OVERVIEW OF URBAN RENEWAL AND
ECONOMIC DEVELOPMENT
IOWA MUNICIPAL PROFESSIONALS
INSTITUTE
July 23, 2013
Patricia J. Martin & Kristin Cooper
Ahlers & Cooney, P.C.
100 Court Avenue, Suite 600
Des Moines, IA 50309-2231
pmartin@ahlerslaw.com; kcooper@ahlerslaw.com
Telephone: 515-246-0350 Pat 515-246-0330 Kristin
FAX: 515-243-2149
CAVEAT
This Guide is intended for general informational
purposes only. Answers to legal questions about
Iowa urban renewal law can vary greatly
depending upon the specific facts in a given
situation. Please consult an attorney.
2
WHAT IS TIF?
• Tax Increment Financing
• Concept is to capture the incremental
(increased) taxes generated from the
construction of buildings/expansions
 Frozen base (everyone shares in the base)
 Tax Increments generated (new value less base)
 Everyone benefits -- eventually
3
HOW TO COMPUTE TIF?
• New Value After Improvements
• Frozen Base Value
• Difference in Assessed Value
Combined Tax Levy =
Debt Service Levy
and School’s PPEL
& ISPL
=
Net TIF Levy
$2,000,000
$1,500,000
$ 500,000
$32/$1,000
$ 4/$1,000
$28/$1,000
Net TIF Levy times Difference in Assessed Value = Tax Increment
$28/$1,000 x $500,000 = $14,000 Tax Increment per year
4
WHAT HAPPENS WITH VARIOUS
TAXES?
INCREMENTAL TAXES
PPEL
ISPL
DEBT SERVICE LEVIES
JOINT CITY-COUNTY
BLDG
TAXES ON BASE VALUE
Potential TIF $$
Will be Increased
Will be Increased
Will be Increased
Will be Increased
No Change
5
WHEN IS TIF?
FROM PROJECT COMPLETION TO TAX COLLECTION
HOW THE SYSTEM WORKS
2013
2014
2015/2016
CAUTION
Project Completes Summer 2013_
Assessed 01-01-14
Taxes Based on 01-01-14 Valuation Will
Not Be Paid Until Fiscal Year 15-16
Until And Unless Incremental Taxes Are
Collected (Which Could be Even Later Than
Fiscal Year 15-16) There Are No TIF
Reimbursement Dollars to Spend
6
WHY IS TIF?
• Iowa Code Chapter 403 and 15A combine to give
City authority for grants, loans, tax rebates to
private entities
• Iowa Code Chapter 403 gives City authority to use
Tax Increment for public infrastructure that
promotes Economic Development
• 6 types or designations are available for UR Areas
• The types are described in an UR Plan: slum;
blight; economic development(C&I), ED(LMI
housing), and ED (non-LMI housing); mixed.
7
WHERE IS TIF?
• TIF can be used for Urban Renewal projects
that are authorized within the UR Area that
has been designated by the UR Plan within the
time allowed under law.
• Therefore the first question is: Is the property
on which the Urban Renewal project will occur
(roads built or building constructed) within a
current UR area?
8
HOW IS TIF?
In order to receive the right to use TIF or Tax
Increment, the City goes through a plan or
amendment adoption process in order to
receive the legal authority to use tax revenues
from affected taxing entities (school and
county).
9
COUNCIL/BOARD
•Resolution to set
hearing
•Receive reports
on consultation
•Refer to P&Z
(not required for
amendments)
•Receive report
from P&Z (not
required for
amendments)
•Hold consultation
•Hold Hearing
Hold
Consultation
•Draft UR Plan
is approved by
Staff and
Counsel
•Send copy of
resolution,
•and notice of
consultation to
affected taxing
entities.
AFFECTED TAXING
ENTITIES
P&Z
(not required for
amendments)
•Written
response to
consultation
parties
•plan,
ASAP (new plan only)
CLERK/
AUDITOR OR
DESIGNATED
STAFF
•Obtain written
permission of all
Ag owners and
city/county
joint agreement
(if applicable).
•Receipt by P&Z
(new plan only)
•Pass Ordinance
•Report to
Council/Board
•Publish
Ordinance
•Record Plan
•Written
comments about
plan.
NOTMORE THAN 30 DAYS
•P&Z report to
council/board
(new plan only)
10
WHEN IS TIF?
• How long can you collect TIF?
