Implementing and Understanding Tax Increment Financing (TIF) Districts

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Implementing and Understanding Tax Increment Financing (TIF) Districts. TIF Overview What is Tax Increment Financing (TIF)? When is it the Right Tool? How is it Implemented? How is the TIF Financed?. - PowerPoint PPT Presentation

Text of Implementing and Understanding Tax Increment Financing (TIF) Districts

  • Implementing and Understanding Tax Increment Financing (TIF) Districts

  • TIF Overview

    What is Tax Increment Financing (TIF)?When is it the Right Tool?How is it Implemented?How is the TIF Financed?

  • TIF is a municipal financial incentive tool created by the Illinois State Legislature in 1978 to assist communities implement sound economic development.TIF can be used to acquire property.TIF can provide infrastructure.TIF can pay for consultant, engineering, attorney and other applicable soft costs.

  • TIF As Part of Local Planning

  • WHEN IS IT THE RIGHT TOOL?

    Will the area benefit from a TIF designation? What is the areas current condition or past history?

    To Induce Industrial ProjectsTo Induce Commercial Projects including Downtown areasTo Induce Residential and Mixed Use Projects

  • Determine the Area to be StudiedAdopt a Feasibility Resolution Qualify the Redevelopment AreaConservation AreaBlighted Improved / VacantIndustrial Jobs Recover Area (IJRL)

    HOW IS TIF IMPLEMENTED?

  • HOW IS THE TIF FUNDEDPAY AS YOU GO

    Developer NoteRedevelopment Agreement

    Maximum TIF term 23 years, Financing obligations 20 yearsUP FRONT

    GO TIF BondTaxable Revenue Bond

  • TIF Basics

    Review of TIF FinancingTIF involves splitting property tax revenue generated from properties within the TIF District into two components or buckets:Bucket for Base Revenues For All Local GovernmentsBucket for Incremental Revenues For Redevelopment within TIF

  • TIF MechanicsReview of TIF Financing- Ideally, a successful TIF produces positive incremental revenue over time

    Chart1

    110001000

    210001000

    310001000

    410001000

    510001000

    610001000

    710001100

    810001200

    910001300

    1010001400

    Year

    Base AV

    Total AV

    Year

    Assessed Value (AV)

    Sheet1

    YearBase AVTotal AV

    11,0001,000

    21,0001,000

    31,0001,000

    41,0001,000

    51,0001,000

    61,0001,000

    71,0001,100

    81,0001,200

    91,0001,300

    101,0001,400

    Sheet1

    000

    000

    000

    000

    000

    000

    000

    000

    000

    000

    Year

    Base AV

    Total AV

    Year

    Assessed Value (AV)

    Sheet2

    Sheet3

  • General Assumptions

    User Assumptions

    Anytown, Illinois

    TIF - Project Analysis

    Preliminary User Assumptions

    Avg.Sq. Ft.% Sales% Sales

    ComponentProjectClassSq. Ft./Market ValueGeneratingAvg. SalesTaxable (LocalTaxable (Home

    NameDescriptionCode# UnitsSq. Ft./UnitSales TaxSq. Ft./UnitSales Tax)Rule Sales Tax)

    Parcel 1Residential Component4152300,000.00000%0%

    Parcel 2Retail Component341,000100.0041,000200100%0%

    Parcel 3Specialty Grocery Store311,000100.0011,000600100%0%

    Parcel 4Book Store320,000100.0020,000300100%0%

    Parcel 5Restaurant36,00070.006,000250100%0%

    N/A

    N/AN/A000.00000%0%

    N/AN/A000.00000%0%

    N/AN/A000.00000%0%

    N/AN/A000.00000%0%

    N/AN/A000.00000%0%

    N/AN/A000.00000%0%

    N/AN/A000.00000%0%

    N/AN/A000.00000%0%

    N/AN/A000.00000%0%

    LandVacant Land300.00000%0%

    Totals78,000

    Class Codes:

    Exempt0

    Industrial (6B Eligible)1

    Industrial2

    Commercial3

    Residential4

    Vacant Land5

    &CFOR DISCUSSION PURPOSES ONLY

    &L&F&RKane, McKenna and Associates, Inc.

    General Assumptions

    Anytown, Illinois

    TIF - Project Analysis

    General Assumptions

    Sales Tax Inflation Rate3.0%Reassess.Developer SalesSales Inflation5-Year Avg. Tax Rate:High School Dist. 125Lake CountyCentral LC WaterCollege of Lake Cty.Vernon Hills Park

    Property Tax Inflation Rate3.0%YearFactorTax ShareFactor5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:

    % Inc. Prop. Tax for Project100.0%2004100.00%0.00%100.00%YearTax Rate

    Tax Rate6.080%2005103.00%0.00%103.00%19975.418%YearTax RateYearTax RateYearTax RateYearTax RateYearTax Rate

    2006*106.09%0.00%106.09%19985.418%19974.3082%19970.2353%19970.1954%19970.1930%19970.000%

    Equalizer (5-Yr. Average)1.002007109.27%0.00%109.27%19995.418%19984.3082%19980.2353%19980.1954%19980.1930%19980.000%

    Class 6B Assmnt. Rate33.33%2008112.55%0.00%112.55%20005.418%19994.3082%19990.2353%19990.1954%19990.1930%19990.000%

    Industrial Assmnt. Rate33.33%2009115.93%0.00%115.93%20015.418%20004.3082%20000.2353%20000.1954%20000.1930%20000.000%

    Commercial Assmnt. Rate33.33%2010*119.41%0.00%119.41%20014.3082%20010.2353%20010.1954%20010.1930%20010.000%

