Tax Increment Financing (TIF)

The primary tool used by EURA to finance redevelopment efforts is tax increment financing (TIF).  Through TIF, the incremental new tax revenues generated by a redevelopment project are used to fill the gap between private financing and the total cost of a redevelopment project.

The new development made possible by a TIF investment can create significant new tax revenue, but the revenue will be generated and collected over time.  Thus there is not any revenue available at the inception of the project when the development costs are being incurred.  In order for the project to progress, money must be borrowed or invested up front and be repaid over time.  There are two principal ways in which this is done – EURA can agree to reimburse the developer or EURA can issue TIF bonds.

When EURA agrees to reimburse the developer, the developer must pay the eligible project costs up front and use the pledged TIF revenues as collateral.  The EURA then reimburses the developer with only the tax revenues from the individual project.  If EURA issues TIF bonds, the bond proceeds are used to pay for project costs and the bonds are repaid from the TIF revenues generated by the project.

Under this financing mechanism, the county assessor establishes the current value of the property in the area at the time the district is formed.  This value is known as the “base value”.   Tax revenues generated from the base value continue to be paid to the taxing entities.  Over time, due to public and private investment, property values rise, the difference between the “base value” and the increase is called “increment” or “increment value”.  Tax revenues generated from the increment value are distributed to the urban renewal agency, and are used to pay for improvements, revitalization activities to attract private investment, eliminate deteriorating conditions, and to spur economic development.  Once the urban renewal district expires, the local taxing entities will have new, permanent sources of revenue that would not have existed if the project had not been undertaken.  Note:  Urban renewal agencies DO NOT determine property values or levy rates.

 

 

EURA works cooperatively with other taxing entities, such as school districts and special districts whose jurisdictions include a proposed urban renewal project, to manage the impact this financing tool might have on their delivery of services.

The amount of TIF varies from project to project. In order to determine the level of TIF funding a project is eligible for, EURA typically uses the lesser of three amounts—the financing gap, the TIF capacity of the project (how much sales and/or property tax increment it is expected to generate) or the eligible costs.

The length of the period in which TIF may be used in a redevelopment project is tailored to each specific project. The maximum length of a TIF project area is 24 years, but many have shorter durations.

While there is no increase in tax rate in an urban renewal project, increased property values do often result in increased property tax revenue.

Some Uses of Incremental Revenue

• Public Utilities – water, sewer, irrigation, fiber, storm drainage
• Public Infrastructure – streets, curbs, gutters, sidewalks, streetscape
• Parks and Park Improvements
• Property acquisition, demolition and site preparation; Improve, renovate, clear and prepare for redevelopment properties or buildings
• Curbs, gutters, sidewalks and streetscape
• Appraisals, title searches, surveys, studies, preparation of plans
• Relocation of persons displaced from an urban renewal area
• Acquire property to eliminate unsanitary or unsafe conditions, lessen density, eliminate obsolete or other uses detrimental to public welfare
• Invest and borrow money, issue bonds, and accept loans and grants
• Encourage private development – economic development incentives
• Consultant Fees/Staffing
• Elimination of Slum and Blight
• Parking Facilities
• Environmental Remediation
• Facilitate Local Improvement Districts (LIDs) and Business Improvement Districts (BIDs)

Does Urban Renewal Increase Taxes?

No, urban renewal does not increase property taxes; it simply allows for the reallocation of growth on taxes to the urban renewal agency rather than the overlapping taxing districts (City, County, Cemetery, etc.). Taxpayers in Eagle see Urban Renewal as a line item on their tax statements whether or not they own property inside of an urban renewal area. This line item can and does cause some confusion. The Urban Renewal line item does not represent an extra charge, or result in a larger tax bill than would otherwise occur; instead, it represents a division of tax dollars, collected from all properties in an amount that equals the growth on taxes inside the urban renewal district. If urban renewal was terminated in Eagle, general property taxes would not decrease; they would just be reallocated to all taxing jurisdictions.

Does Revenue Allocation Financing Negatively Impact Taxing Districts?

During the life of the district, taxes from the “base value” are still sent to the taxing districts and the “increments” are diverted to the urban renewal agency to spur development that would not have occurred but for urban renewal.  When the urban renewal district expires, taxing jurisdictions can expect to receive more tax revenues than they would have, had the urban renewal area never existed at all.