The value and timing of proposed new development are

driving factors. Will there be enough money?

 How do we fund improvements up front, if we don’t

realize any increment until after the development occurs?

 Part of the answer can be found in innovative approaches

including various debt financing strategies that involve property owner involvement through:

 Assessment Agreements (7-15-4294 MCA)  Special Improvement Districts  other

(Erin will be covering the use of debt financing later in our presentation today.)

August 2014

Working with Affected Taxing Jurisdictions

Meet early and often

August 2014

 Include all the affected taxing jurisdictions in the

initial planning stages. (2011 Legislature notes the importance of this but is not specific.)

 Make informational presentations to county

commissioners, school board representatives, city council members, planning board members to explain TIF and its potential benefits to all jurisdictions over time.

 Consider securing letters of support  Don’t wait until the hearing on the adoption of the

district plan to notify the affected parties!

LAND USE PLANNING AND TIF DISTRICTS

Presented by Lanette Windemaker, AICP Planning Consultant

AUGUST 2014

ANNEXATION

TIF’s must include WHOLE parcels entirely within a SINGLE jurisdiction

AUGUST 2014

ANNEXATION PROCESS

 Varies according to part of Title 7 used,

but all require the following:

 Legal description (7-2-4211).  Map (7-2-4201).  Notice (7-2-4127).  Resolution of Adoption.  Filing of map with office of County Clerk (7-2-4201).  Timeframe – varies, about 2 to 3 months.

AUGUST 2014

PART 46 VS PART 43

Part 46 Annexation by Petition (7-2-4601 MCA) Part 43 Annexation of Contiguous Land (7-2-4301 MCA)

AUGUST 2014

 Executed petition (4601).  No land used for agricultural,

industrial, or manufacturing can be annexed (4608) unless signed by 100% of the owners

• f the land to be annexed and

in accordance with the adopted growth policy.

 Timeframe - about 2 months.

 Resolution of Intent (4312).  Mail notice (4312).  20-day protest period (4313).  Less than 300 parcels does not

require a vote (4314(1)(d)).

 Written consent from industrial

and manufacturing uses (except railroad) is required (4303/4314 (1)(d)).

 Timeframe - about 3 months.

GROWTH POLICY

AUGUST 2014

REVIEW GROWTH POLICY

 Review the adopted Growth Policy relevant to the TIF

district to determine what has to be done to comply with 7-15-4299 MCA.

 Do the Community Goals and Objectives:

 Support the development of secondary value-adding industry

(perhaps including agricultural or forestry related development).

 Support the development of public infrastructure to promote

economic development.

 Support the need for urban renewal/rehabilitation/revitalization.

AUGUST 2014

GROWTH POLICY CONTINUED

 Do the Existing Conditions and Projected Trends:

 Demonstrate the need for secondary value-adding development

activities.

 Demonstrate the need for jobs development and tax base

improvement (set in the context of decline/stagnation).

 Support additional or new land for economic development.

 Do the Land Use and Land Use Maps:

 Show industrial/manufacturing type of value-adding development use

in the area where TIF will be created.

 Describe appropriate land uses for the TIF.

AUGUST 2014

GROWTH POLICY CONTINUED

 Does the Public Infrastructure Strategy:

 Support the planned infrastructure development.

 Do the Implementation Strategies:

 Describe TIF as a strategy to achieve the Community Goals and

Objectives.  Is the adopted Growth Policy Amendment process different

than state law?

AUGUST 2014

GROWTH POLICY ADOPTION OR AMENDMENT

AUGUST 2014

GROWTH POLICY PROCESS (76-1-601 MCA)

 Public notice (602, 10 days).  Public hearing before Planning Board (602).  Written recommendation by resolution from Planning

Board (603).

 Governing Body Resolution of Intention (604).  Governing Body Resolution to Adopt (604).  Timeframe – 2 to 3 months.

AUGUST 2014

ZONING

AUGUST 2014

WE HAVE ZONING

 Is the zoning within the TIF area in accordance with the

Growth Policy?

 Do the permitted uses accommodate the planned TIF

District uses?

 Do the minimum physical standards accommodate the

planned TIF District uses?

 Is the adopted zoning amendment process different than

state law?

