Using Tax Increment Financing

RSA 162K

What is TIF?

A powerful tool for funding necessary infrastructure improvements.

Using a portion of new taxes created by new construction, expansion or renovation of property within a defined district to make public improvements.

The City Council is in control of how TIF dollars are spent. An Advisory Board insures that the TIF Plan is implemented.

Development Districts & TIF Plans

The Development District should include the area where public improvements are needed, and sites that are likely to generate new tax revenue.

District boundaries can be adjusted after creation if necessary to include new infrastructure or development.

An official plan must be developed by the TIF Advisory Board, and approved by the City Council, outlining how TIF revenue is to be spent.

Each year the municipality can review it’s financial situation and decide how to distribute the incremental revenues.

What Can TIF Be Used For? All activities undertaken must be consistent with

the Development Plan, and can include, but are not limited to: Acquire land or easements Build or improve roads, bridges and transportation

systems linking commercial areas, or to meet the goals of the development plan

Extend or improve water, sewer, utilities to the development district

Install lighting, street signs, landscaping, and/or pedestrian ways

Construct parking structures, plazas, or other traffic and parking control features

Planning or engineering for public improvements or projects.

Bond or Pay-as-you-go TIF revenue is set aside to either

a) pay a bond issued by the City for improvements in the TIF District, or

b) complete the improvements in the development plan in phases, or

c) be saved until sufficient annual increment is available to support a bond for the entire project.

Bonds issued in this manner do not count against a City’s debt capacity.

Bonds with a dedicated revenue source will not raise the tax rate in the manner that GO Bonds will.

How Does TIF Work?

A district is created with boundaries that include areas where public improvements are needed, in addition to areas where new development or redevelopment is likely to take place.

An inventory of the properties is done, establishing the base value of the district. Taxes on the base value continue to get distributed in the usual way.

As properties in the district are developed or redeveloped there, there may be an increase in the taxable value. The difference between the base and the new value is the increment.

A portion of the taxes from the new incremental value are dedicated for use within the TIF district and/or to pay the bond, rather than the usual distribution.

If needed, the City Council may reallocate portion of the revenues back to the general fund.

Example

Have some confidence of development or redevelopment

Have identified public infrastructure needs in the same area

Could use TIF instead of City GO bonds to accomplish goals

Example The inventory of the district shows a

combined assessment for taxes of $2 million, producing $40,500 in tax revenue annually (@ $20.25 per $1,000 value)

After development, the properties in the district have an assessed value of $10 million, producing $40,500 for the general fund and $162,000 in TIF revenue.

Can be affected by- Changes in assessment Changes in tax rate The value of new development projects

What To Do Next?

Review RSA 162-K and amendments Hold a public hearing at least 15 days

before a vote, with appropriate notifications

Get input from schools, County, Elected Officials, Chamber of Commerce, Rotary, Planning Board, other stakeholders

City Council adoption

To Establish a TIF District

Define and map the TIF District Appoint TIF Advisory Board and District

Administrator Define public and infrastructure improvements Prepare spreadsheet for tax assessment and

potential tax increment revenues of proposed district

Prepare cost benefit analysis of public improvements Draft time schedule of TIF District Development Refine and revisit City Council Hold a Public Hearing City Council vote to establish district and approve

development plan – Approved in Dec. 2005

RSA 79e – Downtown Tax Relief

Identify eligible Districts & properties

Approved by Rochester City Council in 2007

Develop a review & approval process

Have had 2 projects approved for tax relief The Castle on Charles

Street Scenic Theater on

North Main St.

Intent is to offer an incentive for property owners to invest in Downtown properties Offset increased

property tax Extra incentives for

housing & affordability

Actual assessed values may not match investment profile

Public Benefit

Tax Credit Programs

Federal New Markets Tax

Credits R&D Tax Credits Historic

Revitalization ARRA Revitalization

Zone Renewable Energy

New Hampshire• Revitalization Zone Tax

Credits – (CROP Zone)• R&D Tax Credit• No broad base personal

income tax • No sales tax• No use tax • No inventory tax • No capital gains tax• No professional service

tax • Low Corporate income

tax

Local Programs & Incentives

JOB Loan Program Sign & Façade

Grant Program RIDA - Bonding or

Loan Guarantees through BFA-CDFA

SBA Lenders - Guarantees

CDBG - Grants

Job Training Grants up to $20,000

Energy Efficiency Loans – Ocean Bank

SEDC – Revolving Loan Fund & more

Angels & Venture

A Final Thought

“They always say time changes things, but you actually have to change them yourself.”

Andy Warhol

Other Economic Development Topics Not Covered Technology

Impact on ALL industries

ED Marketing tools Data-driven

Development Psychographic

market analysis GIS Planning

Program & organization administration Benchmarking

Funding ED Programs

Workforce development Training incumbent

workers Workplace skills for

youth Youth retention Significant shortages Workplace Productivity “Green” Jobs &

Industries What is the Future of

Economic Development?

Stay in Touch

www.thinkrochester.bizFacebook, Twitter, LinkedIn

Slideshare

Karen.pollard@rochesternh.net Rochester Economic Development

Commission December 10th