Tax Increment Financing Overview

Tax Increment Financing (TIF) Model Overview

Tax increment finance (TIF) is a method to pro­mote urban renewal efforts in an area by directing the property tax revenues generated from property value increases within a designated TIF district to finance the costs of improvements made in the district. TIF addresses a lack of state and federal programs.

Iowa cities, counties and community colleges may establish TIF districts. Although the terms urban renewal areas and TIF are often used interchange­ably, TIF districts are established within approved urban renewal areas (URA). URAs often contain a larger geographic area than the TIF district that is established, and URA can contain more than one TIF district.

When a TIF district is created, a “base” valuation of the property value is established. It accounts for assessed values prior to the TIF designation. The tax revenue from this base value remains with all taxing authorities. Increases in the assessed value over time over and above the base are called the “increment.” The TIF authority may access the tax revenue generated by the increment, or may choose to release some or all of this revenue back to the traditional taxing authorities.

TIF districts can be created to accomplish different goals, per Code Sec­tion 403.2. Success may look different depending upon whether a TIF was set up to address slum and blight, or economic development.

Slum and Blight
Economic Development
Address issues related to:
• the safety, health and wel­fare of an area
• areas experiencing im­paired growth
• housing challenges
• increasing criminal activity
• traffic problems or hazards
Address the need for:
• creating economic development partnerships
• strengthening and revitalizing the economy of the state and municipalities
• providing jobs and housing
(including LMI)

Non-revenue Producing Projects

48 percent of projects are non-revenue producing, 80 percent of these are in the category of road and bridge infrastructure im­provement.  Public buildings can lead to eco­nomic growth or stabilization in a slum or blight area. An example of a public building that receives TIF funds is a building for public safety that will serve a TIF area.

Process

The annual TIF process is a process created for the purpose of developing a five-year Capital Improvement Plan. The TIF process is for projects occurring in calendar years 2018-2022. The TIF process is intended to provide a format for departments, developers and utilities to submit projects to the City Administrator and to the City Council, while weighing in capital projects.

The first year of the Capital Improvement Plan, which could include TIF projects, will be included as part of the budget submitted for Council approval each year before March 15th.

The TIF process includes TIF Administration and Economic Development Staff Costs and Development Project Worksheets to coincide with the five year CIP and Urban Renewal Plan.

These documents assisted in the creation of the Tax Increment Financing Model Summary to project revenues, expenses and holding a reasonable ending balance.

All documentation is then reviewed by the City Administrator and organized for presentation to the City Council.

Synopsis

The TIF Plan for 2018-2022 totals $4,696,256, plus existing debt obligations of $3,438,169. Of the first total:

  • 80% for infrastructure, economic development incentive programs, trails and transportation projects  ($3,760,000)
  • 13% for development agreement incentives ($642,256)
  • 6% for Administration and Staff Costs ($294,000)

TIF projects for 2018 total approximately $1,406,000. Capital spending authorizations by year/project/category for the upcoming year include:

  • 71% for infrastructure, economic development incentive programs, trails and transportation projects  ($1,010,000)
  • 17% for development agreement incentives ($250,000)
  • 10% for Administration and Staff Costs ($146,000)

This TIF Plan represents a concerted effort to ensure that needed capital projects and infrastructure are in place in a timely manner to accommodate continued growth and development in the community.