TIF
Tax Increment Financing (TIF)
Definition of TIF and the role of the CRA
The CRA provides funding to selected, eligible redevelopment projects. The CRA is allowed to capture the property tax on the increased valuation of property created by selected, eligible redevelopment projects. This captured tax increment then is used to assist in funding public improvement costs, rehabilitation, aquisition, demolition, and workforct housing within the project for up to 15 years. This process is referred to as Tax Increment Financing (TIF). TIF is a program designed to encourage property owners to redevelop a blighted or substandard property into something that will promote economic improvements within the city. Both the city and the property owner benefit from this legislation. The upfront costs of development are decreased, but is paid back with the property owners property taxes over the next fourteen years.
For example, assume a commercial property is developed. The predevelopment property value is $100,000. After redevelopment, the new value is $600,000. Property taxes on the original value of the project ($100,000) continue to be paid to the local taxing entities. The TIF provision allowed the property taxes on the increased value ($500,000) to be paid to the CRA and invested back into public improvements for the project. Public improvements include but are not limited to: economic development incentives, upgrades of buildings and public facilities, purchase of land for redevelopment activities, and update of business and recreational facilities. Waverly's CRA encourages and evaluates projects based on their positive impacts on neighborhoods and the community in general. TIF provisions allow this incremental property tax to be redirected for the project for up to 15 years. At the end of the TIF, the entire tax on the redevelopment project would become part of the general tax base.
Application Process
The TIF approval process consists of three major steps:
- Designation of a blighted area. This step identifies the portions of the community that are eligible for the use of TIF. Specific statutorial criteria must be met for an area to be designated as blighted.
- Preparation and approval of a redevelopment plan. The city prepares a specific redevelopment plan for the projected area. The plan has certain statutory requirements and includes a description of the tax increment projected area.
- Approval of a redevelopment agreement. Following approval of the redevelopment plan, the CRA and the developer/owner negotiate a redevelopment agreement. This contract sets forth the mutual responsibilities of both parties and included the financial terms of a project. As part of the agreement process, the developer negotiates loan terms with a private lender, or bond underwriter if the project is utilizing a publicly offered bond issue.
If you would like to bring a business to Waverly and apply for TIF, please contact City Administrator Stephanie Fisher at cityadministrator@citywaverly.com or 402-786-2312.