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Transcript of TIF presentation
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Tax Increment FinancingWest Hills Business Center
Presentation to:
Northwestern Lehigh School District
June 15, 2011LCIDALCIDALCIDALCIDA
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Tax Increment FinancingWhat Are TIFs/How Do They Work?
Tax Increment Financing (TIF) is an economic development financing tool
which can utilize increases in property taxes, resulting from privatedevelopment within a specified area, to finance needed capital
improvements within that same area.
A portion of the new taxes or tax increment generated by a
development project is designated by the affected taxing bodies to cover
the debt service payments of a bond or note that finances the eligible
improvements.
In many cases, the improvements that are financed via a TIF constitute
publically owned infrastructure.
2West Hills Business CenterLCIDALCIDALCIDALCIDA
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Tax Increment FinancingWhat Are TIFs/How Do They Work?
The Tax Increment Financing Act of 1990 (amended 1992), Act
113, 35 P.S.6930.1 et seq., permits Local Industrial
Development or Redevelopment Authorities to administer a TIFproject in accordance with the affected local taxing bodies.
Today 49 states and the District of Columbia have such
legislation.
The process starts with a local Authority working with a private
development project in need of assistance with excessive costs
related to necessary improvements to support the project.
In the majority of cases, the required assistance involves fundingmandated public infrastructure improvements.
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Tax Increment FinancingWhat Are TIFs/How Do They Work?
The basic process involved in developing a tax increment financing
project is as follows:
- The local industrial development authority, in this case, LCIDA,makes presentations to the affected taxing bodies (i.e school
district, local municipality, county) requesting they designate a
representative to serve on a TIF Committee to assist the Authority
in developing a Tax Increment Financing Plan.**This is the purpose of our presentation to you tonight.
- The resulting TIF Plan must include, among other things, an
exhaustive description of the project/district and a detailed
economic feasibility study and assessment of the fiscal impact on
the municipal tax base.
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Tax Increment FinancingWhat Are TIFs/How Do They Work?
Upon completion of the TIF Plan, the Authority then presents
the plan to the taxing bodies and requests that they either opt-in or opt-out of the plan.
In this context, the three taxing bodies (county, municipality and
school district) agree to allocate all or part of the increased taxes,
received from properties within the TIF District, to the Industrial
Development Authority to meet principal and interest payment
obligations to the holders of the bonds or notes.
Finally, the county or the local municipality designates by
ordinance or resolution a certain geographical area as a TIF
District.
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Tax Increment FinancingWhat Are TIFs/How Do They Work?
Things to remember:
The allocations made by each of the taxing bodies in support ofthe project do not need to be the same and the taxing bodies
retain 100% of their Base taxes.
Once the TIF loan is repaid, the TIF District is dissolved and all
tax proceeds go to the respective taxing bodies.
TIF is not a tax abatement program - unlike the Local Economic
Revitalization Tax Assistance Act (LERTA) and the Keystone
Opportunity Zone (KOZ) programs.
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Tax Increment FinancingWhat Are TIFs/How Do They Work?
EXAMPLE
TIF DISTRICT BEFORE DEVELOPMENT GENERATESA TAX BASE OF$10,000
AT COMPLETION OF DEVELOPMENT THE
DISTRICT GENERATES TOTAL TAXES
OF$100,000
THE TAX INCREMENT IS +$90,000
THE TAXING BODIES AGREE TO ALLOCATE 70%
OF THE TAX INCREMENT TO THE IDA OR...$63,000
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Tax Increment FinancingWhat Are TIFs/How Do They Work?
EXAMPLE (continued)
IDA BORROWS $500,000 THROUGH THE ISSUANCE OF BONDS ANDREPAYS THE IDAS BOND OBLIGATIONS WITH THE $63,000
RECEIVED EACH YEAR.
THE TAXING BODIES RETAIN THE $10,000 TAX BASE AND 30% OF
THE TAX INCREMENT ($90,000), FOR TOTAL TAXES RETAINED OF$37,000 VERSUS THE ORIGINAL $10,000.
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Tax Increment FinancingHow is the TIF Guaranteed?
Recourse from the note holder or bond holders, in the event ofdefault, will be limited to the funds made available through the tax
increment financing or the NID. The School District, Township andthe County will have no liability in the event of default.
No full faith and credit guarantee will be provided by any of thetaxing bodies.
The TIF legal documents will provide that property owners within
the TIF District will be prohibited from seeking tax reassessments oftheir properties below a floor that is adequate to service debt.
In the event the School Board disagrees with the results of theplanned Lehigh County Reassessment, the TIF will not preclude theSchool Board from challenging the reassessment.
As a reinforcement mechanism to offset potential deficits in TIFrevenues to support the required debt service, a NID will also becreated.
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Tax Increment FinancingHow is the TIF Guaranteed?
The Pennsylvania Neighborhood Improvement District Act allows
municipalities to establish a Neighborhood Improvement District(NID).
Property owners in the NID can be assessed fees based on debtservice shortfall and collected as property tax.
The revenues generated from the assessments in the NID willprovide funds necessary to ensure that payments of principal andinterest under the bonds will be made.
The NID that will be formed will include only the tax incrementdistrict which will be the proposed development site only.
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Tax Increment FinancingWest Hills Project Overview
Location: I-78, Exit 45 (New Smithville)
Consists of: 233 Acres
3,800 Linear Feet Frontage on I-78 Planned Development- 2.3 Million Square Feet
Product: Institutional Quality Industrial Buildings
High Quality Business Park Environment
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Tax Increment FinancingProperty Location
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Tax Increment FinancingWest Hills Project Status
Industrial Zoning
Approved Plans:
Final Subdivision Plan (Township)
Final Land Development Plan (Township)
Approved Permits: PENNDOT - Highway Occupancy Permit
PA Dept of Environmental Protection NPDES
US Army Corps of Engineers Section 404 of the U.S. CleanWater Act
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Tax Increment FinancingWhy is a TIF Needed?
Public Infrastructure Deficiencies
I-78 Exit 45 New Smithville PENNDOT has Designated the Bridge Over I-78 as Functionally Obsolete
Sub-Standard Vertical and Horizontal Clearances
Signals and Turning Lanes Needed
Waste Water Treatment Plant Currently a Failed System Which is Subject to PADEP Moratorium
Will be Upgraded to Meet Current PADEP Standards
Will Add Capacity for West Hill Business Center (WHBC), Weisenberg
Elementary School, Diner
Electrical Service Substation Upgrades and Extension to WHBC
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