TIF Framework and Financing Primer October, 2007 Ryan Maher (336) - PowerPoint PPT Presentation

TIF Framework and Financing Primer October, 2007 Ryan Maher (336) 721-6823 Laura Radcliff (314) 955-4201

Tax Increment Financing � TIF: Tax Increment Financing (most states) � TAD: Tax Allocation Districts (Georgia) � RAD: Revenue Allocation Districts (New Jersey) � TIRZ: Tax Increment Reinvestment Zones (Texas) 2

What is TIF? � A mechanism used to capture the future tax benefits of real estate improvements to pay the present cost of those improvements � Based on state law guidelines, local governments collect real property taxes (and sales taxes in some states) for the project � The taxes collected for the project are those above a “base” level of taxation prior to the development within the TIF district 3

The Increment Basic TIF Example Increment New tax from new investment base post project Existing tax base frozen prior to project 0 1 Year 20 21 4

The Blight Finding 5

TIF Funds the Gap � “But For” TIF, the development would not have occurred � Interpretations of the “But For” Test: � Cost: Removal of blight makes the project too expensive without public assistance � Required Public Improvements: Developing an industrial park, improving the appearance of downtown, improving roadway access � Scope and Quality: A development might occur without public assistance, but it will be bigger or better with public assistance 6

Economic Development Policy Context � Project-specific TIFs (committed user) � District-wide TIFs (ex. Downtown – public parking; convention facilities) � “If you TIF it they will come” (public infrastructure for new industrial parks) 7

Who Takes the Risk? Timing of financing Level of assistance Net benefit to local government 8

Financing TIF Improvements � Incur Debt � Pay-As-You-Go � Combination of Debt and Pay-As-You-Go 9

Pay-As-You-Go � A Tax Increment Revenue Note evidences the right to receive the TIF revenue stream � Developer-held � Bank-held � Assignment to third party – typically accredited investors 10

Bonds � Long-term bonds may be issued � At the commencement of the project � Upon meeting hitting certain development milestones, typically described in a Redevelopment Agreement � Commonly, bonds are issued to take out previously issued notes 11

Taxable vs. Tax-Exempt 12

TIF is one financing tool among many, including: � Assessment Districts � New Markets Tax Credits � Brownfields Programs � State Level Infrastructure Programs � Business Improvement Districts (Various) � Tax Abatement (and other special districts) � CDBG � Tax Credits (Economic � State and Local Economic Development, Training, Housing – Federal and State) Development Programs � Transportation Departments (US � Economic Development and State) Administration (federal) � USDA Programs (Various) � Empowerment Zones � US EPA Programs (Various) � Foreign Trade Zones � HUD 108 � Local Revenues 13

General Steps In The North Carolina Tax Increment Financing Process � Specific legislation is outlined in the North Carolina Project Development Financing Act, Article 6 of Section 159 of the North Carolina General Statutes � Designate a qualified redevelopment area.. The area must be: � “Blighted, deteriorated, deteriorating, undeveloped, or inappropriately developed from the standpoint of sound community development and growth; � Appropriate for rehabilitation or conservation activities; or � Appropriate for the economic development of the community.” � Develop and propose a development financing plan � If a City or Town, it must submit proposed plan to the County for review � After solicitation and designation of specific projects, choose a developer or developers to redevelop the site � Approval required from North Carolina Local Government Commission � Project feasibility study will be required � Three bond document review sessions will be required � Hold a public hearing on the proposed plan � Adopt the development financing plan and any other “base” documents (i.e. minimum assessment agreements, intergovernmental agreements) � Issue long-term debt (i.e., TIF bonds) to assist in financing of a development or redevelopment 14

The Underwriter & Development Financing: A Project Oriented Approach The Underwriter Offers Advice Fundamental to Project Success � Assist in the Development of the Plan of Finance that County Include Alternative Financing Structures in Conjunction with a Tax Increment Financing � Integrate project documents with financing documents for the most cost effective financing arrangements � Operating agreements � Development agreements � Lease and management agreements � Intergovernmental agreements � Coordinate all aspects of the Tax Increment Financing 15

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