What is a TIF
District?
The
City of Columbia is in the process of exploring a Tax Increment Financing (TIF)
District in the central city area. We've had a number of single TIF projects
here in The District already.Tax Increment Financing (TIF) is a way to help encourage the development of catalytic projects, particularly in a downtown area. A TIF leverages the future taxes a project will create in order to help fund the project.
Single Project TIFs.
How exactly does a TIF work?
First, the property tax assessments are frozen at current levels. All taxing entities--city, schools, and the county--continue to receive the same amount of property tax revenue as they do right now. Only the increase in property taxes goes to the project.
Second, the sales taxes are also frozen at current levels--but the increases are split between the project and the taxing entities. Any taxing entities receiving sales tax will continue to receive their current amount plus 50% of increase in sales taxes generated by the project.
The increase in taxes is used to pay off a portion of the developer's loan, usually 15-19%. TIFs usually take between 15 and 23 years to pay off, although a successful project can be paid off even sooner. When the loan is paid off, the tax revenues increase to their new levels and everyone benefits by receiving those additional revenues.
TIF Districts.
Structurally, TIF Districts are similar to single project TIFs except that they gather multiple properties into a district in order to fund a wide range of projects throughout that district.
Instead of simply taking the increase in property and sales taxes from one property, the district pools together the increased taxes from every property within the district. Simply put, a TIF District will capture 100% of the property tax increases and 50% of the sales tax increases from everyone in the TIF District.
These funds are then used to pay for both public and private projects, ranging from key infill developments to improved stormwater systems to new or repaired infrastructure. A TIF Commission decides which projects are funded based on a pre-approved set of criteria.
TIFs and CIDs.
How
does a TIF District affect the CID?
It's likely that all or part of the CID will be included in a proposed TIF District (no map has been drawn at this point). It's necessary to include commercial properties within a TIF District because residential properties simply do not generate enough in tax revenue to fund major projects.
Because the CID (unlike the SBD) is funded by property assessments rather than property taxes, those funds should not be impacted. Sales tax revenues, however, will be impacted. Half of all new sales taxes collected will go to the TIF District.
These captured sales tax revenues will be used for projects throughout the TIF District--possibly outside the CID as well--at the discretion of a TIF Commission. The CID will have input into which projects are funded but this decision will not be up to the CID.
On the positive side, a TIF District can encourage new, catalytic development projects within the CID and may also help upgrade our infrastructure. More growth and more infrastructure improvements in the central city area will help us in the long run.
The CID Board has not yet taken a position on TIF Districts and is currently working with the city as they flesh out a proposal.
Come Learn More.
The city is hosting an informational session on TIF Districts and we encourage all our members to attend. Speakers will include a representative from Grand Center in St. Louis (a successful TIF District) as well as a representative from Stifel Nicolaus who can elaborate on the technical aspects of TIF DIstricts, inlcuding how they impact CIDs.
Join us from 5 to 7 p.m on Tuesday, June 26th at the City Council Chambers.
We will also continue to keep everyone posted as the city progresses on this.
