Transcript Tax Increment Financing in West Virginia: A Guide for

Tax Increment Financing in
West Virginia
What is Tax Increment Financing (TIF)?
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TIF uses the projected increase in property tax revenue
to be gained by developing an area to assist in paying
for the development project
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TIF can be a useful tool in helping to fund economic
development
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TIF helps fund projects that otherwise would not get built
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Tax increment financing became possible in West
Virginia after passage of Amendment One to the West
Virginia Constitution on November 5, 2002
The TIF handbook
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The West Virginia Development Office has developed a
comprehensive TIF handbook outlining how to use tax
increment financing in West Virginia
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The handbook includes
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Information on tax increment financing in general
Specific information on what qualifies for TIF under the West
Virginia law and how to get development or redevelopment
project areas or districts or development or redevelopment
projects approved
Sample applications for the use at the local level for project
proposals
Applications that local officials will submit to the West Virginia
Development Office
Who can use TIF?
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Tax increment financing is a tool that can be used by
counties and class I and II municipalities in West Virginia
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Projects that receive TIF funding can be proposed by a
county, a municipality, another government entity or a
private developer
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However, every project must have the support of the local county
or class I or II municipality who have the responsibility of getting
approval for TIF-funded projects
Where can TIF be used?
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Tax increment financing can only be used for projects within a
development or redevelopment project area or district
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Such project areas or districts can be established in advance of a
project idea or at the same time a project is being proposed
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Projects must directly and substantively benefit the area in which
they are located
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TIF financing is reserved for projects that otherwise would not get
built
Development or Redevelopment Project Areas or
Districts
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Development or redevelopment project areas or districts can exist
for no more than thirty (30) years
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A development project area or district is a discrete, contiguous
geographic area that has not previously been developed or is
underdeveloped
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A redevelopment project area or district is a discrete, contiguous
geographic area that needs upgrading and can be classified as
either (1) a blighted area or (2) a conservation area
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The development of a development or redevelopment area or district
would result in:
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An increase in jobs,
Enhancement of the tax base, and
Encourage commerce, industry, or manufacturing to locate their
operations in West Virginia
Development or Redevelopment Projects
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A development or redevelopment project must promote the
economic development of the project area or district by:
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Eliminating a blighted area,
Preventing the deterioration of an area into a blighted area,
Increasing employment, and/or
Encouraging the location of commercial or industrial activity and jobs in
West Virginia
Examples of projects that might use Tax Increment Financing:
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Creating an industrial site – including installing sewer, water, and electric
lines to the site
Cleaning up a environmentally blighted area and preparing the land for
future development
Building a road that improves access to an area
How does Tax Increment Financing work?
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A development or redevelopment project area or district is
established
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The county assessor certifies the base assessed value
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A development or redevelopment project gets approved
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Each year, over the life of the TIF-funded project, the county
assessor will certify the current assessed value of the property in the
development or redevelopment project area or district
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The difference between the amount of regular levy property taxes
on the current assessed value and the amount of regular levy
property taxes on the base assessed value is the tax increment
How does Tax Increment Financing work?
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TIF can be used when a development or redevelopment
project is expected to generate a positive increment
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In other words, TIF works when a project is expected to increase
property values in the project area or district
The incremental increase in regular levy taxes are used
to help finance the project in one of two ways:
(1) Pay-as-you-go
(2) Issuing Tax Increment Financing Bonds or Notes
TIF: An example
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TIF bonds are to be issued in Kanawha County
Property has base assessed value of $500,000.
Regular levies on this property are $1.5476 per each $100 in
assessed value. (As a result, local levying bodies are currently
collecting $7,738 in regular levies on this property.)
If TIF bonds are issued to help fund the project, property values are
expected to rise to $1.5 million in 2005 and then by an additional
three (3) percent per year after that.
The local levying bodies will continue to receive $7,738 in regular
levies from this property throughout the financing period.
The increment will be used to make payments to holders of the TIF
bonds issued for this project.
At the end of the financing period, all tax revenues will revert back to
the local levying bodies.
Example of Tax Increment Financing
$60,000
$54,705
$48,605
Property Tax Revenues
$50,000
$41,927
$40,000
$36,167
$31,198
$26,911
$30,000
$23,214
$20,000
Annual Increment
in 2005: $15,476
Annual
Increment in
2015:
$23,460
Annual
Increment in
2025:
$34,189
$10,000
$7,738
$0
2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033
Year
Base
Total
Establishing a Development or Redevelopment
Project Area or District
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Hold public hearings;
Obtain from the county assessor the base assessed
value of all taxable property with a tax situs in the
proposed project area or district;
Submit an application to the West Virginia Development
Office;
Adopt a county order or enact a municipal ordinance
approving the development or redevelopment project
area or district; and
Establish the tax increment financing fund (TIF fund).
TIF Fund
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The TIF fund is the fund in which the tax increment in a
development or redevelopment project area or district is
deposited by the county sheriff.
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A TIF fund is established after an order or ordinance is
approved establishing the project area or district.
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The county or municipality must establish a process to
be used to allocate any excess increment that accrues
in the TIF fund for the project area or district and that is
not tied to a specific project proposal
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This could happen if property values increase faster than
expected
Getting Approval for a TIF-funded Development
or Redevelopment Project
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Receive a detailed application from a developer;
If the project proposal includes use of TIF bonds, consult with outside
bond counsel and investment bankers or commercial bankers about the
feasibility of using TIF bonds for this project;
Determine whether the proposed TIF bonds or notes will be tax-exempt
from federal taxes
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TIF bonds are always exempt from West Virginia taxes;
Verify all information in the project application;
Hold public hearings;
Establish a memorandum of understanding (MOU) with any outside
developer on competitive bidding and local labor practices;
Submit an application for project approval to the West Virginia
Development Office; and
Adopt a county order or pass a municipal ordinance approving the
development or redevelopment project plan.
