District Improvement Financing DIF Tax Increment Financing TIF. Smart Growth / Smart Energy Toolkit

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1 District Improvement Financing DIF Tax Increment Financing TIF

2 What is? District Improvement Financing (DIF) and Tax Increment Financing (TIF) are both economic tools that promote redevelopment by the use of tax increments. TIF offers tax breaks to developers. DIF channels tax dollars into targeted redevelopment districts.

3 The Problem MANY municipalities in Massachusetts are faced with high unemployment rates and blighted, distressed, or simply underutilized areas. Many of these sites contain abandoned or contaminated facilities, while others are characterized by dilapidated infrastructure and commercial operations that simply are not economically viable.

4 Both DIF and TIF provide municipalities with innovative tools to target districts or specific projects for redevelopment.

5 DIF Authority: M.G.L., Chapter 40Q FIRST STEPS: Designate a district Certify district: State Economic Assistance Coordinating Council ("EACC") Term of District: 30 years maximum

6 DIF The development program spells out the goals of the district and the means to achieve them. The program will identify the following: Existing uses and current zoning, Proposed uses and any needed zoning changes, Existing buildings Planned construction or renovation, Current and planned infrastructure, A financial plan.

7 Application Forms are available from: MA Office of Business Development (MOBD) Boston Regional Office One Ashburton Place Suite 2101 Boston, MA Voice: (617) Fax: (617)

8 Once a District & Program Have Been Certified: TOOLS FOR IMPLEMENTATION: Acquiring land Constructing or reconstructing improvements (such as buildings, roads, schools and parks) Incurring indebtedness and pledging tax increments and other project revenues for repayment of these debts Posting of a bond by the City or Town (for initial funding)

9 TIF Authority: M.G.L., Chapter 40d 59 FIRST STEPS: Developer Agreement Term of TIF: 20 years maximum

10 TIF A city or town must initiate a TIF by a vote of its governing body approving the TIF Plan which must include: Designation of the area that will be the TIF zone; Description in detail, including plans and specifications where appropriate, of all construction and construction related activity; Projection of public and private costs and a betterment schedule for the defrayal of public costs;

11 TIF AND Authorization of tax increment exemption from property taxes; Establishment of a maximum percentage of costs of public construction that can be recovered through betterments or special assessments against any parcel in the TIF zone eligible for exemptions;

12 AND TIF Identification of property owners in the TIF Zone; Executed Agreements between the city or town and each owner of property within the TIF zone; Delegation of authority to enter into development agreements to one municipal agency, board or officer;

13 TIF A TIF Zone must be in an area approved by the EACC as an Economic Opportunity Area (EOA) or found to be an area "presenting exceptional opportunities for economic development" by the Director of Economic Development.

14 SUCCESS REDEVELOPMENT BRINGS: Increased tax revenue; Improved infrastructure; Improved transportation services; Increased housing supply; and New jobs

15 SUCCESS Is tied to careful planning which identifies the needs of the district and combination of uses most likely to succeed. While TIF focuses on job creation, DIF allows significant flexibility in planning for the district's housing and commercial needs.

16 SUCCESS The role of private partners is crucial to achieving the desired effects. In both cases, public/ private agreements provide details and guidelines.

17 SUCCESS DIF and TIF programs will satisfy many of the Commonwealth's Sustainable Development Principles, including:

18 REDEVELOPMENT FIRST The use of DIF and TIF encourages redevelopment of existing dilapidated sites, urban infill and revitalization.

19 CONCENTRATE DEVELOPMENT Both DIF and TIF facilitate concentrated development in areas in or adjacent to existing downtowns. They make use of existing infrastructure and mass transit.

20 ARE FAIR DIF and TIF provide economic incentives to developers and encourage true economic partnerships between developers and municipalities.

21 EXPAND HOUSING OPPORTUNITIES DIF allows the use of tax increments to fund both affordable and market priced housing projects. TIF can be used as an incentive for housing development in urban centers.

22 INCREASE JOB OPPORTUNITIES By virtue of their economic objectives, TIF and DIF Agreements are directly tied to the creation of new jobs.

23 PLAN REGIONALLY DIF and TIF can satisfy regional needs for industry, consumer services, health care, and employment.

24 FINANCIAL CONSIDERATIONS Both DIF and TIF provide funding mechanisms for development in targeted districts: COSTS: - Planning/administrative BENEFITS: - Increased tax revenues - Improved standard of living

25 FINANCIAL CONSIDERATIONS TIF provides a direct upfront benefit to a Developer in the form of tax relief. The money saved on taxes can pay the project's construction costs. Developers utilizing TIF benefits can also often access other state financial incentives such as Investment Tax Credits, Abandoned Building Tax Deductions and Research and Development Tax Credits.

