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Downtown Development Authority: The Basics

Downtown Development Authority: The Basics. Michigan Downtown Association Marquette MDA Conference July 10, 2009. Donald W. Keim Thomas D. Colis Miller Canfield Paddock and Stone, PLC web : www.millercanfield.com. What is a DDA?. Downtown Development Authority.

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Downtown Development Authority: The Basics

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  1. Downtown Development Authority: The Basics Michigan Downtown Association Marquette MDA Conference July 10, 2009

  2. Donald W. Keim Thomas D. Colis Miller Canfield Paddock and Stone, PLC web: www.millercanfield.com

  3. What is a DDA? Downtown Development Authority

  4. Cities, townships and villages may create a DDA. Separate legal entity. Board members appointed by governing municipality. Included in municipality’s budget.

  5. Concept: Dedicate part of property tax revenues to improvements -improvements bring growth -more taxes for all.

  6. What do DDAs do? DDAs are used to finance “public improvements” including streets, sidewalks, streetscapes, water and sewer improvements and improvements to buildings for handicap accessibility.

  7. Funding DDA Activities DDA may levy up to 2 mill property tax. DDA may capture tax increment revenues from all property within the development area to finance public facilities within the development area.

  8. What is TIF? “Tax Increment Financing” Tool for local economic development authorizing capture of property taxes levied by certain taxing units to be used for development purposes. TIF depends on growth in value. “But for” development theory.

  9. Capturing Value Initial Assessed Value (a/k/a Base Value) of property is set in the first year of Plan. Each subsequent year: Current Assessed Value. Current Assessed Value – Initial Assessed Value = Captured Value. Tax Increment Revenues (TIR) = Captured Value X Millage Rates.

  10. Establishment of DDAs DDA District must satisfy the 3 Ds: Downtown of the municipality (term not defined in Act, up to governing body of municipality). District zoned and used principally for business. Deteriorating property values must be demonstrable in some way. Section 3 of DDA Act sets forth the procedures for establishing a DDA.

  11. How many parcels must be “deteriorating” in value? OAG 6558: “Significant”number, more than “one or two.”

  12. “An area in thedowntown of a municipality zoned and used principally for business.” Sec. 1(d). Downtown district: “An area in a business district that is specifically designated by ordinance of the governing body of the municipality pursuant to this act.” Sec. 1(j)

  13. Circular Definition – what does it mean? Attorney General: Act 197’s focus “for the accomplishment of its stated purposes is upon a business district zoned and used as such.” OAG, 1983-84, No. 6212 (March 29, 1984). Thus, both the zoning and the actual use of properties within any proposed district must be principally for business activities.

  14. Public Hearing Required. The Clerk’s nightmare. Publish notice of hearing twice – both at least 20 days before hearing. Post and mail notice of hearing. Certified mail to other taxing units. Opt-Out for other taxing units: Resolution must be adopted and filed with Clerk of municipality creating DDA within 60 days of public hearing on establishment of DDA. Ordinance Adopted. Must be published. Must be filed with the Secretary of State. DDA Created by Ordinance

  15. Amending District Boundaries Same requirements as for establishment of DDA. Section 3 of DDA Act allows municipality to amend DDA district boundaries using the same steps used to establish DDA (Opt-out right applies to expansion of boundaries).

  16. The Development Plan and TIF Plan Controls capture and use of TIR. Procedural requirements: Similar to creating DDA but not identical. Plan applies to “Development Area” – may or may not be same as DDA district boundaries. If 100+ residents: DA Citizens Council.

  17. Mandatory contents of Development Plan in Section 17 of DDA Act. Mandatory contents of TIF Plan in Section 14 of DDA Act. No “opt-out” - Village of Holly v Holly Twp., 267 Mich. App. 461 (2005). No 60-day delay.

  18. Procedure to Approve Plan Development Plan and TIF Plan can be adopted together. Public hearing required. DDA adopts resolution approving Plan. Governing body of municipality adopts resolution calling public hearing on Plan. Publish notice of hearing twice – the first publication must be at least 20 days before hearing. Post and mail notice of hearing. Certified mail to other taxing units. Plan adopted by ordinance.

  19. Financing DDA Projects DDA may pay for projects from TIR on a pay-as-you-go basis; DDA may issue bonds payable solely from TIR; or Municipality may issue bonds payable primarily from TIR of the DDA and pledging the municipality’s full faith and credit as additional security for the bonds.

  20. Limited Capture of School Taxes Since 1994, definition of “tax increment revenues” excludes revenues captured from the levy by the State, K-12 school districts and intermediate school districts.

  21. However, DDAs that had obligations incurred prior to 1995 may capture TIR from the State, K-12 school districts and ISDs up to amount needed to pay “eligible obligations,” “eligible advances” and “other protected obligations” (pre-1995 obligations). Bonds issued to refund eligible obligations and other protected obligations may also capture school taxes.

