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Downtown & Infill Tax Increment Districts: Strategies for Success

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Downtown & Infill Tax Increment Districts: Strategies for Success

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Tax Increment Financing (TIF) is the #1 local funding source for revitalization of downtowns and urban areas. Such areas face far different challenges than industrial parks or mixed-use neighborhoods when it comes to formulation and implementation of TIF plans. When used successfully in urban areas and downtowns, TIF can not only grow jobs and property tax base, but also serve as a tool for remediating environmental contamination, integrating green design into infrastructure and the built environment, reestablishing a community’s commercial core, improving bikeability, and retrofitting a suburban-style development pattern into walkable urban streets.

Tax Increment Financing (TIF) is the #1 local funding source for revitalization of downtowns and urban areas. Such areas face far different challenges than industrial parks or mixed-use neighborhoods when it comes to formulation and implementation of TIF plans. When used successfully in urban areas and downtowns, TIF can not only grow jobs and property tax base, but also serve as a tool for remediating environmental contamination, integrating green design into infrastructure and the built environment, reestablishing a community’s commercial core, improving bikeability, and retrofitting a suburban-style development pattern into walkable urban streets.

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Downtown & Infill Tax Increment Districts: Strategies for Success

  1. 1. Downtown & Infill Tax Increment Districts: Strategies for Success WEDC Presentation July 16, 2014 Presented By: Ben Zellers, AICP, CNU-A
  2. 2. Downtown & Infill TID Strategies 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). • “Blight” controversy. • 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: Brodhead, WI Downtown Brodhead Redevelopment Project
  4. 4. Case Study: Brodhead, WI • Building Improvement Program • $5,000 with simple application. • Application vs. dev. agreement. $
  5. 5. Strategies for Downtown & Infill TIDs 2. Stay up-to-date on the status of your community’s TIDs and be ready to adapt to changing circumstances. • Successful TIDs can be amended to share revenue with blight elimination TIDs; boundaries can be amended up to four times. • Annual reports are required by WI DOR – review reports to see how expenditures compare with increment generated and debt service payments.
  6. 6. Case Study: City of Monona • Amended successful TID #2 to provide funds to struggling TID #4. 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)
  7. 7. Case Study: City of Middleton Subtraction #2 Downtown Middleton Subtraction #1
  8. 8. Strategies for Downtown & Infill TIDs 3. 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. • Try to match planned public improvements with private development projects to make sure there is sufficient increment to pay back the investment. • Municipal investments vs. developer-financed. • Don’t count on changes to state law to bail out underperforming TIDs.
  9. 9. Strategies for Downtown & Infill TIDs 4. 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.
  10. 10. 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.
  11. 11. Case Study: City of Stoughton • Old gas station site clearance: $30,000 DNR grant; TID #4 matching funds.
  12. 12. Strategies for Downtown & Infill TIDs 5. 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.
  13. 13. 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.
  14. 14. 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.
  15. 15. 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.
  16. 16. Strategies for Downtown & Infill TIDs 6. 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.
  17. 17. Strategies 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?!?!
  18. 18. Strategies for Downtown & Infill TIDs 7. 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. • Can use to capitalize an RLF.
  19. 19. 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.
  20. 20. 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.
  21. 21. Questions? Ben Zellers, AICP, CNU-A 999 Fourier Drive, #201 Madison, WI 53717 (608) 821-3967 bzel@vierbicher.com

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