UnderstandingTax Increment Financing

(TIF)

TIF: What is it?

• A local government financing tool that can be used to target development to specific areas to capture new tax dollars to fund the needed public improvements that would not otherwise have occurred.

TIF’s Purpose

• Promote, stimulate and develop the general and economic welfare of Kansas and its communities.

• Assist in development and redevelopment of areas designated as blighted, environmentally contaminated, conservation, and enterprise zones.

-taken from Kansas Statutes

TIF Pays for Public Improvements

• Allows part or all of future growth in property tax revenue resulting from redevelopment to be used to pay for the public improvements involved in a project.

Public Improvements TIF will Finance

• Sanitary and storm sewers and lift stations;

• Drainage conduits, channels and levees;• Street grading, paving, curbing and

guttering;• Street lighting fixtures, connection and

facilities;• Underground gas, water, heating and

electrical service and connections;• Drives and driveway approaches in right-

of-way;

Public Improvements (cont.)

• Sidewalks and pedestrian under and overpasses;

• Water mains and extensions;

• Parking facilities;

• Landscaping and plants, fountains, shelters, benches, sculptures, lighting and similar amenities and;

Public Improvements (cont.)

• All related expenses to redevelop and finance the redevelopment project (such as bond and legal counsel, or other required studies).

TIF Includes:

• Incremental increases in property tax revenues from:– County– City– Unified School District– Any other taxing subdivision levying real property

taxes

• Does not include: state authorized school district levy (20 mills) and state mill levy (1.5 mills).

Calculating the Increment

The department store’s increment

•A soybean field is assessed at $25,000 and generates $853 of property taxes per year.•A developer builds a department store on the grounds, increasing the market value to $1,000,000. The generated property taxes will increase to $34,135.•The increment of property taxes to be used for investment into the TIF district is $33,282.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

Before District/Project After District/Project

The Increment

Base

$853

$34,135

Value of the Increment

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

First Year 20 Years

$33,281

$665,623

All things being equal, the increment over the life of the TIF district will generate $665,623 in property taxes to be used for public improvements within the TIF district.

Possible Use of Increment*

• Construct approximately 6 city blocks with street, curb and guttering

• Extend water, sewer and electric services 2,600 feet

• Allow landscaping of up to $25,000

• Invest $8,595 for other uses allowed in city’s TIF policy

*This is only a hypothetical analysis and should not be construed to be the actual costs of a project. This example is only meant todemonstrate a possible scenario of the use of the increment to fund public improvements in the course of 20 years.Actual project costs will be determined by the city’s engineer and are subject to change and a variety of other variables.

Financing TIF

Types of TIF Bonds

• Special obligation bonds

• Industrial revenue bonds

• Full faith and credit or G.O. bonds

• Private activity bonds

TIF Repayment Options

• Property tax increments generated within redevelopment district; (preferred)

• From revenues of the city derived from or held in connection with the undertaking and carrying out of any redevelopment project or projects;

• Any private sources, contributions or other financial assistance from the state or federal government;

• Increased franchise fees collected from utilities and other businesses using public right-of-way within the redevelopment district;

• Local sales and use taxes collected or; • By any combination of these methods.

TIF Eligibility

Areas Eligible for TIF

• Blighted areas

• Conservation areas

• Enterprise zones

• Must be within city limits

Enterprise Zones

• Areas:– designated prior to July 1, 1992;

– conservation, development or redevelop is necessary to promote the general and economic welfare of such city and;

– typically include properties that are undeveloped and may serve as future industrial/business park sites or residential subdivisions.

-taken from Kansas Statutes

Areas Eligible in the Ottawa Area

Enterprise Zones within city limits

High Priority Enterprise Zoneswithin city limits

Enterprise Zones outside city limits

Areas Eligible in the Ottawa Area:Franklin County

Enterprise Zones within city limits

High Priority Enterprise Zoneswithin city limits

Areas Eligible in the Ottawa Area:City of Ottawa

Areas Eligible in the Ottawa Area: Northeast Industrial Park

Areas Eligible in the Ottawa Area: K-68 Corridor*

*Requires annexation into the city limits

Areas Eligible in the Ottawa Area: 15th and 17th Streets

Areas Eligible in the Ottawa Area: The Granger Property*

*Requires annexation into the city limits

Areas Eligible in the Ottawa Area: Fogle Quarry*

*Requires annexation into the city limits

The TIF Process

The TIF Process

• The City Commission establishes a TIF district by adopting a resolution, holding a public hearing and then passing an ordinance creating the TIF district.

• A redevelopment plan is then created for the project area that is consistent with the comprehensive plan after a resolution, public hearing and ordinance have been adopted by the City Commission.

-taken from TIF policy

Olathe’s Success Story:151st Street

$6.9 million in public improvements

5 commercial entities

214 acres of vacant field developed into commercial district

Questions or Comments?