    Residential Assmnt. Rate33.33%2011122.99%0.00%122.99%5-Yr. Avg.6.080%

    Vac. Land Assmnt. Rate33.33%2012126.68%0.00%126.68%5-Year Avg. Equalizer5-Yr. Avg.4.308%5-Yr. Avg.0.235%5-Yr. Avg.0.195%5-Yr. Avg.0.193%5-Yr. Avg.0.000%

    First Levy Year20042013130.48%0.00%130.48%

    First Tax Collection Yr.20052014*134.39%0.00%134.39%YearEqualizer

    Annual Absorption of Units50.0%2015138.42%0.00%138.42%19971.0000School District 103Village of Vernon HillsVernon Hills Twp.Vernon Hills LibraryLincolnshire Fire Dist

    Local Sales Tax Rate1.0%2016142.58%0.00%142.58%19981.00005-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:

    Home Rule Sales Tax Rate0.00%2017146.85%0.00%146.85%19991.0000

    Base Sales Taxes02018*151.26%0.00%151.26%20001.0000YearTax RateYearTax RateYearTax RateYearTax RateYearTax Rate

    Homeowners Exemption3,5002019155.80%0.00%155.80%20011.000019970.000%19970.1654%19970.0512%19970.2692%19970.000%

    2020160.47%0.00%160.47%19980.000%19980.1654%19980.0512%19980.2692%19980.000%

    2021165.28%0.00%165.28%5-Yr. Avg.1.000019990.000%19990.1654%19990.0512%19990.2692%19990.000%

    Initial Absorption Rates:2022*170.24%0.00%170.24%N/A20000.000%20000.1654%20000.0512%20000.2692%20000.000%

    Parcel 150.0%2023175.35%0.00%175.35%20010.000%20010.1654%20010.0512%20010.2692%20010.000%

    Parcel 250.0%2024180.61%0.00%180.61%

    Parcel 350.0%2025186.03%0.00%186.03%5-Yr. Avg.0.000%5-Yr. Avg.0.165%5-Yr. Avg.0.051%5-Yr. Avg.0.269%5-Yr. Avg.0.000%

    Parcel 450.0%2026*191.61%0.00%191.61%

    Parcel 5100.0%2027197.36%0.00%197.36%Lake Cty. Forest Pren/an/an/an/a

    N/A0.0%2028203.28%0.00%203.28%5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:5-Year Avg. Tax Rate:

    N/A0.0%2029209.38%0.00%209.38%

    N/A0.0%2030*215.66%0.00%215.66%YearTax RateYearTax RateYearTax RateYearTax RateYearTax Rate

    N/A0.0%2031222.13%0.00%222.13%19970.0000%19970.0000%19970.0000%19970.000%19970.000%

    N/A0.0%2032228.79%0.00%228.79%19980.0000%19980.0000%19980.0000%19980.000%19980.000%

    N/A0.0%2033235.66%0.00%235.66%19990.0000%19990.0000%19990.0000%19990.000%19990.000%

    N/A0.0%2034*242.73%0.00%242.73%20000.0000%20000.0000%20000.0000%20000.000%20000.000%

    N/A0.0%20010.0000%20010.0000%20010.0000%20010.000%20010.000%

    N/A0.0%

    N/A0.0%5-Yr. Avg.0.000%5-Yr. Avg.0.000%5-Yr. Avg.0.000%5-Yr. Avg.0.000%5-Yr. Avg.0.000%

    Land0.0%

    &CFOR DISCUSSION PURPOSES ONLY

    &L&F&RKane, McKenna and Associates, Inc.

    Absorption Assumptions

    Anytown, Illinois

    TIF - Project Analysis

    Absorption Assumptions

    Absorp.Annual Units/Sq. Ft. OccupiedAnnual LandAnnual

    YearParcel 1Parcel 2Parcel 3Parcel 4Parcel 5N/AN/AN/AN/AN/AN/AN/AN/AN/AN/ALandAbsorptionBalance

    2004360

    20053641,00011,00020,0000

    2006366,0000

    2007360

    200880

    20090

    20100

    20110

    20120

    20130

    20140

    20150

    20160

    20170

    20180

    20190

    2020

    2021

    2022

    2023

    Totals15241,00011,00020,0006,000000000000000

    &L&"Arial,Bold"EXHIBIT II-A (Scenario #1)&CFOR DISCUSSION PURPOSES ONLY

    &L&F&RKane, McKenna and Associates, Inc.

    Absorption Analysis

    Anytown, Illinois

    TIF - Project Analysis

    Absorption Analysis

    Parcel 1Parcel 2Parcel 3Parcel 4

    CumulativeCumulativeCumulativeCumulative

    Units/Sq. Ft.% OccupiedUnits/Sq. Ft.%Units/Sq. Ft.% OccupiedUnits/Sq. Ft.%Units/Sq. Ft.% OccupiedUnits/Sq. Ft.%Units/Sq. Ft.% OccupiedUnits/Sq. Ft.%

    YearOccupiedfor YearOccupiedOccupancyOccupiedfor YearOccupiedOccupancyOccupiedfor YearOccupiedOccupancyOccupiedfor YearOccupiedOccupancy

    20043650.00%3623.68%00.00%00.00%00.00%00.00%00.00%00.00%

    20053675.00%7247.37%41,00050.00%41,000100.00%11,00050.00%11,000100.00%20,00050.00%20,000100.00%

    20063683.33%10871.05%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20073687.50%14494.74%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    2008897.37%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20090100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20100100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20110100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20120100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20130100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20140100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20150100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20160100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20170100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,000100.00%

    20180100.00%152100.00%0100.00%41,000100.00%0100.00%11,000100.00%0100.00%20,00010

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