1998-08-10 Regular Meeting and Workshop of City Council

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I ;+f. IY/AI I , I ~.I I I I The ABCs of 'IF By Lolita Sereleas I Tax Increment Financing (TIF) became a household term for economic developers when it emerged as a popular tool to facilitate development and combat urban blight in targeted areas. Local governments use TIF programs for land procurement and to pay for public improvements that suPPOrt development. including water. sewer lines. streets. lighting. and parking lots. Areas already slated for redevelopment are the primary. beneficiaries ofTIF funds. A TIF district essentially captures the tax capacity of the properties located within the specified area. For the duration of the district. property taxes that result from increases in the tax level above the level of a designated year are placed in a special fund that can be used only to finance public project costs. Bonds are often sold at the outset of the redevelopment project by a designated development agency so that funds are available for up-front expenses, including land assembly and infrastructure COSts. Simply stated, TIF utilizes the revenue increase that will result from redevelopment to fund extraordinary construction and development costs. TIF has gained in popularity with public officials because it generates money for redevelopment without expe,nding general revenue. The principal purpose ofTIF is to e)jminate..~)jghi: by supporting revitalization activities chat .t.J1e::pRwteiS'tEtOf'l!i~'. upwil1ing (or perhaps unable) to undertake. The TIF.objective is not to aid private enterprise. TIF also provides for the recycling of infrastructure. enhances the tax. base, creates and helps to retain jobs, aids in revitalizing brownfields, provides affordable housing. and facilitates neighborhood stability. In addition to providing economic benefits to individual communities. TIF districts can have regional land-use implications as well. Because TIFs are often located in urban areas, they help to combat urban sprawl and the consumption of open land in a metro region by providing incentives for urban infill development. "TIFs are a great cool for revitalizing blighted urban land," sayS Peter Skosey, urban development difeaor at the Metropolitan Planning Council in Chicago. "They give municipalities tools which level the playing field against greenfield development." I I . ...... The principal purpose of TIF is to eliminate blight by supporting revitalization activities that the private sector is unwilling or unable to undertake. I' I .1 ...... I I I' .. I .1 i As an incentive for private investment, ftnds from TIF districts in Rock Island. Iliinois, are used to pay for interest costs incurred by the tkveloper in a retkvelopment project. IIF Roots TIF dates back to the "urban renewal" movement that resulted from the Federal Housing Act of 1949. The purpose of this act was the elimination of the nation's blighted and substandard areas. One outcome of the federal urban renewal program in the 1950s was the passage of relatively uniform urban renewal laws in every state. The laws gave development powers to local governments and permitted the establishment of urban renewal authorities and programs. The states' most basic urban renewal laws have since been vastly amended, however. Even the language has been changed. For example, references to urban renewal have been changed to "community development." In the 1970s, the gradual withdrawal of federal funds from urban renewal projects produced a need for new sources of revenue to fund the programs. California and Minnesota were the first states to make extensive use ofTIF. The success ofTIF in these two states gained the attention of cities nationwide. Today, nearly every state has some form ofTIF legislation. TIF districts around the country have several important criteria in common: . A needs assessment to establish the necessity of a TIF district, and the designation of a boundary for the district. . Creation of a redevelopment agency by resolution or ordinance. The agency may be a governing body of the municipality, or it may be a new agency appointed by this body. Eleventh Street Tax Increment Financing District Iii '" ~ ... >> ~ 0. ~ ;J :l ~ :, .,. >> ~ 0. il' o ~ o ~. r ;- ... ~ = fi' 1 ~ =