AUGUST 2014

WE NEED TO ADOPT OR AMEND ZONING

 Zoning Map.  Zoning Text.  Both Zoning Map and Zoning Text must be in accordance

with the Growth Policy.

 Municipal Zoning must follow the process in 76-2-301  County Zoning must follow the process in 76-2-201.

AUGUST 2014

ZONING PROCESS

Municipality (76-2-301 MCA) County 201 Zoning (76-2-201 MCA)

AUGUST 2014

 Notice (303, 15 days).  Zoning Commission public hearing

(307).

 Governing Body public hearing (303).  First reading and provisional adoption of

Ordinance.

 Second reading and final adoption of

Ordinance.

 30 days to be effective.  Timeframe - about 4 months.  Notice and post (205, 45 days).  Planning Board written

recommendation (204).

 Notice (205).  Governing body public hearing (205).  Notice of Resolution of Intention (205).  Notice of passage of Resolution of

Intention (205).

 30-day protest period (205).  Resolution to Adopt (205).  Timeframe; about 4 months.

PLANNING BOARD REVIEW AND RECOMMENDATION

AUGUST 2014

PLANNING BOARD ROLE

 Ensure that Growth Policy adequately addresses the use of TIF.  Review the TIF Plan for conformance with Growth Policy

(7-15-4213).

 Review zoning within the TIF area for accordance with Growth

Policy (7-15-4206, 4208, 4209 and 4213).

 Adopt a recommendation on conformance of the TIF Plan with

the Growth Policy.

 Adopt a recommendation on accordance of the zoning within the

TIF area with the Growth Policy.

 Written recommendation required (4213), consider a Planning

Board resolution rather than waiting for approved minutes.

AUGUST 2014

TIF ADOPTION PROCESS

AUGUST 2014

TIF ADOPTION

 Planning Board review and written recommendation (4213).  Publication of notice (4215).  Certified mailing of notice (4215).  Public Hearing before the Governing Body (4214).  First reading and provisional adoption of Ordinance (4217).  Second reading and final adoption of Ordinance.  Ordinance effective 30 days after adoption.  Timeframe – about 3 months.

AUGUST 2014

TIMEFRAME FOR TIF PROCESS

 Preparation time for legal description(s) and map(s), lists of

property owners and geocodes, TIF Plan, etc. is dependent

• n staffing availability and consultant support.

 Work on growth policy and/or zoning is dependent on

staffing availability and consultant support.

 Legally required processes take about six to eight months if

handled simultaneously.

 Revising TIF boundaries is the same process as

establishment of the original TIF.

AUGUST 2014

Lunch!

August 2014

ROBIN RUDE MONTANA DEPARTMENT OF REVENUE

August 2014

Calculating and Predicting the Increment

Appraisal Process

 Four basic approaches

 Sales Comparison  Using similar properties that have sold in a market area  Cost Approach  Replacement Cost New Less Depreciation + Land  Income Approach  Income models developed using data collected from Income & Expense

forms + Cap Rate developed on sold properties

 Productivity Approach  Productive Capacity for Agricultural and Forest Land using Soil Survey

Appraised Value after Phase In less the Exempt % (Comstead or Homestead) multiplied by the Tax Rate is the Taxable Value Taxable Value is then multiplied by the mills (1/1000 of a dollar) do determine the Levied Taxes

August 2014

Valuation Over Time

Commercial Property

Tax Year 2009 Reappraisal Value VBR Value Phase-In Value Exempt % Exempt Amount Taxable Market Taxable % Taxable Value Previous Mills Tax Estimate

• n Previous

Mills 2009 $600,000 $450,000 $474,990 14.20% $67,449 $407,541 2.93% 11,941 744.35 $8,888.28 2010 $600,000 $450,000 $499,950 15.90% $79,492 $420,457 2.82% 11,857 743.71 $8,818.17 2011 $600,000 $450,000 $525,000 17.50% $91,875 $433,125 2.72% 11,781 721.89 $8,504.59 2012 $600,000 $450,000 $549,900 19.00% $104,481 $445,419 2.63% 11,715 721.89 $8,456.94 2013 $600,000 $450,000 $574,950 20.30% $116,715 $458,235 2.54% 11,639 721.89 $8,402.08 2014 $600,000 $450,000 $600,000 21.50% $129,000 $471,000 2.47% 11,634 721.89 $8,398.47

Note: Taxes stay relatively flat due to the Phase In Value, increased exemption %, decreased taxable %.

