05.01 - Conceptual Support for Estab of a TIF

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TAX INCREMENT FINANCING (TIF) M Tax Increment Financing (TIF) uses the increased property taxes generated by new real estate development within a tax increment financing district to pay for certain eligible costs associated with the development... "captured" taxes are used to subsidize eligible project costs such as land acquisition, demolition, public and site improvements, and related consulting and administrative costs. - - -- The value of the property prior to development continues to generate property taxes which are distributed to all appropriate taxing jurisdictions. The City maintains its ability to approve or reject a business subsidy at its discretion, based on the merits of the project and the overall benefit to the community, using the criteria as a means of measuring overall benefit. - - -- At this point, the City is considering the "concept" and by a "yes" vote, agrees the developer can proceed with exploration to see if they fit the required guidelines. The developer pays all costs. The justification for use of TIF rests solely with the "But For" test. A simple way to express this test is that the development or redevelopment would not occur without a tax increment subsidy.... this financing tool has helped to reshape and revitalize many communities. - - -- An independent outside financial firm studies the But For They forward their recommendation to the City and the Council makes the final determination. Types of TIF: Redevelopment, Renewal and Renovation, Housing, Soils Condition, and Economic Development. This project is looking into a Redevelopment TIF which is described as: generally a blighted area containing substandard buildings, sometimes having inadequate streets and incompatible land uses. - - -- The site being looked at must be certified by outside firms as blighted. TIF monies would be used to remove the blight, extend a sewer line, install a force main for sanitary sewer, build a city street, purchase the land under that street, and move a fence. Pay -as- you -go financing: Under this method of financing, the developer pays all costs up front and is reimbursed for eligible project costs over a period of time. Reimbursements are made from tax increment revenues. This financing approach significantly reduces city liability and risk. If the development does not occur or does not reach the levels forecasted, the increment is reduced and less funds are available for reimbursement.