Tax increment financing (TIF) is a tool that allows future tax revenues from new development in a designated area to pay for public infrastructure improvements in that area. TIF districts are established to promote development in blighted, contaminated, conservation or enterprise zones. The tax increment is the difference between taxes collected from property values before and after improvements. This increment is used to finance things like streets, sewers and parking in support of the new development. Ottawa, Kansas has several eligible areas for potential TIF districts, including industrial parks and corridors that could be annexed into city limits. The process involves establishing the district boundaries, approving a redevelopment plan, and issuing bonds or other financing to fund approved infrastructure projects.

1. Understanding Tax Increment Financing (TIF)

2. TIF: What is it? A local government financing tool that can be used to target development to specific areas to capture new tax dollars to fund the needed public improvements that would not otherwise have occurred.

3. TIF’s Purpose Promote, stimulate and develop the general and economic welfare of Kansas and its communities. Assist in development and redevelopment of areas designated as blighted, environmentally contaminated, conservation, and enterprise zones. -taken from Kansas Statutes

4. TIF Pays for Public Improvements Allows part or all of future growth in property tax revenue resulting from redevelopment to be used to pay for the public improvements involved in a project.

5. Public Improvements TIF will Finance Sanitary and storm sewers and lift stations; Drainage conduits, channels and levees; Street grading, paving, curbing and guttering; Street lighting fixtures, connection and facilities; Underground gas, water, heating and electrical service and connections; Drives and driveway approaches in right-of-way;

6. Public Improvements (cont.) Sidewalks and pedestrian under and overpasses; Water mains and extensions; Parking facilities; Landscaping and plants, fountains, shelters, benches, sculptures, lighting and similar amenities and;

7. Public Improvements (cont.) All related expenses to redevelop and finance the redevelopment project (such as bond and legal counsel, or other required studies).

8. TIF Includes: Incremental increases in property tax revenues from: County City Unified School District Any other taxing subdivision levying real property taxes Does not include: state authorized school district levy (20 mills) and state mill levy (1.5 mills).

9. Calculating the Increment

10. Items Needed for Calculation (Example: Anybiz, Inc.) Original market value ($25,000) New market value ($100,000) Assessment rate (25% because property is commercial) Mill rate (Ottawa’s is 136.538)

11. Calculations before TIF Project 1. Multiply original market value prior to creation of TIF district by the assessment rate. O.M.V. is $25,000 A.R. is 25% (business) $25,000(.25) = $6,250 in assessed valuation 2. Multiply assessed valuation of $6,250 by mill rate of 136.538. $6,250(.136538) = $853.36 3. Taxes equal $853.36 prior to the establishment of the TIF district.

12. Calculations after TIF Project 1. Multiply new market value after TIF district is created by the assessment rate. N.M.V. is $100,000 A.R. is 25% (business) $100,000(.25) = $25,000 in assessed valuation. 2. Multiply assessed valuation of $25,000 by mill rate of 136.538. $25,000(.136.538) = $3,413.45. 3. Taxes equal $3,413.45 after the TIF project.

13. The department store’s increment A soybean field is assessed at $25,000 and generates $853 of property taxes per year. A developer builds a department store on the grounds, increasing the market value to $1,000,000. The generated property taxes will increase to $34,135. The increment of property taxes to be used for investment into the TIF district is $33,282. $853 $34,135

14. Value of the Increment $33,281 $665,623 All things being equal, the increment over the life of the TIF district will generate $665,623 in property taxes to be used for public improvements within the TIF district.

15. Possible Use of Increment* Construct approximately 6 city blocks with street, curb and guttering Extend water, sewer and electric services 2,600 feet Allow landscaping of up to $25,000 Invest $8,595 for other uses allowed in city’s TIF policy *This is only a hypothetical analysis and should not be construed to be the actual costs of a project. This example is only meant to demonstrate a possible scenario of the use of the increment to fund public improvements in the course of 20 years. Actual project costs will be determined by the city’s engineer and are subject to change and a variety of other variables.

16. Financing TIF

17. Types of TIF Bonds Special obligation bonds Industrial revenue bonds Full faith and credit or G.O. bonds Private activity bonds

18. TIF Repayment Options Property tax increments generated within redevelopment district; (preferred) From revenues of the city derived from or held in connection with the undertaking and carrying out of any redevelopment project or projects; Any private sources, contributions or other financial assistance from the state or federal government; Increased franchise fees collected from utilities and other businesses using public right-of-way within the redevelopment district; Local sales and use taxes collected or; By any combination of these methods.

19. TIF Eligibility

20. Areas Eligible for TIF Blighted areas Conservation areas Enterprise zones Must be within city limits

21. Enterprise Zones Areas: designated prior to July 1, 1992; conservation, development or redevelop is necessary to promote the general and economic welfare of such city and; typically include properties that are undeveloped and may serve as future industrial/business park sites or residential subdivisions. -taken from Kansas Statutes

22. Areas Eligible in the Ottawa Area

23. Areas Eligible in the Ottawa Area: Franklin County Enterprise Zones within city limits High Priority Enterprise Zones within city limits Enterprise Zones outside city limits

24. Areas Eligible in the Ottawa Area: City of Ottawa Enterprise Zones within city limits High Priority Enterprise Zones within city limits

25. Areas Eligible in the Ottawa Area: Northeast Industrial Park

26. Areas Eligible in the Ottawa Area: K-68 Corridor * *Requires annexation into the city limits

27. Areas Eligible in the Ottawa Area: 15 th and 17 th Streets

28. Areas Eligible in the Ottawa Area: The Granger Property * *Requires annexation into the city limits

29. Areas Eligible in the Ottawa Area: Fogle Quarry * *Requires annexation into the city limits

30. The TIF Process

31. The TIF Process The City Commission establishes a TIF district by adopting a resolution, holding a public hearing and then passing an ordinance creating the TIF district. A redevelopment plan is then created for the project area that is consistent with the comprehensive plan after a resolution, public hearing and ordinance have been adopted by the City Commission. -taken from TIF policy

32. TIF Success Stories Merriam – Homestead Village 5.2 acre extended hotel project Estimated project costs: $4,250,000 Leavenworth – Wal-Mart 13 to 15 acres for construction of Wal-Mart Estimated project costs: $5,200,000 Wichita – 21 st and Grove Street About one square mile for strip mall, branch bank, Cessna training facility Estimated project costs: $17,000,000

33. TIF Success Stories Lenexa – Thompson Farm Preservation Project 83.5 acres for renovation of historic home and commercial district Estimated project costs: $1,600,000 Kansas City, KS – East Armourdale 10 acres for warehouse facility Estimated project costs: $2,500,000 Kansas City, KS – Gateway Gardens Approximately one city block Estimated project costs: $6,000,000

34. Olathe’s Success Story: 151 st Street $6.9 million in public improvements 5 commercial entities 214 acres of vacant field developed into commercial district

35. Questions or Comments?