August 2014

Timeline

 Once the District has been approved and filed:

 DOR creates a separate levy district for ease of tracking and

calculations.

 All parcels within the boundary of the district will need to be

identified including real estate, personal property, centrally assessed, mobile homes, etc.

 DOR determines the base year as of January 1st of the year of its

creation/filing.

 The base value is the sum of the taxable value of all property and

property types within the district boundaries.

 Planning Ahead:

 Collection of taxes from the first potential increment will not occur

until November of the following year .

 Example:  Base year – January 1st 2012  First potential increment collection – November 30th, 2013

August 2014

Department of Revenue Reporting

 The Department of Revenue completes Certified

Values Spreadsheet each year

 The spreadsheet shows each taxing jurisdiction and

property class

 The bottom section shows a break out of all Tax

Increment Districts and their respective increment

August 2014

Certification of Values

Total Market Value Exempt Market Value Market Taxable Total Market Value Exempt Market Value Market Taxable Total Market Value Exempt Market Value Market Taxable Market Taxable SD 2 - Billings 123,119,329

• 123,119,329

3,663,995 4,801,619,335 800,268,035 4,001,351,300 107,671,947 305,814,631 305,814,631 21,067,793 4,465,029,999 133,304,556 2 T4-EAST BILLINGS 14,216,502

• 14,216,502

415,903 79,248,725 8,907,770 70,340,955 1,908,335 737 737 44 84,661,700 2,327,387 2 U- EXTENDED N 27TH ST 3,204,167

• 3,204,167

95,771 73,573,680 40,021,752 33,551,928 925,579 111,339 111,339 13,273 36,867,434 1,034,623 2T3A - 2008 EXPANDED N 27TH ST 11,327,264

• 11,327,264

336,949 167,515,632 32,476,447 135,039,185 3,672,884 32,763,788 32,763,788 1,964,796 179,168,557 5,975,779 2 T5 - SO BILLINGS BLVD 12,167,133

• 12,167,133

364,506 219,087,557 29,721,238 189,366,319 5,027,916 7,989,133 7,989,133 880,392 211,885,555 6,334,795 SD O2 - Outside Billings 11,772,132

• 11,772,132

352,632 894,537,439 42,546,396 851,991,043 22,833,320 138,213,985 138,213,985 10,562,815 1,007,473,993 33,903,754 SD 3 - Blue Creek Outside 1,398,827

• 1,398,827

41,961 56,352,024 2,079,737 54,272,287 1,515,332 11,594,773 11,594,773 977,108 68,399,106 2,566,723 SD 3C - Blue Creek Blgs 140,261

• 140,261

4,210 61,055,917 748,652 60,307,265 1,590,627 167,330 167,330 5,385 60,614,856 1,600,222 SD 4 - Canyon Creek 2,466,421

• 2,466,421

73,985 97,149,640 4,825,301 92,324,339 2,493,230 4,164,700 4,164,700 339,574 102,286,999 2,997,148 SD 7 - Laurel 1,331,745

• 1,331,745

39,953 204,183,106 43,680,520 160,502,586 4,261,659 11,268,819 11,268,819 917,671 177,093,732 5,324,218 7 TI - LAUREL URBAN RENEWAL 7,550,014

• 7,550,014

226,253 56,813,776 3,530,883 53,282,893 1,444,907 908,330 908,330 74,777 61,741,237 1,745,937 SD 23 - Elysian Billings 42,501,259

• 42,501,259

1,241,278 450,155,555 20,688,985 429,466,570 11,620,828 6,157,483 6,157,483 435,943 479,943,202 13,343,760 23T5 - SO BILLINGS BLVD 7,498,808

• 7,498,808

218,435 110,047,231 23,718,793 86,328,438 2,341,613 41,890 41,890 5,027 93,913,908 2,566,354 SD O23 - Elysian Outside Blgs 8,485,106