• It depends of the designation or type of area;
and
• It depends on when the property that the
project is located on was put in the Plan; and
• It depends on what the Plan says
11
SUNSETS
• Slum and Blight —no statutory sunset, plan
dictates
• Econ. Dev. (Comm./Ind) (post-1/1/95 plans) (and
no part is slum/blight)
20 years from calendar
st
year after 1 certification of debt
• Mixed Econ. Dev. and Blight--no statutory sunset,
plan dictates
• Econ. Dev. (LMI
housing) 20 years from calendar
st
year after 1 certification of debt
• Econ. Dev. (NON-LMI housing) 10 stfiscal years
starting with 2d fiscal year after 1 certification of
debt, (can extend to 15 years with consent of
other taxing entities if city is under 15,000
population)
12
WHAT CAN TIF REIMBURSEMENT BE USED FOR?
1.
2.
3.
4.
Is the Project within an Urban Renewal Area (exception: LMI
Match Urban Renewal Project)?
Does the Project qualify under Iowa Law? Iowa Code 403.6; Iowa
Code 403.12
Is the Project adequately described in the Urban Renewal Plan?
Will the Project achieve approved goals?
Eliminate Slum.
Eliminate Blight.
Create or Retain Jobs or Income.
Provide housing for LMI families.
Provide Public Improvements for non-LMI housing
development.
13
Best practices
TIF is a reimbursement statute
Life cycle charts (how to handle interfund loans)
14
Think About TIF Authorization a Little
Differently
• TIF is a REIMBURSEMENT PROCESS. The City or County
certifies “loans, advances, indebtedness or bonds.”
• Tie these 3 things together:
1. Authority for the UR Project in the Plan (description and
dollar amount).
2. Resolution by Council/Board approving the expenditure
as an UR Project, authorizing payment, and qualifying it
be included in December 1 certification to county.
3. December 1 certification to the county auditor of the
expense.
15
Life Cycle of TIF
Advances
Fund with Available
Balance (Not 403.19
Special Fund)
403.19 Reimbursement
Paid into Special Fund and
Transferred into Fund
where Advance Originated
403.19 TIF
Certification
Governing Body
Approval of UR
Project and Advance
Incremental Taxes
Available
Governing Body Finding of
Qualification for
Reimbursement (if not
approved along with project)
16
Reimbursement Process for
Loans, Indebtedness or Bonds
Governing Body Approval of Loan, Indebtedness or Bond
Governing Body Approves Use of Loan Indebtedness or Bond Proceeds for UR Project Expenditure
Incremental Taxes Available
Governing Body Finding of Qualification for Reimbursement (if not approved with project)
403.19 TIF Certification
403.19 Reimbursement Paid into Special Fund and Used to Pay or Reimburse Loan, Indebtedness
or Bond Fund
17
17
TWO KINDS OF HOUSING AREAS
ECONOMIC DEVELOPMENT –
LMI HOUSING AREA
• This is an area where the city or county wants to promote development or
construct improvements to promote housing opportunities for ONLY LMI
persons.
• Still get a 20 year sunset
• Housing for LMI
– Documentation that income of residents meets LMI maximum
– Documentation that the housing is affordable to LMI residents
• Can use Tax Increment for a variety of purposes (land purchase, rebates of
increment, loans, grants, etc.)
18
NON-LMI HOUSING
ECONOMIC DEVELOPMENT –
INFRASTRUCTURE FOR NON-LMI HOUSING
This is an area where a city or county wants to
help fund the cost of Public Improvements to
serve housing that is too expensive for LMI
persons. This type of area should be mixed with
any of the other types only when the effect that
it might have is fully understood and accepted.
19
NON-LMI HOUSING
•
Can only use TIF for reimbursement of Public
Improvements (as defined in Iowa Code)
Have to set aside LMI funds equal to the percent of LMI
residents in the county or audit the income of residents
or provide units within the UR area affordable to LMI
residents
•
–
–
–
LMI Set-Asides can be used for a variety of purposes to assist
with LMI housing (lots, interest rate buy down, etc.)
