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Downtown & Infill Tax Increment Districts


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How to successfully utilize Tax Increment Financing (TIF) on downtown and infill real estate development projects. Presentation made by Ben Zellers to the American Planning Association Wisconsin conference in June 2014.

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Downtown & Infill Tax Increment Districts

  1. 1. Downtown & Infill Tax Increment Districts: Strategies for Success APA-Wisconsin Conference June 2014 Presented By: Ben Zellers, AICP, CNU-A
  2. 2. 10 Tips for Downtown & Infill TIDs 1.Downtown & redevelopment TIDs typically require longer timeframes and greater resources than other types of TIDs. •Most downtown TIDs should be created as “Blight Elimination” TIDs (27-year lifespan) and not “Mixed-Use” TIDs (20-year lifespan). •If possible, maximize your TID’s life by delaying the formation of the district until you have an increment-generating project ready to develop. •Planning expenses can be incurred prior to the formation of the TID.
  3. 3. Case Study: Village of Shorewood Hills •Neighborhood Plan.
  4. 4. Before increment- generating project
  5. 5. Raingarden terrace Pervious pavers LED Streetlights Terrace trees Benches & trash receptacles Bike racks After
  6. 6. •Surface parking •Very little greenspace •Green roof •Solar panels •Increased greenspace
  7. 7. Case Study: Village of Shorewood Hills Insert Arbor Crossing Pics
  8. 8. 10 Tips for Downtown & Infill TIDs 2.Understand risks associated with the timing of the TID’s expenditures. •Too much up-front investment with no solid development prospects can quickly turn into cash flow problems. •Match planned public improvements with private development projects to make sure there is sufficient increment to pay back the investment. •Don’t count on changes to state law to bail out underperforming TIDs.
  9. 9. Case Study: Village of Shorewood Hills •TID #3: created 2008 Streetscape: Spring 2010 Streetscape, Water, Sewer: Summer 2013 Add Lane & Bury Power Lines: Summer 2012 Bike path extension, stormwater improvements: Spring 2014 Redevelopment Assistance: Fall 2012
  10. 10. 10 Tips for Downtown & Infill TIDs 3.Evaluate all TIDs in your community to determine how they can work together to accomplish the community’s development goals. •Successful TIDs can be amended to share revenue with blight elimination TIDs.
  11. 11. Case Study: City of Monona •Amended successful TID #2 (along Beltline) to provide funds to struggling TID #4 (a blight elimination TID along Monona Drive). City of Monona: TID #2 and TID #4 Year TID #2 Projected Annual Surplus TID #4 Projected Annual Deficit 2011 $1,193,505 $(256,771) 2012 $1,213,247 $(269,728) 2013 $330,397 $(320,755) 2014 $429,733 $(306,464) 2015 $441,183 $(311,808) 2016 $789,134 $(315,629) 2017 $1,385,136 $(323,416) 2018 $1,556,406 $(1,280,619) 2019 $(1,164,586) 2020 $(228,539) 2021 $(280,455) 2022 $(253,845) 2023 $(208,855) 2024 $(216,802) 2025 $(191,443) 2026 $(215,020) 2027 $(125,439) Total $7,422,537 $(4,690,512)
  12. 12. 10 Tips for Downtown & Infill TIDs 4.Stay up-to-date on the status of your community’s TIDs and be ready to adapt to changing circumstances. •Annual reports are required by WI DOR – review reports to see how expenditures compare with increment generated and debt service payments. •Boundaries can be amended up to four times; project plans can be amended an unlimited number of times. •Know where you are with respect to 12% limit.
  13. 13. Case Study: City of Middleton Subtraction #1 Subtraction #2 Downtown Middleton
  14. 14. 10 Tips for Downtown & Infill TIDs 5.Allow sufficient time for development agreements to be negotiated. •Agreements are required when providing assistance to a developer. •Agreements for redevelopment projects are generally more complicated due to parcel assembly, relocation, environmental contamination, and other issues. •Start early by developing a draft term sheet at the beginning of a project.
  15. 15. Case Study: City of Stoughton •Environmentally contaminated parcel. •RDA acquired from private company, resold to housing developer. •Riverfront parcel. •Grant funding for remediation. •WHEDA funding for housing developer. •Tax agreement. •Public improvements. •Prevailing wage rates. •Park dedication fees/land.
  16. 16. Case Study: City of Stoughton •Development agreement plus all appendices and attachments was . . . 87 PAGES!
  17. 17. 10 Tips for Downtown & Infill TIDs 6.Leverage the TID budget by applying for brownfield, stewardship, and other types of grants that support redevelopment. •TIF money can be used as matching funds for other funding sources.
  18. 18. Case Study: City of Stoughton •Elven Sted project: $200,000 BEBR grant; TID #5 used for matching funds. •$568,000 TIF of assistance to project.
  19. 19. Case Study: City of Stoughton
  20. 20. Case Study: City of Stoughton •Old gas station site clearance: $30,000 DNR grant; TID #4 matching funds.