• 8,485,106

253,631 132,447,453 15,101,732 117,345,721 3,210,613 4,858,649 4,858,649 444,225 138,674,446 4,145,637 TOTALS 301,505,176

• 301,505,176

8,941,309 9,678,116,423 1,158,137,400 8,519,979,023 226,179,756 901,805,680

• 901,805,680

59,446,137 9,823,069,976 297,246,648 UTILITIES GRAND TOTALS Levy District PERSONAL PROPERTY REAL PROPERTY

August 2014

District Name 7TI Laurel Urban Renewal Tax Increment Current Taxable Base Taxable Increment Personal 226,253 84,221 142,032 Real 1,519,684 1,085,002 434,682 Total 1,745,937 1,169,223 576,714 District Name 2T3A 2008 Expanded N 27th St Current Taxable Base Taxable Increment Personal 338,099 153,987 184,112 Real 5,637,680 3,174,820 2,462,860 Total 5,975,779 3,328,807 2,646,972 District Name 2U North 27th Street Current Taxable Base Taxable Increment Personal 95,771 57,386 38,385 Real 938,852 726,045 212,807 Total 1,034,623 783,431 251,192 District Name 2T4 East Billings Current Taxable Base Taxable Increment Personal 419,008 268,962 150,046 Real 1,908,379 1,531,832 376,547 Total 2,327,387 1,800,794 526,593 District Name 2T5 S Blgs Blvd 2T5 Current Taxable Base Taxable Increment Mobile 60,411 74,383

• Personal

366,076 93,165 272,911 Real 5,908,308 3,725,619 2,182,689 Total 6,334,795 3,893,167 2,441,628 District Name 23T5 S Blgs Blvd 23T5 Current Taxable Base Taxable Increment Mobile 620 1,451

• Personal

219,094 463,229

• Real

2,346,640 2,871,590

• Total

2,566,354 3,336,270

• Total Increment

19,984,875 14,311,692 6,443,099 August 2014

August 2014

Management of District Funds

This is a Real Property Tax bill for Yellowstone County. The Levied Taxes under 0000-27th St UR are part of the base for the district which goes to the General Fund and the 2TI3 taxes go to the TIFD Fund.

August 2014

Important Reminders

 Tax increment is not determined per individual

property.

 Once the increment for the entire district has been

determined, a percentage is calculated that will indicate the amount of the General Tax that stays with the base and the amount of the General Tax that goes to the TIFD.

 To maximize the benefit to the District, the timing of the

creation an filing of the District is important.

 Base value is determine for the year of creation.  Potential increment is calculated the following year.  If improvements have already happened in the base year, the

increment potential will be less.

August 2014

05.05.2006 | MoneyGram

Tax Increment Bonds

Erin McCrady Partner Dorsey & Whitney LLP

May 18, 2012

What is Tax Increment?

 Tax increment revenue is: 

• the amount of taxes collected from the levying of mills within an

urban renewal district (URD) or targeted economic development district (TEDD)



against



• the increase in taxable value of the property in the district since the

base year



Collection of Tax Increment

 In order to collect tax increment, the district plan must authorize tax

increment financing (MCA 7-15-4282 and 7-15-4279)



• state intent to use tax increment financing



• establish a base year



Use of tax increment to be consistent with district plan

Calculation of Tax Increment

 Department of Revenue will calculate:  - base taxable value — the actual taxable value of all taxable property within the

district as it appears on the property tax record at Jan. 1 of the year the district plan is adopted

 - actual taxable value — the actual taxable value of all taxable property within

the district as it appears on the property tax record at Jan. 1 of the year of calculation

 - incremental taxable value — the amount, if any, by which the actual taxable

value exceeds the base taxable value

Use of Tax Increment

 Permitted uses of tax increment revenue include:

• land acquisition
• demolition and removal of structures
• construction or improvement of streets, roads, curbs,

gutters, sidewalks, pedestrian malls, alleys, parking lots and off-street parking facilities

• construction or improvement of sewers, sewer lines,

sewage treatment facilities, storm sewers, waterlines, waterways, water treatment facilities, natural gas lines, electrical lines and telecommunications lines

• purchase, sale and leasing of land at fair value for

development by private enterprise or public agencies

• assist secondary, value-adding industries in meeting

infrastructure and land needs

Tax Increment Bonds



What are tax increment bonds?