LMI set aside fund can be used anywhere in the municipality
Sunset restriction (approx. 10 years unless municipality is less
than 15,000 in population and county and school consent to
up to an additional 5 years)
20
2012 Amendments to UR Law
21
2012 UR Amendments
Urban Renewal Report
• Must be completed for each UR Plan and Area
in effect during the most recently ended fiscal
year
• Affirmative vote of Council/Board
• Submit electronically by December 1 following
the fiscal year
22
Urban Renewal Report
• Very detailed – 21 paragraphs of information,
including:
– Area designation; submission of all ordinances and
amendments to UR Plan; maps
– List of all UR Projects in process and completed
– List of all expenditures from special fund and the relating
UR Project
– Amount of property taxes rebated and list of those
properties
– Assessed value of UR Areas, portion of assessed value used
to calculate incremental taxes, and portion “released” to
other taxing entities
• Now on the DOM website
23
Consequence for Reporting NonCompliance
• Urban Renewal Report & Annual Financial Report
• Due by December 1 following end of fiscal year
• Prior to publication and adoption of budget for
fiscal year after December deadline
• Otherwise: Department of Management will
not certify city or county’s taxes back to county
auditor
24
Amendments to Urban Renewal Plans
• Urban Renewal Project must be included in the
plan or an amendment to plan
–
–
–
–
–
Public improvements
Development Agreements
Conveyance or Acquisition of Property
Blight Remediation
Planning, engineering fees, attorneys fees and costs
• No Planning & Zoning review for amendments
(just for new plans)
25
When to Amend?
• As needed; and/or
• Annually
26
Relocation of Business Limited
• Cannot use TIF Reimbursement for Urban Renewal Projects
that include the relocation of a business from county or
contiguous county
• 2 exceptions
– Written agreement between the two municipalities
– Finding that relocation is “in the public interest” (out of state
move)
• “Relocation”, closure or substantial reduction of existing
operations
• And start up of substantially the same operation in the
same county or a contiguous county
• Does not limit “expansion” as long as no closure or
substantial reduction of existing operation
27
TIF Audit and Certificate of Compliance
• Each city or county audit includes examination
of TIF compliance under section 403.19.
• City/County must annually certify compliance.
• State Auditor will provide information and
rules on this certification
28
Changes to TIF Certification
• TIF Certification must also include
– Interest negotiated
– Amounts which qualify for payment from TIF in
the next fiscal year and any subsequent fiscal year
29
Using TIF for Public Buildings
• If proposed Urban Renewal Plan or
amendment includes use of TIF for
a public building:
– Analysis of alternative development
options and funding must be included
in proposal
– Show such alternatives are “less
feasible” than using TIF for the
project
– Also include with annual Urban
Renewal Report
•
•
•
•
•
•
•
•
•
Police Station
Fire Station
Administration Building
Swimming Pool
Hospital
Library
Recreational Building
City Hall
Other public building
exempt from taxation
30
No Redetermination of Area Type
• Urban Renewal Areas can no longer be
redetermined once they are designated.
• i.e. Cannot amend a pure economic
development plan to include a blight area.
31
Surplus Balance in Inactive Funds
• If the necessity for the TIF special fund ceases to
exist and a balance remains:
– Assume the special fund “ceases to exist” upon the
expiration of the ability to collect increment in the Area.
If so:
• Balance cannot be transferred to another fund
• Balance must be paid into the funds for the respective
taxing districts
32
Use of Interest Earned on TIF
• Interest earned on amounts in special fund
must be deposited into the special fund
• Net proceeds from sale of assets purchased
using TIF money shall be deposited in special
fund.
• No transfers are allowed from the special fund
except for payment of loans, advances, etc.
that qualify for payment from the special
fund.
33
ALTERNATIVES TO TIF
URBAN REVITALIZATION
ORDINANCE FOR INDUSTRIAL
ABATEMENT
REBATE CITY ONLY TAXES
34
Development Agreements
• What is a Development Agreement?
• Must be sure that:
– Development Property is in Urban Renewal Area
– Specific project authority in Plan (given 2012
legislation)
– Grants/benefits will not be cut short by sunset
– Ordinance allowing for collection of increment
35
Development Agreements
• Types of Development Agreements
– Rebate Agreements (Lower risk)
• not 100% of taxes paid
– Up Front Incentives (Higher Risk)
• Forgivable loan
• Up front cash payment
• Infrastructure improvements
• Key parts of Development Agreements
– Timing of rebates, grants
– Benefit to City (job creation/retention, building)
– Nonappropriation language
36
QUESTIONS?
Contact Information:
Patricia J. Martin (515) 246-0350
Kristin Cooper (515) 246-0330
Ahlers & Cooney, P.C.
pmartin@ahlerslaw.com
kcooper@ahlerslaw.com
953271
37