The Local Application Process for Development
or Redevelopment Projects
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The law gives counties and municipalities considerable
flexibility in establishing the process by which they will
consider project proposals from developers.
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A sample application form and set of standards, which
have been endorsed by the West Virginia Municipal
League, West Virginia Association of Counties, and the
County Commissioners’ Association of West Virginia can
be found in Exhibit B of the West Virginia Tax Increment
Financing Handbook.
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The application requirements include information on the
developer, the project, and the sources of financing.
The Approval Process and the Expenditure of
Funds
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The law allows counties and municipalities to be
reimbursed from TIF funds for of any cost incurred
during the approval process
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A county or municipality may need to pass an
inducement resolution in order to make expenditures
(that may later be reimbursed).
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Counties or municipalities may also want to require
private developers to pay for the approval costs
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This will cut down on the number of “false applications”
Public Hearings and Comment
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The law requires that the public and other levying bodies in an area be
given the opportunity for comment through a public hearing process.
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When the development or redevelopment project area or district is being
proposed at the same time as a development or redevelopment project,
the hearings may be conducted either separately or together as long as
they meet the guidelines outlined in the law.
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Such guidelines include advance notifications of hearings through publication of
such notices in local publications and letters to other local governing bodies.
During the notification period, but not to exceed thirty (30) days:
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All municipalities included in a project area or district proposed by a county must
provide their approval in the form of a resolution.
All counties included in a project area or district proposed by a class I or II
municipality will have the opportunity to request further information, provide
guidance, or make other formal requests.
Approval by the State
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A county or municipality must apply to the West Virginia Development Office
for approval of:
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A proposed development or redevelopment project area or district.
A project to be financed, in whole or part, by TIF financing.
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The Development Office has sixty (60) days to approve the application,
reject the application, or return the application to the county or municipality
with instructions.
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TIF is a tool for local officials. The State role is simply to ensure that a
county or municipality has met the requirements of the law, including
conducting a thorough analysis of:
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The proposed project, its economic feasibility, and its effect on jobs and the local
economy, in both the short- and long-term, and
The need for TIF financing, the terms of the financing, and the effect of TIF
financing on local levying bodies.
Detailed applications for approval by the West Virginia Development Office
are included in the TIF handbook.
Orders or Ordinances
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The county commission or the governing body of a
municipality must adopt an order or ordinance
establishing a development or redevelopment area.
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The county commission or the governing body of a
municipality must adopt an order or ordinance approving
a project plan.
Prevailing Wage, Local Labor Preferences, and
Competitive Bidding
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Any development or redevelopment project that has
been approved by the West Virginia Development Office
that exceeds $25,000 and that receives even 1-cent of
TIF money is deemed by statute to be a public
improvement and is subject to the prevailing wage, local
labor preferences, and competitive bidding requirements.
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A county or municipality must establish a memorandum
of understanding (MOU) with any outside developer in
which such person acknowledges his/her obligations to
pay prevailing wages and which outlines the competitive
bidding process for this project
After a Development or Redevelopment Project
Area or District has been established
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The county or municipality must ensure that the tax increment is
collected and properly allocated.
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The county assessor will certify each year’s current assessed value
The sheriff will allocate regular levy taxes
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The taxes on the base assessed value will go to appropriate levying bodies
The increment will be deposited in the TIF fund
Each year in which there are non-allocated funds in the TIF fund,
according to the procedures set out in its application for the
development or redevelopment project area or district, it will be
decided whether to:
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Leave the money in the TIF fund, or
Redistribute the excess monies to the local levying bodies.
After a Project Plan has been Approved
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If TIF bonds are notes are to be issued, the county or
municipality will work with the bond counsel and
underwriter and will authorize, through an order or
ordinance, the issuance of such obligations.
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Annually during the life of the project, the county or
municipality must report to the West Virginia
Development Office and in notices in local publications
on the status of the project.
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Every five years, during the life of the project, the county
or municipality must hold public hearings on the status of
the project.
Additional Information on TIF in West Virginia
can be obtained from these sources
West Virginia Development Office
Capitol Complex, Building 6, 5th Floor
Charleston, WV 25305-0311
Toll Free Phone: 1-800-WVA-DEVO (982-3386)
Phone: (304) 558-2234
Fax: (304) 558-1189
www.wvdo.org
West Virginia Association of Counties
2211 Washington Street, East
Charleston, WV 25311
Phone: (304) 346-0591
Fax: (304) 346-0592
Email: [email protected]
www.wvcounties.org
County Commissioners’ Association of
West Virginia
2309 Washington Street, East
Charleston, WV 25311
Phone: (304) 345-4639
Fax: (304) 346-3512
Email: [email protected]
www.polsci.wvu.edu/ccawv
West Virginia Municipal League
2020 Kanawha Blvd., East
Charleston, WV 25311
Phone: (304) 342-5564
Toll Free Phone: (800) 344-7702
Fax: (304) 342-5586
Email: [email protected]
www.wvml.org
Bond counsels listed in the Bond Buyers Municipal Marketplace (the “Red Book”) or
investment bankers or commercial bankers who may underwrite TIF bonds or notes may
also be good resources.
Conclusion
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TIF is an exciting new tool that allows counties and class
I and II municipalities in West Virginia to compete with
other states for businesses and jobs and to promote
economic development and redevelopment in their local
areas.
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Questions?