  22. Amendments to Plans • Section 18 of DDA Act allows DDA to amend Development and TIF Plan using same steps for approval of Plan (Opt-out right does not apply to amendments to Plan)

  23. Plans may be amended to change duration, boundaries of Development Area (not District), projects and improvements and financing of projects and improvements. Projects undertaken by DDA must be authorized by law and in the DDA Plan. Amending the Development Plan

  24. Amending the TIF Plan • The TIF Plan should be amended with the Development plan and should include updates to: • Maximum amount of bonded indebtedness to be incurred • Duration of the program • Estimated captured assessed value and tax increment revenues for the duration of the program • Estimated impact of the TIF Plan on taxing jurisdictions subject to capture in the Development Area

  25. Timeline to Amend Development and TIF Plan • If 100+ residents: DA Citizens Council must be established by City Council resolution at least 90 days prior to the public hearing on the plan amendment. • DA Citizens Council should meet with the DDA before DDA approves plan amendment. Notice of first DA Citizens Council meeting must be published in newspaper at least 5 days before the meeting. • DDA adopts resolution approving plan amendment. • Governing body of municipality then adopts resolution calling public hearing. • Publish notice of hearing twice – the first publication must be at least 20 days before hearing. • Post and mail notice of hearing at least 20 days before hearing. • Certified mail to other taxing units. • Plan adopted by ordinance, in accordance with regular municipal procedures for adopting ordinances. • If first reading of ordinance at public hearing, then second reading and adoption of ordinance can be at the next meeting of the governing body. • Publication of ordinance.

  26. Sample Proceedings CalendarBased on regular meeting schedule of DDA (3rd Thursdays) and Governing Body (1st Mondays) • May 4: Establish DA Citizens Council at least 90 days before public hearing on plan amendment (only if necessary, for 100+ residents.) • May 22: Publish notice of first Citizens Council meeting. • May 27: First Citizens Council meeting with DDA. • Note: failure of a Citizens Council to organize itself, to consult with and be advised by the DDA, or failure to advise the governing body of its findings as required by the DDA Act does not preclude the adoption of a Development Plan by the municipality, so long as the municipality complies with the other provisions of the Act. • Before June 25: DDA develops plan amendment. • June 25: DDA approves plan amendment by resolution. • July 6: City Council adopts resolution setting public hearing on adoption of plan amendment.

  27. By July 14: First publication of notice of public hearing. • Note: if boundaries of DDA district are being amended, the second notice must be published by July 14. • By July 14: Posting of notice of public hearing. • By July 14: Mailing of notice of public hearing. • July 14 – date of adoption of ordinance: Opportunity for taxing units to meet with DDA and municipality. • Before date of hearing: Second publication of notice for plan amendment.

  28. August 3: Public hearing on ordinance approving amendment to plan. First reading of ordinance. • By August 24: if a DA Citizens Council has been formed, it is required to notify municipality within 20 days following the hearing of its findings and recommendations concerning the plan amendment. • September 7: Second reading of ordinance. Adoption of ordinance approving plan amendment. • Note: if boundaries of DDA district are being amended, the governing body may not adopt the ordinance until at least 60 days following the public hearing. • Publication of ordinance.

  29. What Can We Spend Money On?

  30. PA 197 States “Public facility”, defined as a street, plaza, pedestrian mall, and any improvements to a street, plaza, or pedestrian mall including street furniture and beautification, park, parking facility, recreational facility, right-of-way, structure, waterway, bridge, lake, pond, canal, utility line or pipe, building, and access routes to any of the foregoing, designed and dedicated to use by the public generally, or used by a public agency.

  31. The reality? Act now provides for marketing of district – what is allowed?

  32. Questions?

  33. Currently Senior Counsel at Miller, Canfield, Paddock and Stone, P.L.C., Don has worked with Michigan communities since 1978. During this period he has helped create, expand, contract, and in a few cases dissolve, over 100 tax increment authorities. Don has worked on dozens of development/tax increment plans and has been bond counsel for over 75 tax increment bond issues. He has also found time over the past 30 years to work with tax increment authorities in over a hundred communities. keim@millercanfield.com 313-496-7517 Tom is a principal with Miller Canfield practicing in the area of municipal finance, including tax increment finance, economic development, Brownfield redevelopment, special assessments, and intergovernmental transactions. Tom has been with the firm for over 15 years. He has worked with dozens of communities providing assistance and guidance in connection with their tax increment authorities and has been bond counsel on numerous tax increment bond issues. colis@millercanfield.com 313-496-7677 Presenters: Donald Keim and Thomas Colis

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