 - special limited obligations  - secured and payable solely from the tax increment

revenues

 - not general obligation bonds

Adequacy of Tax Increment

 Municipality may issue tax increment bonds only if it

can establish that there is sufficient tax increment revenue each year to pay the principal and interest payments on the tax increment bonds.

 Governing body must make findings with respect to

the adequacy of tax increment in the resolution or

• rdinance authorizing the tax increment bonds.

Sale of Tax Increment Bonds

 Tax increment bonds can be sold:  - in a public sale  - to banks or other private parties  - to developer

Sale of Tax Increment Bonds

 Public Sale

• underwriters
• preparation of an official statement and other public
• ffering documents

 - underwriters negotiate terms of bond with public bond

holders (i.e. interest rate and repayment schedule) and

• ffer the terms to the city/town

 Private Sale

• direct sale to a bank or other private party without use of

underwriters

• city/town negotiates terms of the bond directly with

bank or other private party

Sale of Tax Increment Bonds

 Sale to Developer  - developer initially pays for improvements

• tax increment bonds issued to developer in an

amount equal to the improvements

• bond typically only paid to the extent there is

sufficient tax increment

Credit Enhancements

 Additional security for the repayment of tax

increment bonds may include:

 - debt service reserve accounts  - debt service coverage requirements  - mortgages  - guaranty agreements

• development agreements / deficiency payments
• assessment agreements

Credit Enhancements

 Debt Service Reserve Accounts 

• typically 5% - 10% of bond proceeds placed in an

account and used as backup in the event there are insufficient tax increment revenues to pay the tax increment bonds

 Debt Service Coverage Requirements

• requires a positive ratio of tax increment revenues to

debt service payable on tax increment bonds (e.g. tax increment revenues must equal at least 125% of the maximum debt service payable on the tax increment bonds in any fiscal year)

Credit Enhancements

 Mortgage  - third party grants a mortgage on property to secure

tax increment bonds

 Guarantee Agreement

• third party guarantees the payment of the tax

increment bonds

Credit Enhancements

 Development Agreement / Deficiency Payments  - developer agrees to construct a development project in the district

that will result in additional tax increment revenues and also agrees to pay amounts due on the tax increment bonds to the extent there are insufficient tax increment revenues

 Assessment Agreements

• parties establish minimum market value of land, existing

improvements or improvements or equipment to be constructed or acquired

• third party agrees to pay deficiency payments if property is valued

by DOR at a market value that is less than the value established by the agreement

• agreement is filed with the county clerk and creates a lien on the

property

Alternative Structures

 Special Improvement District Bonds. SID bonds issued

(and assessments charged to property owner(s)) with a promise by municipality to refinance the SID bonds with tax increment bonds as soon as there are sufficient tax increment revenues.

 Other Revenue Sources. Contribution of other funds to

the payment of project costs or payment of debt on the bonds (e.g. combination of tax increment revenues and parking revenues used to build a parking garage).

 Metal Mines Tax / Oil & Natural Gas Production Tax.

Maybe in the future?

Other Sources of Funds

 Creation of district does not preclude use of other

sources of funds and revenues to pay for improvements within a district.

• State/Federal grants
• DNRC
• Intercap
• Rural Development
• GO Bonds
• SID/RSID Bonds

Termination of Tax Increment Provision

 A tax increment provision terminates upon the later

• f:

 -

the 15th year following its adoption or

 -

the payment in full of all tax increment bonds payable from the tax increment derived from the district



Tax Increment Financing Statutes

 Remember:  Montana’s Tax Increment Financing Statutes change

nearly every legislative session.

JANET CORNISH

August 2014

Managing TIF Districts

How are TIF Districts Managed?

 Urban Renewal Districts

 The Local Governing Body

with or without an advisory board, or

 A separate “Urban

Renewal Agency”, established by the local governing body.

 TEDDs

 The Local Governing Body

with or without an advisory board

August 2014

Break

August 2014

CHRIS BEHAN, MISSOULA REDEVELOPMENT AGENCY

August 2014

Making TIF Work in Your Community

August 2014

TIF and Economic Development