  21. 21. Case Study: Village of Shorewood Hills •$364,000 stormwater management, bike path extension, and park improvement project: –$53,000 Dane County Urban Water Quality Grant –$125,000 Dane County Partners for Recreation and Conservation Grant –$186,000 TID #3 Funds
  22. 22. Case Study: Village of Shorewood Hills University Avenue
  23. 23. Case Study: Village of Shorewood Hills
  24. 24. Case Study: Village of Shorewood Hills
  25. 25. 10 Tips for Downtown & Infill TIDs 7.Smaller projects can add up. •Don’t just go after/fund “home run” projects. •Consider budgeting for a façade improvement program and/or housing improvement program when creating or amending a TID. •While payback from smaller projects may not be as immediately noticeable as larger projects, the cumulative long-term effect will have a positive impact on the community and the TID.
  26. 26. Case Study: City of Stoughton •Downtown façade improvement program. –CDBG funds used for façade improvements ($5,000 maximum grant with required match). –TIF funds used for local match for USH 51/Main Street reconstruction through Downtown.
  27. 27. Case Study: City of Stoughton •2002-2004: –16 projects. –$55,500 of grants approved. –$171,600 used for matching funds. •Property values increased by 50% in the Downtown from 2001-2005.
  28. 28. Case Study: Basset Neighborhood •On isthmus in Madison – TID #28.
  29. 29. Case Study – City of Madison •City of Madison “Small Cap TIF” loan program. •City provides a forgivable second mortgage loan at 0% interest to finance acquisition/rehabilitation of property (up to a maximum of $60,000 or 15% of purchase price). •Borrower and property eligibility requirements.
  30. 30. Case Study – City of Madison •Other uses of TIF in Basset Neighborhood: –Water main replacement –Sanitary sewer replacement –Street/sidewalk reconstruction –Streetscape improvements –Railroad right-of-way safety improvements –Lake Monona shoreline stabilization –Grants to private developers
  31. 31. •TID #28 created in 2000, closed in 2007. •2 TIF loans to developments totaling $4,827,000. •~$12 million total expenditures. •Value increased from $206m to $485m (+135%) Case Study – City of Madison
  32. 32. 10 Tips for Downtown & Infill TIDs 8.CDAs and RDAs can be powerful partners in pursuing downtown revitalization and redevelopment projects. •Consider pairing TID creation with creation of a redevelopment district, which can give a CDA or RDA more authority to carry out the goals of the plan. •CDAs and RDAs can remove some of the politics of redevelopment; developers can prefer working with a CDA/RDA over a Plan Commission/Council.
  33. 33. 10 Tips for Downtown & Infill TIDs •Staff with citizens with development field related experience (realtors, developers, engineers, planners, etc) •Can dig into the details of redevelopment & spend the time on things like development agreements. •Another committee?!?!
  34. 34. 10 Tips for Downtown & Infill TIDs 9.“Pay-as-you-go” (or “Developer- Financed”) is a type of development agreement, not a type of TID. •The appropriateness of pay-as-you-go depends upon a number of factors. •Do not lock into a policy that all TIF assistance to developers will be pay-as- you-go. •Weigh pros and cons before proceeding.
  35. 35. Case Study: Village of Shorewood Hills
  36. 36. Case Study: Village of Shorewood Hills •TID #4 – Walnut Grove •Absentee landlord, largely vacant building. •Proposed redevelopment: 100 apartments; 10,000 sq. ft. of retail. •Initial developer request ~$2m, 100% Village-financed: •Counter: ~$1.9m, 50% Village- financed, 50% developer-financed.
  37. 37. Case Study: Village of Shorewood Hills
  38. 38. Case Study: Village of Shorewood Hills
  39. 39. Case Study: Village of Shorewood Hills 4 3 2 Locust Ave. University Ave.
  40. 40. 10 Tips for Downtown & Infill TIDs 10.The closing of a TID can create an opportunity to fund affordable housing in the community. •A Village Board/City Council can adopt a resolution specifying that up to a year’s worth of increment will be applied to improving housing stock and increasing the supply of affordable housing anywhere in the community. •Consider a housing stock improvement program.
  41. 41. Case Study: City of Monona •“Renew Monona” program. •Offers 0% interest loans, with principal payments due upon the sale of the home or after 10 years (whichever is first). •Home value restrictions: ≤$120% of median single family assessed value in City. •Maximum loan amount: $10,000. •Minimum 50% match.
  42. 42. Case Study: City of Monona •Can use loan for electrical, plumbing, mechanicals, window replacement, insulation improvements, additions. •Initial funding with money from final year of increment from TID #3; 3 application rounds: –$120,000 available. –$269,965 requested for . . . –$684,699 of home improvement projects.
  43. 43. Questions? Ben Zellers, AICP, CNU-A 999 Fourier Drive, #201 Madison, WI 53717 (608) 821-3967