26 FINANCIAL CONSIDERATIONS DIF provides financial benefits to developers by providing infrastructure and surrounding amenities to support their projects. Early public funding takes the initial burden off the developer and minimizes risk.

27 TIF CASE STUDY Worcester, Massachusetts St. Vincent's Hospital relocation The City entered into a TIF Agreement with St. Vincent's Hospital which enabled the hospital to move to a downtown site and expand, creating the new Worcester Medical Center.

28 TIF: ST. VINCENT S HOSPITAL TIF AGREEMENT: Tax exemptions by declining formula; Term of 18 years; 55 full time jobs; and 41 part time jobs.

29 TIF: ST. VINCENT S HOSPITAL The expectations have been exceeded, with the creation of 117 full time jobs and 215 part time jobs to date.

30 TIF: ST. VINCENT S HOSPITAL

31 TIF: ST. VINCENT S HOSPITAL The new Worcester Medical Center provides needed state of the art medical care to area residents in a beautifully designed setting, with the convenience of a downtown location. It is surrounded by shops, restaurants and a 1900 space parking garage. It offers needed jobs to the community and has greatly increased the city's tax base. At the end of the TIF's term, the city will realize the benefit of the increased tax revenue.

32 DIF CASE STUDY Concord, New Hampshire Redevelopment of 40 acres abandoned lumberyard and adjacent mill building

33 DIF: CONCORD, NH Location was a highly visible location, at the intersection of I-93 and I-393,on the edge of the Concord s downtown. Travelers passing through Concord to mountain vacation spots, saw only the blight. Nothing invited them to explore the otherwise, vital and charming downtown district.

34 DIF: CONCORD, NH PLANNING BY THE CITY: Identified area need for hotel/conference center; Acquired land; Issued bonds; and Partnered with private developer.

35 DIF: CONCORD, NH 99 room Marriott Courtyard and Grappone Conference Center

36 DIF: CONCORD, NH The site now houses adjacent office buildings. The abandoned mill has been converted into elderly housing.

37 DIF: CONCORD, NH Medical Center at DIF Site

38 DIF: CONCORD, NH The owner of the hotel/conference center pay taxes to the city. The city uses the tax increment; the tax revenue due the to difference is the current assessed value the original assessed value to pay off the bond debt.

39 DIF: CONCORD, NH FINAL RESULT: Increased $30 million dollars in tax base for the city; A flourishing project for the private developer; Increased availability of elderly housing; Creation of new jobs, and Prevention of the spread of blight to an attractive site that marks the entrance to Concord.

40 TIF CASE STUDY Leominster, Massachusetts The City of Leominster entered into a TIF Agreement with Star Container Corporation, to encourage Star Container s expansion plans for its packaging facility.

41 TIF: LEOMINSTER Star Container had a long established, successful manufacturing presence in Leominster. The expansion consisted of an additional 54,000 square feet of floor area and the purchase of additional corrugated box manufacturing equipment.

42 TIF: LEOMINSTER TIF AGREEMENT: Eight year term; Front loaded sliding scale of property tax exemptions; and No tax of increment as follows:

43 TIF: LEOMINSTER Year 1: 100 % of the increment Year 2: 90 % of the increment Year 3: 75 % of the increment Year 4: 60 % of the increment Year 5: 45 % of the increment Year 6: 30 % of the increment Year 7: 15 % of the increment Year 8: 0 % of the increment.

44 TIF: LEOMINSTER Star Container invested approximately 6.2 million dollars into the facility and equipment. The Agreement provided for the creation of 25 new full time manufacturing and managerial jobs. 150 existing jobs were retained by ensuring the facility stayed at the existing site.

45 TIF: LEOMINSTER At the end of the TIF period, the City will gain approximately $23, annually in additional property taxes. Star Container is located in the state designated Economic Target Area of Northern Worcester County. Therefore, Star Container can seek other state economic incentives in addition to the TIF Agreement with the City.

46 TIF: LEOMINSTER USE TIF TO ENCOURAGE business compatible with city s needs Leominster uses TIF for manufacturing businesses because: Existing base in manufacturing plastics; Creates jobs, which pay higher than the minimum wage; and Greater economic benefit.

47 MOBD: LINKS: Worchester TIF: Concord DIF: ps/hotelctr Leominster TIF: