TIF in Des Moines, IA March 2010 City Manager s Office City of Des Moines
What is TIF? TIF = Tax Increment Financing It s a flexible economic development tool. TIF can only be used in an urban renewal area. (Chapter 403.19/Iowa Code). TIF can only be used for the activities or items described in the urban renewal plan.
TIF in other words. Urban renewal area's property tax base is frozen. All future increases in tax revenues go into a special fund that can be spent only on capital projects within that area. TIF typically lasts 15 to 20 years. Idea is that improvements will generate new tax revenue and leave the city better off than it started.
Where?
NE Economic Development District Respond to needs and opportunities in NE Hubbell Avenue Corridor/HWY 65 area Create new taxable valuation for the City of Des Moines Provide resources to assist with public infrastructure needs (streets, utilities, green infrastructure, watershed management, trails, corridor beautification, traffic signals) Redevelop vacant buildings & sites (eg: Former Homemaker s)
SE Economic Development District Respond to needs and opportunities in the SE 14 th /Army Post Corridors and SuperBlock Area. Promote assembly of vacant lots and blighted properties to encourage redevelopment. Mixed use opportunity nodes (eg:mckinley/yeader Village Area) Create new taxable valuation and reinvigorate full regional potential of retail corridor (2.5M+ SF). Create resource to assist with public infrastructure projects.
TIF Example The frozen base assessment of a property is $100,000 in 2005 when TIF was created. In 2009, the assessed value is $150,000. Yr. Assessed Value Prop. Tax Revenue 2003 $100,000 $4,000 2007 $150,000 $6,000 new property tax revenue = $2,000 The tax increment is $50,000 (new assessment minus the frozen assessment or $150k - $100k). The new tax revenue of $2,000 is available for use in the area.
Who Gets the $? Frozen Valuation of $100,000 in 2005: The $4,000 property tax revenues from the frozen valuation go to: DMPS $1,708 City - $1,581 Polk Co. $652 DMACC - $58 (43% of tax levy) (40% of tax levy) (16% of tax levy) (1% of tax levy) TIF By state law, the city can use all of the new revenue $2,000 on projects in the specific TIF area.
Who Gets the $, Part 2 While the City can use the entire increment, it has chosen to return a portion of the new property tax revenue from the TIF to Polk Co., DMACC and DMPS. In FY2010/11, DM will return about 50% of the TIF to these jurisdictions. The following chart shows an overview of the return of the increment over the past 30 years.
Use and Return of Increment TIF-Used TIF Returned
When does a TIF district end? If the TIF district is: - Slum/blight: Unlimited. (DM limits districts to 30 years.) - Eco. Development/Housing: 10 Years - Eco. Dev./Non Housing: Up to 20 years When TIF ends, the full tax base including the increment, becomes available to all taxing bodies for their use.
In a picture:
When Does TIF Not Work? TIF can go upside-down if the tax base goes below the frozen level. That can happen if buildings are demolished or the property tax assessment is successfully challenged which then reduces the property tax assessment.
Urban Renewal Plan & TIF Roles There are a number of legally-required meetings, notices and documents that must be undertaken before an urban renewal plan and TIF can be adopted by the City Council. (At least 3+ months)
TIF Process in General
Plan & Zoning Commission Duties P & Z has State of Iowa-mandated duties as well as Council ordinance-related duties. The Iowa Code directs the municipality s P & Z commission to make recommendations to its city council on: Whether a proposed urban renewal plan or amendment is in conformity with the adopted comprehensive plan.
Urban Design Review Board Duties As per ordinance, the Board is directed to advise the Council on: The design of public improvements and the exterior design of major projects funded in part with City funds. - Whether a proposed urban renewal project qualifies for funding from TIF under the applicable urban renewal plan - Whether the level of proposed TIF financial assistance for a specific individual project is reasonable and appropriate. The selection of urban renewal sites for clearance or rehabilitation, and problems relating to acquisition, clearance or rehabilitation of property, relocation of displaced persons, and disposition of acquired property. The operation of the skywalk system.
Access TIF for a Project? Project has to be located in a TIF area. Project is real-estate based with an increase in tax assessment. Quality jobs. Project needs to show why TIF is needed; what is the gap. Need to have bank/financing on-board and pro-forma before coming to us.
When Does Project Get the $ Negotiated by City and developer. Has to be TIF revenue in area; may be several years out if in a new TIF area (and not assured that $ are there). Typically done over several year time period; not a lump sum.
East Locust Streetscape 2003 New streets, sidewalks, light fixtures and street trees from the Des Moines River to State Capitol area. TIF Investment: $2.8 million Over $50 million in building permits since 2003.
Successful relocation of family owned industrial business to Guthrie Avenue Business Park Previous site purchased for SE Connector project Retention of 15-20 specialized manufacturing jobs; also created ability for future expansion and additional jobs. $1.3M New Facility Central Wire and Iron
Downtown Housing Conversions
New Development Airport Commerce Park West Developer fronted the public infrastructure costs up to a maximum of $3.875M. The developer is repaid from TIF generated annually.
13 new buildings Frozen Base 1995 Valuation: $77,310 Current Valuation: $45.7M Results so far: Airport Commerce Park West
Thank you Matt Anderson Office of Economic Development 400 Robert D. Ray Drive Des Moines, IA 50309 maanderson@dmgov.org 515-283-4012