Understanding TIF University Heights City Council April 28, 2015 Peter Fisher The Iowa Policy Project

How TIF Works $2 m building built in 2011 on a $.5 m lot

How TIF Diverts Taxes City Tax: $40,000 County Tax: $20,000 School Tax: $45,0000 City General Fund County Funds School Funds $10,000 $30,0000 $5,000 $15,000 $30,000 City TIF Fund $75,000 TAXES COLLECTED WHERE TAXES END UP

The Original Rationale for TIF To be used in blighted urban neighborhoods. Recognizes that cities, not schools or counties, have the major responsibility for facilitating and regulating development. Cities assume some risk in financing or assisting the redevelopment of blighted areas. But if the redevelopment is a success, schools and counties benefit from higher tax base. So: TIF allows cities to be repaid for their investment first; then when the project is paid for, the TIF ends and the tax base is fully available to all local governments.

Solon TIF Areas

In Three Cities, Over Half of the Tax Base is tiffed

TIF as a Cash Cow: Share of Property Taxes from TIF

For Some Cities, the TIF Fund has become a Second General Fund or a Substitute for the Debt Fund Shueyville Fiscal Year 2012 TIF fund is over 5 times as large as the general fund. What TIF revenue is used for: City hall/community center 12 th street project

Overlying Entities Means TIF will Shift Taxes Outside the City

How TIF Shifts Taxes

Percent of Property Taxes from Outside the City

Coralville TIF Areas Coral Ridge Mall – Highway 6 Combined Area (blue) Other Areas (cross-hatch) TIF $

Mall/6 TIF: Where Taxes Go, With and Without TIF Diversion

Mall/6 TIF Forces County & School Property Taxes Higher

Responsible TIF Use Project Based: All diverted revenues are used to repay the costs of the original project causing the development (e.g., infrastructure for Coral Ridge) or are rebated to developer (e.g., Plaza Towers in I.C.) When those project costs are paid, the TIF diversion ends. Rebates do not exceed what is justified No continued use of TIF to finance projects elsewhere that couldn’t stand on their own. No use of TIF to pay general costs of city government, tax exempt facilities, lobbyists, etc.

Questions to Ask Will the project itself generate sufficient revenue to pay the TIF project costs? (If it is a rebate, the answer is yes.) Is there a public benefit from this project, or are there features that the city is demanding that the developer would not otherwise incorporate? Does the project really need incentives, or does it need all of the incentives requested? If it does need incentives to be profitable, why should the city subsidize a project that the market cannot support?