Transcript Public Sector Incentives The Missing Piece of the Retail Development Puzzle? Jim M.

Public Sector Incentives
The Missing Piece of the
Retail Development Puzzle?
Jim M. Page, CCE, IOM
President and CEO
Chamber of Commerce of West Alabama
Tax Increment Financing (TIF)
Tax Increment Financing, or TIF, is a public financing method that is used for subsidizing
redevelopment infrastructure and other community-improvement projects.
TIF is a method to use future gains in taxes to subsidize current improvements, which
are projected to create the conditions for said gains. The completion of a public project
often results in an increase in the value of surrounding real estate, which generates
additional tax revenue.
When an increase in site value and private investment generates an increase in tax revenues,
it is the "tax increment." Tax Increment Financing dedicates tax increments within a
certain defined district to finance the debt that is issued to pay for the project.
TIF is often designed to channel funding toward improvements in distressed,
underdeveloped, or underutilized parts of a jurisdiction where development might otherwise
not occur. TIF creates funding for public or private projects by borrowing against the future
increase in these property-tax revenues.
Source:
Tax Increment Financing and Economic Development, Uses, Structures and Impact. Edited
by Craig L. Johnson and Joyce Y. Man. State University of New York Press
City of Huntsville, Alabama
Formed in 2000, TIF 3 was created to support new schools in the area from
Research Park Boulevard west to County Line Road. Funds in TIF 3 provided
$30 million to build Columbia High School and Providence Elementary
School, $10 million for roads and infrastructure in the school zones, and
incentivized residential and commercial development in the western corridor.
TIF 3 funds have generated $58.5 million in revenue. While the TIF was
formed to provide capital income to build new schools, it has provided an
additional $21 million to City and County schools.
The market value of all properties in TIF 3 is estimated to exceed $2 billion.
Much of that value was spawned by the road and infrastructure projects
made possible by the TIF. New schools brought new families and
housing, business opportunities, construction projects and jobs. The
building surge began with the new Target on University and included the new
Kroger on Jeff Road, Redstone Gateway, major growth in Research Park, and
expanded residential areas on Martin and Zierdt Roads.
Source:
www.huntsvilleal.gov
Amendment 772
Approved by the Legislature of Alabama in 2004,
Constitutional Amendment 772 allows counties and
municipalities to "lend its credit to or grant public funds
and things of value in aid of or to any individual, firm,
corporation, or other business entity, public or private,
for the purpose of promoting the economic and industrial
development of the county or the municipality."
Source:
Code of Alabama
What powers are granted under Amendment 772?
The statute provides four primary vehicles for use by governing bodies in
attracting business:
1) Acquisition or improvement of real property, buildings, or equipment
2) Conveyance of properties to an individual or entity for use as industrial,
commercial, research, or service facilities
3) Grants of funds, things of value, or lending of credit to promote economic
or industrial development
4) Issuance of obligations (such as bonds, warrants, and notes) or of
indebtedness as a means of securing funds to accomplish any of the abovementioned activities
Source:
Robert E.L. Gilpin
Kaufman Gilpin McKenzie Thomas Weiss, PC
Types of Public Sector Incentives
Debt Issuance to Recruit New Business
• Public Improvements:
Sewer, water, roadways, etc.
• Earmarking Future Tax Revenues
Debt Issuance to Retain Existing Business
Lending Credit to Recruit and/or Retain Business
Types of Public Sector Incentives
Reinvestment Using Increased Sales Tax Rate
• Higher tax rate for certain area of development
Sales Tax Rebates / “Success Sharing”
• No upfront public funding
• Immediate revenue for public entity once project is completed
• Pre-determined, capped timeframe and dollar amount
• Infrastructure improvement and additional construction
• Job creation
• Increased property value
• Proactively addresses retail leakage!
Final Thoughts
“Offering incentives for retail growth is horrible public
policy. But that is the world we live in. Other cities are
trying to land these same stores and we compete against
one another. I had one person tell me its just jealousy,
that Prattville wants to be like Montgomery. It's not
jealousy, it's survival. Half of our budget is made up of
sales tax collections. For any city to prosper, it has to
maintain and grow its sales tax collections.”
-Jim Byard, Jr.
Former Mayor of Prattville, Alabama
Public Sector Incentives
The Missing Piece of the
Retail Development Puzzle?
Jim M. Page, CCE, IOM
President and CEO
Chamber of Commerce of West Alabama