TIF & Property Taxes

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TIF & Property Taxes

  1. 1. A strategy to provide property tax relief in East St. Louis 200 N. Broadway  Suite 1000  St. Louis, MO 63102  (314) 231-7318 By Mike Weber, Director PGAV URBAN CONSULTING
  2. 3. <ul><li>TIF is designed to induce private sector investment in redevelopment projects. </li></ul>
  3. 8. How TIF Works <ul><li>TIF district is established by City Ordinance (the City has 7 TIF districts covering almost the entire City) </li></ul><ul><li>Property taxes are then distributed in two ways: </li></ul><ul><ul><li>Tax on base assessed value goes to taxing districts </li></ul></ul><ul><ul><li>Tax on gains on assessed value goes to special TIF fund </li></ul></ul>
  4. 10. How TIF Works (graphic illustration)
  5. 11. Streets, Sewers and Other Public Improvements
  6. 12. TIF & Public Works <ul><li>TIF funding for new streets & other public works should be in support new private development. </li></ul>
  7. 13. TIF & Public Works <ul><li>When possible TIF can fund street improvements in existing neighborhoods. </li></ul>
  8. 14. TIF & Public Works <ul><li>TIF is NOT intended or designed to serve as funding source for normal maintenance and reconstruction of streets and utilities. </li></ul><ul><li>While the need for new streets and sewers is enormous, TIF can only cover a small portion of the costs (see next chart ) . </li></ul><ul><li>TIF dollars must be spent within the TIF district generating the TIF dollars. </li></ul>
  9. 16. Why are property tax rates so high in East St. Louis?
  10. 17. Property Taxes <ul><li>Property tax rates are determined by dividing the tax levy request by the rate setting “equalized assessed value” (EAV) within the taxing district. </li></ul><ul><li>The higher the rate setting EAV, the lower the tax rate. </li></ul><ul><li>If there is no growth in EAV over time, tax rates will tend to go up. </li></ul>
  11. 18. Tax Rate Computations <ul><li>1986 Tax base (assessed valuation): $50,000,000 </li></ul><ul><ul><li>1986 levy request: $1,000,000 </li></ul></ul><ul><ul><li>Tax rate to generate levy request: $2.00 /$100 AV </li></ul></ul><ul><li>2006 Tax base: $50,000,000 </li></ul><ul><ul><li>2006 levy request: $1,800,000* </li></ul></ul><ul><ul><li>Tax rate to generate levy request: $3.60 /$100 AV </li></ul></ul><ul><ul><li>* The 2006 levy request reflects inflation between 1986 and 2006. </li></ul></ul>
  12. 19. Property Taxes (a comparison) <ul><li>A $75,000 home in East St. Louis would pay in the range of $3,100 to $3,500 in property taxes. </li></ul><ul><li>In Fairview Heights , the same home value would result in $1,700 in taxes. 1 </li></ul>1 based on tax rate for tax code 08040
  13. 20. Contributing Factors to High Taxes <ul><ul><li>Population loss of 9,400 between 1990 & 2000. </li></ul></ul><ul><ul><li>Loss of 1,880 occupied housing units between 1990 & 2000. </li></ul></ul><ul><ul><li>ALL INCREASES IN PROPERTY VALUE BENEFITS PRIMARILY THE TIF FUNDS. </li></ul></ul><ul><ul><li>More than ½ of the City contains tax exempt or vacant lots . </li></ul></ul>
  14. 24. Contributing Factors to High Taxes <ul><li>Exemptions & TIF Constrains Tax Base: </li></ul><ul><ul><li>Total Assessed Value $170 million </li></ul></ul><ul><ul><ul><li>Less exemptions 33 million </li></ul></ul></ul><ul><ul><ul><li>Less TIF Increment Value 89 million </li></ul></ul></ul><ul><ul><li>Net Taxable Value $48 million </li></ul></ul><ul><li>Only 28% of the City’s assessed value is available for normal taxation. </li></ul><ul><li>Between 2003 and 2006, the City’s net taxable value has dropped by nearly $900,000 </li></ul>
  15. 26. Dissolve & Reduce TIF Districts <ul><li>Over 50% of the City’s tax base is dedicated to the various TIF funds. </li></ul><ul><li>By dissolving and reducing the size of the TIF districts more of the tax base will be available to generate revenue for all affected taxing districts. </li></ul><ul><li>With a larger rate setting EAV, tax rates should go down. </li></ul><ul><li>Expected property tax savings: 19% to 26% </li></ul>
  16. 28. Effect on $75,000 Home <ul><li>Current: </li></ul><ul><ul><li>2006 tax rate for tax code 01099 12.9186 </li></ul></ul><ul><ul><li>Total property tax bill $3,230 </li></ul></ul><ul><li>Move $31 million EAV from TIF Districts: </li></ul><ul><ul><li>Tax rate with added tax base 10.4677* </li></ul></ul><ul><ul><li>Total property tax bill $2,617 </li></ul></ul><ul><ul><li>Savings of $613 </li></ul></ul><ul><ul><li>*Assumes all taxing districts keep levy requests in line with recent trends. Also assumes loss of School District GSA is made up by increased levy. </li></ul></ul>
  17. 30. Effect on $75,000 Home <ul><li>Current: </li></ul><ul><ul><li>2006 tax rate for tax code 01099 12.9186 </li></ul></ul><ul><ul><li>Total property tax bill $3,230 </li></ul></ul><ul><li>Move $50 million EAV from TIF Districts: </li></ul><ul><ul><li>Tax rate with added tax base 9.673* </li></ul></ul><ul><ul><li>Total property tax bill $2,418 </li></ul></ul><ul><ul><li>Savings of $812 </li></ul></ul><ul><ul><li>*Assumes all taxing districts keep levy requests in line with recent trends. Also assumes loss of School District GSA is made up by increased levy. </li></ul></ul>
  18. 31. Actions Required & When Effective <ul><li>City Council needs to pass ordinances dissolving and reducing size of TIF districts. </li></ul><ul><li>If accomplished in 2007, it will affect tax rates in 2008. </li></ul>
  19. 32. Other Considerations <ul><li>The City will continue to use TIF to induce private development and redevelopment projects. </li></ul><ul><li>If needed, new project-based TIF districts will be created. </li></ul><ul><li>The effectiveness of property tax relief is predicated on all affected taxing districts cooperating with the City in this effort! </li></ul>

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