TIF and Beyond: City Economic
Development Projects
Patricia Martin, Ahlers & Cooney, P. C.
R. Mark Cory, Ahlers & Cooney, P. C.
1
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
Housing Incentive Options
Urban Revitalization
Pros
Cons
County Assessor takes over
administration
No tax increment is created (meaning all
financial benefits go to the owner)
Easy to amend term/schedules
Attractive schedules if you can meet
requirements
Burdensome to start one
Urban Renewal
Pros
Tax increment is created
Cons
Administration; Limited options for non3
LMI housing
Attractive schedules if:
• Area is designated as blight and you
want to include single family residential
• If housing is for LMI individuals/families
• If building is multi-residential (3 or more
housing units and up to 75% of sq. ft. is
residential)
4
• How attractive? Up to 100% for up to
10 years
–Can be a smaller percentage and
smaller number of years.
5
CITY ONLY INCENTIVE AGREEMENTS
When are these useful?
• Only one parcel is involved
• Mid-level projects
• Or retail
How does a city get this authority?
»Iowa Code section 15A.1
»Must be tied to the creation or retention
of jobs
6
CITY ONLY INCENTIVE AGREEMENTS
Pros
NO UR Plan, no amendments
No UR reporting
Cons
No tax increment is created
No county or school effect because city is Rebates are smaller because city has
only accessing its own taxes
access to only its taxes to rebate
Less complex agreement
Consider whether 384.24A(4) is
applicable. (loan agreement procedure)
7
7
1. Developer (Business) completes a project with an assessed value of at least
X dollars. What is X? X depends on your city. It may be $500,000 for a small
city and $1.0 M for a larger city or some different minimum.
2. Developer (Business) either agrees to retain X jobs and/or create Y new
jobs.
3. Developer (Business) enters into a short development agreement and
Developer annually certifies that:
•
Developer (Business) is still operating the business
•
Developer (Business) has paid all property taxes for this parcel (and all
other
commercial parcels) and
•
Developer (Business) has retained X employees and/or hired Y
employees.
4. If so, Developer (Business) receives a % of city-only taxes or all the city
8
taxes except the City’s debt service levy for X years.
LEAGUE’S “SNAPSHOT OF TAX
INCREMENT FINANCE” SAYS:
1,530 TIF Districts out of 2,528 total TIF Districts had
a base year after 1995 (61%)
and
75% of those had a statutory end date
WHAT DOES THIS MEAN?
9
END OF LIFE DISCUSSION
STARTING FOR ECONOMIC DEVELOPMENT PLANS/AMENDMENTS
ADOPTED
AFTER 1/1/95, THERE IS A 20 YEAR LIMITATION ON THE
COLLECTION OF TIF
“If an urban renewal plan for an urban renewal area is based upon a finding that the area is
 an economic development area and that
 no part contains slum or blighted conditions,
 then the division of revenue provided in section 403.19 and stated in
the plan shall be limited to twenty years from the calendar year following
the calendar year in which the municipality first certifies to the county auditor
the amount of any loans, advances, indebtedness, or bonds which qualify for
payment from the division of revenue provided in section 403.19.” Iowa Code
Section 403.17(10).”
10
EXAMPLE
Question:
What if the City adopted an ED plan on 1/2/95, and adopted a TIF
ordinance on that entire Plan Area on 1/2/95 and the City then
certified debt by 12/1/95, when is the sunset?
Answer:
The last fiscal year to collect tax increment on the area within that
TIF Ordinance (the entire URA) is FY 15-16. Given that we are
currently in FY 14-15, that is our next fiscal year. In fact, under that
scenario, if your last fiscal year to collect TIF is FY 15-16, you would
have to certify by 12/1/14 to get the FY 15-16 increment.
11
First of all: The statutory limit is on the collection of tax
increment within a TIF ordinance of an economic
development urban renewal area.
•
•
•
It is not a limit on the duration of a Plan.
It is not a limit of how long an area can be covered by a
Plan.
It is not applicable to mixed Economic Development/
Blight areas
12
• What to do?
13
14
OPTION:
Take out the undeveloped
land from the urban renewal
area and create a new UR
area using some or all of the
undeveloped land and
perhaps additional
undeveloped land.
15
What have you lost?
The land you cut out gets a new stepped-up
base (January 1 of the year before debt is first
certified) but you may not lose much because
undeveloped land will likely still have a relatively
low base value.
16
When should you do this?
a) Right now
OR
b) Wait until a prospect that wants to build shows
up so you don't waste your money on creating
an URA that is not yet needed or contains the
wrong parcels.
17
What if you guessed right?
If Original Area is all developed,
you don’t need to do anything.
Remember, even if you do
nothing, while the ability to
collect Increment expires on the
Original Area.... you can still use
Increment from the Amendment
No. 1 Area on UR projects in the
Original Area.
18
How to Put Projects on the
Board
19
Sometimes, rebate agreements do not
achieve the desired results.
1. City needs to build infrastructure
2. Project requires cash “up front”
(needs, not developer wants)
3. Other unique circumstances
20
Which play should you run?
21
Joint efforts of City, UR counsel and bond
counsel
22
384.24(3)(q)
Essential Purpose:
“aiding in the planning, undertaking, and
carrying out of urban renewal projects under
the authority of chapter 403… .”
23
384.24(3)(q)
1. G.O. Debt Service Levy Available
2. Requires Valid UR Purpose under Statute and
UR Plan
3. Subject to 10/20 Notice and Reverse
Referendum
4. May or May not Certify for TIF Reimbursement
24
403.12
1. Requires Valid UR Purpose under Statute
and UR Plan
2. GO Debt Service Levy Available
3. 10/20 Reverse Referendum
4. Public Sale
5. May or May not Certify
25
384.24 (not “q” purpose)
Many times, an urban renewal project
undertaking constitutes an essential purpose
on its own, such as a street, water, sanitary
sewer, storm sewer, sidewalk, etc.
26
384.28 allows the council to “elect” which
procedures to follow “when a project or
activity may be reasonably construed to be
included in more than one classification”
under the definitions of essential and
general corporate purposes.
27
Election Considerations
UR Purpose
Standard ECP Purpose
• Clear intent to treat as
UR project
• Easy proof of council
approval
• Less chance of dispute
over reimbursement
eligibility
• 4/20 notice – no reverse
referendum
28
1.
2.
3.
4.
403.9 Urban Renewal Revenue
Requires valid UR purpose under statute
and plan
4/20 hearing
No reverse referendum, but no debt
service levy
Payable only from TIF or other project
income
29
Option Plays
1. Start 403.12/384.24(3)(q) and 403.9 at
same time
2. Conduct two or more ECP and or GCP
purpose hearings in addition to
403.12/384.24(3)(q)
3. 403.9 and multiple G.O. Hearings
30
31
• Questions?
• R. Mark Cory, rcory@ahlerslaw.com
• Pat Martin, pmartin@ahlerslaw.com
1052933
32