Tax Increment Financing

1. Tax Increment Financing A “Bottoms-Up” Approach to Financing Community Development

2. The Concept • A state authorized, locally driven funding mechanism for community and economic development • A methodology for eliminating blight and infrastructure deficiencies • A strategy for stabilizing, diversifying and expanding the tax base in critical areas

3. What is Tax Increment Financing? • TIF is authorized under 7-15-4282, MCA and enables communities to direct property taxes that accrue from new development within a designated blighted and/or infrastructure-deficient geographic area to various development activities. A base year is established from which incremental increases in property values are measured.

4. The Calculation • Base Year Value Taxable Valuation x Mill Value = Taxes Collected Directed to All taxing Bodies (Local Gov, Schools, State) • Tax Increment Value Incremental Taxable Valuation x Mil Value = Incremental Taxes Collected All Directed to Tax Increment Program (except University Levy)

5. Other Important Provisions • Provisions for Returning Funds • Sunset • Bonding

6. It Takes a Big Private Investment • Assume: $1,000,000 dollars of New Development • Assume: Class 4 property @3.01% (2007) • Assume: A mill levy of .500 • Increment Value = $15,050

7. Applications • Urban Renewal Districts • Industrial Districts • Technology Districts • Aerospace Transportation and Technology Districts

8. The Steps • Identifying a District • Determining Blight or Infrastructure Deficiency • Preparing a Plan • Determining Conformity with the Growth Policy • Providing for Public Notice and Hearing • Adopting the Plan • Notifying the DOR and other Taxing Bodies

9. Allowable Uses of Funds (Public Purpose) • Land Acquisition • Demolition and Removal of Structures • Relocation • Planning and Analysis • General Redevelopment Activities • Improving or Connecting to Infrastructure

10. Neighborhood Planning Provision (Urban Renewal) • Enables a Municipality to Focus on Neighborhood Planning Efforts through the undertaking of “neighborhood development programs” • Allows for Annual Evaluation of Renewal Efforts

11. Some Pitfalls to Consider • The “Slush Fund” Approach – What’s our plan…..really? • Overall Affects on the Tax Base – Are we really improving our community condition? • Changing Property Tax Climate in the State

12. A Successful TIF Program • Provides Incentives to Businesses to locate in areas of greatest need • Improves the overall tax base • Enables locally driven economic development • Creates economic vitality

13. How a Tax Increment Finance Provision (TIF) Works TIF End Date TIF Start Date Tax Value for Distribution Taxable Value Increment for Development Base + Increment Declining Property Values BASE Tax Value for Distribution Time

14. Creating an Urban Renewal District • Establish Blight (42-15-4202, MCA) – Identifying the Urban Renewal Area • Identify the Need for Redevelopment in Response to Blight (43-15-4203, MCA) • Develop a Workable Urban Renewal Program

15. What is Blight? – What are We Addressing? • Public Health Issues • Property Value Depreciation • Public Safety Issues • Community Growth • Substandard Housing • Traffic Problems

16. Preparing an Urban Renewal Plan • Prepare an Urban Renewal Plan which identifies the specific boundaries of the district • Include the TIF provision in the Plan

17. Determining Conformity with the Growth Policy • Submit the Proposed Plan to the Planning Commission to determine conformity with Growth Policy (60 Day Turnaround) • (NOTE: There must be a Growth Policy in place!) (more)

18. Holding a Public Hearing • Set a Public Hearing • Mail Hearing Notice to ALL property owners in the District • Hold the Public Hearing

19. Adoption Requirements • Finding of Blight – by Resolution which finds that: •      (1) one or more blighted areas exist in such municipality; and      (2) the rehabilitation of such areas is necessary in the interest of the public health, safety, morals, or welfare of the residents of such municipality.

20. Adoption Requirements (continued) • Adoption of the Urban Renewal Plan – by Ordinance • A Resolution of Blight must be in place • The plan must conform to the Growth Policy

21. Department of Revenue Notification • 7-15-4284 MCA requires that a certified copy of each urban renewal plan, industrial district ordinance, technology district plan, or aerospace district ordinance or an amendment to any of them containing a tax increment provision with • the department of revenue • each of the affected taxing bodies

22. Modification of Urban Renewal Project plan. • An urban renewal project plan may be modified at any time by the local governing body. • By Ordinance • By the process established in the state statute for Urban Renewal Plans • By a procedure set forth in the plan itself

23. Program Management • Local Governing Body • Separate Urban Renewal Agency

24. Developing an Urban Renewal Program • Programs • Mechanisms • Projects

25. Programs • Infrastructure • Code Upgrades • Safety • ADA • Economic Development/Job Creation • Historic Preservation • Landscaping • Housing

26. Mechanisms • Grants • Interest Write-Downs • Revolving Loans • Technical Assistance

27. Projects • Specific Activities • Initiated Externally or Internally • Must be in Conformance with the Urban Renewal Plan

28. Creating a TIF Industrial District (TIFID) • TIF Districts can be created in areas that • Consist of a continuous area with an accurately described boundary; • Are zoned for light or heavy industrial use in accordance with the area master planning document; (more)

29. TIFID’s (Continued) • Are deficient in infrastructure improvements for industrial development; and • Have as their purpose the development of infrastructure to encourage the growth and retention of secondary, value-adding industries.

30. Creating a Technology District      • Technology districts: • Must consist of a continuous area with an accurately described boundary that is large enough to host a diversified tenant base of multiple independent tenants; • Must be zoned for use in accordance with the area growth policy, as defined in 76-1-103;

31. Technology District (cont.) • Must, prior to creation, be found to be deficient in infrastructure improvements necessary for technology development; • Must, prior to creation, have in place a formally adopted comprehensive development plan; and • May not be designed to serve the needs of a single district tenant or group of non-independent tenants.

32. Creating an Aerospace Technology and Transportation Districts     • Aerospace Districts must • Consist of a continuous area with an accurately described boundary; • Be zoned for use in accordance with the area master planning document; (More)

33. Aerospace Districts (continued) • Found to be deficient in infrastructure improvements for industrial development; and • Have as their purpose the development of infrastructure to encourage the location and retention of aerospace transportation and technology infrastructure development projects in the state.