Adopt Resolution of Necessity 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) August 2014
A Sampling of Blight Criteria The substantial physical dilapidation, deterioration, age obsolescence, 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 obsolete platting Conditions that endanger life or property by fire or other causes Any combination of these factors August 2014
August 2014
A Sampling of Infrastructure Deficiencies 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 August 2014
The Plan 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
TIF District Plans 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 August 2014
Planning Board Role 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 August 2014
Hearing Notice Requirements for District Plans …The notice must: 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) August 2014
Public Hearing Requirements 10 days notice Certified letters to property owners within the proposed district Legal Ad in the newspaper August 2014
Plan Adoption August 2014
Adoption by Ordinance 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 31 st of the base year (30 days after adoption) Attachments include The hearing notice The plan August 2014
Certification by the Montana Department of Revenue August 2014
Certification Documents Documents are mailed to DOR and all affected taxing jurisdictions no later than February 1 st 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 31 st 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. August 2014
Rationale and Feasibility August 2014
The Rationale 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 obstacles, 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 orderly and sustainable fashion. August 2014
Feasibility 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 August 2014
Meet early and often 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! August 2014
LAND USE PLANNING AND TIF DISTRICTS Presented by Lanette Windemaker, AICP Planning Consultant AUGUST 2014
TIF’s must include WHOLE parcels entirely within a SINGLE jurisdiction ANNEXATION 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 43 Annexation of Contiguous Land Part 46 Annexation by Petition (7-2-4601 MCA) (7-2-4301 MCA) Resolution of Intent (4312). Executed petition (4601). Mail notice (4312). No land used for agricultural, 20-day protest period (4313). industrial, or manufacturing can be annexed (4608) unless Less than 300 parcels does not require a vote (4314(1)(d)). signed by 100% of the owners of the land to be annexed and Written consent from industrial and manufacturing uses (except in accordance with the adopted railroad) is required (4303/4314 growth policy. (1)(d)). Timeframe - about 2 months. Timeframe - about 3 months. AUGUST 2014
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 County 201 Zoning (76-2-201 MCA) Municipality (76-2-301 MCA) Notice (303, 15 days). Notice and post (205, 45 days). Zoning Commission public hearing Planning Board written (307). recommendation (204). Governing Body public hearing (303). Notice (205). First reading and provisional adoption of Governing body public hearing (205). Ordinance. Notice of Resolution of Intention (205). Second reading and final adoption of Notice of passage of Resolution of Ordinance. Intention (205). 30 days to be effective. 30-day protest period (205). Timeframe - about 4 months. Resolution to Adopt (205). Timeframe; about 4 months. AUGUST 2014
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 on 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
Calculating and Predicting the Increment ROBIN RUDE MONTANA DEPARTMENT OF REVENUE August 2014
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 2009 Tax Estimate Tax Reappraisal VBR Phase-In Exempt Exempt Taxable Taxable Taxable Previous on Previous Year Value Value Value % Amount Market % Value Mills Mills 2009 $600,000 $474,990 14.20% $67,449 $407,541 2.93% 11,941 744.35 $8,888.28 $450,000 2010 $600,000 $499,950 15.90% $79,492 $420,457 2.82% 11,857 743.71 $8,818.17 $450,000 2011 $600,000 $525,000 17.50% $91,875 $433,125 2.72% 11,781 721.89 $8,504.59 $450,000 2012 $600,000 $549,900 19.00% $104,481 $445,419 2.63% 11,715 721.89 $8,456.94 $450,000 2013 $600,000 $574,950 20.30% $116,715 $458,235 2.54% 11,639 721.89 $8,402.08 $450,000 2014 $600,000 $600,000 21.50% $129,000 $471,000 2.47% 11,634 721.89 $450,000 $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 1 st 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 1 st 2012 First potential increment collection – November 30 th , 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 PERSONAL PROPERTY REAL PROPERTY UTILITIES GRAND TOTALS Exempt Exempt Levy District Total Market Market Total Market Exempt Market Total Market Market Value Value Value Value Value Value Market Taxable Market Taxable 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 August 2014
Laurel Urban Renewal District Name Tax Current 7TI Increment 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 2008 District Name Expanded N Current 2T3A 27th St 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 North 27th Current 2U Street 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 East Current 2T4 Billings 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 S Blgs Blvd Current 2T5 2T5 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 S Blgs Blvd Current 23T5 23T5 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 - August 2014 Total Increment 19,984,875 14,311,692 6,443,099
August 2014
Management of District Funds This is a Real Property Tax bill for Yellowstone County. The Levied Taxes under 0000-27 th 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
Tax Increment Bonds Erin McCrady Partner Dorsey & Whitney LLP May 18, 2012 05.05.2006 | MoneyGram
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 ordinance 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 offering documents - underwriters negotiate terms of bond with public bond holders (i.e. interest rate and repayment schedule) and offer 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 of: - 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.
Managing TIF Districts JANET CORNISH August 2014
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
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