08-27-1984 Council Packet - Laserfiche WebLink

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SUMMARY The basic concept behind tax increment financ- ing is to utilize the new tax revenues generated by a completed development to pay for certain develop- ment costs, such as land acquisition and site improve- ments, thereby allowing the Authority to stimulate private development which might not otherwise occur. The difference between the taxes before devel- opment and the increased taxes after development is referred to as the "tax increment." By following the procedures described in this report, this anticipated tax increment can be used by an Authority to finance certain development costs. For example, a Housing and Redevelopment Authority (HRA) may elect to encourage the redevel opn.ent of a particular blighted area by providing tax increment financing. In order for the HRA to provide tax increment financing it must create a General Dis- trict, and within it, a Tax Increment Financing Dis- trict which includes the particular blighted area. The newly created TIF District could contain several indi- vidual properties which are to be redeveloped, oi,e of which might be a property with a vacant and deterio- rating structure currently producing $2,500 per year in property taxes. PUTsuant to the Act, the Authority could pledge tax increments, and issue tax increment bonds, for all public redevelopment costs associated with the prop- erty. Therefore, the Authority could acquire the prop- erty, prepare thc- site for development, which could include removal or rehabilitation of the existing struc- ture, and then sell the property to a private developer for a specific purpose. The Authority could sell the property at a price which would reflect the new "fair market value" (usually lower than the actual market value). Upon completion of the new development by the private developer, the County Auditor would record the increased assessed value and levy a higher property tax. If the assessment reflected a property tax levy of $43,500, the tax increment would be $43,000 ($45,500 minus the original $2,500 property tax). The $43,000 tax increment would be pledged, together with tax increments collected from other properties within the TIF District, to the repayment of the tax increment bonds which had been issued to finance the initial acquisition and improvement of the TIF District. As shown in the above tax increment calculation, the taxing jurisdictions within the TIF District would still receive the original property tax, posPibly more if the entire tax increment was not needed for the repay- ment of the bonds. However, upon repayment of the bonds the taxing jurisdictions would receiv- the ejAire property tax --venue. In the meantime, the Authority would have removed or rehabilitated several unsightly buildings, developed new facilities, increased the tax base of the City, and probably created new employ- ment within the City.