Tax Increment Financing ( TIF ) Overview January 25, 2013 3TB Project Review
Agenda 1. What is Tax Increment Financing? 2. TIF in the City of Pittsburgh 3. TIF Case Studies 4. TIF Projects (In the Pipeline) 3TB Project Review - # 2
What is Tax Increment Financing? Tax increment financing (TIF) allows local governments to invest in infrastructure and other improvements and pay for them by capturing the increase in property tax revenues. The increase in taxes generated by the enhancements, also known as increment, is used to pay the public debt incurred while making these improvements. More simply put Tax increment financing (TIF) captures the future tax benefits of real estate improvements to pay the present cost of those improvements. Source: CDFA.net/cdfa/cdfaweb.nsf/pages/tifcbuildingresources.html 3TB Project Review - # 3
What is Tax Increment Financing? $1,500,000 Example: The first ("base ) year taxes on property value for the project = $500,000 The subsequent year taxes (post-development) gradually increases to = $1,500,000 The TIF project captures the property tax on the increase in value e.g., the "tax increment" of $1,000,000 The TIF project is able to utilize the increment to pay for the approved TIF project (or debt issued to do such) The taxing bodies continue to receive the taxes on the $500,000 while the increment continues to rise. $500,000 Year 1 Base Year Tax Increment (to Pay Debt Service) Fixed Tax Allocation to Taxing Bodies New Tax Base Year 20 3TB Project Review - # 4
What is Tax Increment Financing (TIF)? Decreased federal and state funding for redevelopment-related activities have forced local governments to identify creative solutions, such as TIF, to address redevelopment. TIF is used in 49 states and the District of Columbia. Generally used to address blight and deterioration, promote neighborhood stability and inspire district-oriented economic development or redevelopment. Source: CDFA.net/cdfa/cdfaweb.nsf/pages/tifcbuildingresources.html 3TB Project Review - # 5
What is Tax Increment Financing (TIF)? Increment can fund capital and professional costs including but not limited to: Site preparation costs Paving Sanitary Sewer / Water Public Use Facilities Parks & Recreation Facilities Streets & Street Lights Parking Facilities Architectural/ Engineering / Planning / Legal Environmental impact studies Operation and Administration of the zone Financing Source: CDFA.net/cdfa/cdfaweb.nsf/pages/tifcbuildingresources.html 3TB Project Review - # 6
What is Tax Increment Financing (TIF)? Pay-As-You-Go vs. TIF Debt TIF Debt is NOT an obligation of the City, County, nor School District Project-Specific vs. District-wide TIFs But For test Source: CDFA.net/cdfa/cdfaweb.nsf/pages/tifcbuildingresources.html 3TB Project Review - # 7
Agenda 1. What is Tax Increment Financing? 2. TIF in the City of Pittsburgh 3. TIF Case Studies 4. TIF Projects (In the Pipeline) 3TB Project Review - # 9
URA TIF Guidelines and Application 3TB Project Review - # 10
URA TIF Guidelines and Application (Excerpt) Exhibits Allegheny County TIF Guidelines, April 27, 2010. City of Pittsburgh Code 201.11 Tax Increment Financing. P.L. 465, No. 113, 53 P.S. Section 6930.1, et seq. Pittsburgh School District Resolutions Three Taxing Bodies TIF Policies Checklist URA TIF Project Application Annual Jobs Report Form 3TB Project Review - # 11
Sample TIF Process Receive TIF Application by Developer or Initiated by URA Define Project Determine Project Eligibility & Funding Gap BUT FOR Estimate Post-Development Taxes Obtain 3TB Initial Approvals to Study TIF as Financing Tool Draft TIF Plan; work with TIF Committee Commission 3 rd party Reports Obtain County and School District Final Approvals Public Hearing Obtain City Council Final Approval Arrange for Project Funding 3TB Project Review - # 12 Apply TIF Funds to the Project
URA TIF Guidelines and Application (Excerpt) TIF Plan: Per the PA TIF Act and URA Guidelines, the TIF Plan will include the following: Background on the project applicant Description of the proposed development Reference to the redevelopment area Estimated costs of the proposed development (including public infrastructure) Market analysis of the proposed development Economic and fiscal impact of the proposed development (during construction and at build out) Employment impact of the proposed development (during construction and at build out) Improvements to be financed with TIF proceeds TIF amount Pledged parcels within TIF District Current assessed value and tax base Projected assessed value Projected pledged revenue Provisions for insufficient TIF revenues and excess tax increment Other financial details of the TIF Estimated non-project costs Maps of the TIF District and existing property conditions Proposed changes to all applicable local plans, ordinances and codes Statement on community engagement Statement of M/WBE participation Statement of sustainability goals Statement of proposed method for relocation (if applicable) TIF District establishment date Duration of TIF District 3TB Project Review - # 13