+

Martha Reimann, Georgia Department of Community AffairsFrederick Gardiner, City of Griffin, Ga

Redevelopment Tax Incentive

Ordinances

+Regulatory Powers May Be STATUTORY or CONSTITUTIONAL Constitutional Statutory

Official Code of Georgia AnnotatedGeorgia Constitution

+Redevelopment Tax Incentives are Constitutionally Created Powers

Enabled in: Georgia Constitution

Article IXSection II Paragraph VIISection 4(d)

(Ga. Laws 2002p 1497)

+Constitutional Powers Are Usually More General and Easier to Defend Constitution

Local Ordinance (if required)

Constitution

State Statute passed by Legislature

As interpreted by State Agency “Rules”

And State Case Law

Local Ordinance (if required)

+What Sort of Properties Can Have Ad Valorem Tax Adjustments? Properties with blighted Commercial or Industrial

Structures.

Properties with blighted Residential Structures that are vacant or used for purposes other that primary residences.

Special sites such as brownfields if specified by local ordinance

Not usually undeveloped land.

The applicable definition of blight is whatever you put in your local ordinance.

+What Taxes May Be Raised?

City ad valorem taxes going toward general revenues

County ad valorem taxes going toward general revenues

Both City and County taxes may be raised on the same property using parallel ordinances

Not School taxes or other special district taxes (CIDs, BIDs, Development Authority Millage, etc.)

+Required Elements of the Local Ordinance

ascertainable standards which shall be applied in determining whether property is maintained in a blighted condition “at a minimum endangerment to health and public safety”

Prohibition against raising taxes on “principal residences”

Specified increased rate of ad valorem taxation . . . through application of a factor to the millage rate applied to the property

ascertainable standards for rehabilitation through remedial actions or redevelopment to have the property removed from identification as “maintained in a blighted condition”

+Required Elements of the Local Ordinance

Specified increased rate of ad valorem taxation . . . through application of a factor to the millage rate applied to the property

Specification of “a decreased rate of ad valorem taxation to be applied for a specified period of time after the county or municipality has accepted a plan submitted by the owner for remedial action or redevelopment of the blighted property and the owner is in compliance with the terms of the plan.”

ascertainable standards for rehabilitation through remedial actions or redevelopment to have the property removed from identification as maintained in a blighted condition

+How Much Can Property Taxes Be Increased?

There is no limit specified in the Georgia Constitution.

A millage rate factor is established in the local ordinance.

So far they seem to vary between 3 to 7 times higher than basic millage.

Keep in mind that when you back out school taxes, city and county general millage rates may be so low that you have to raise them significantly to have an impact.

You are looking for “the tipping point”.

+Appropriate Uses Redevelopment Incentive Tax RevenuesProceeds must be used for “Community Redevelopment”. This is a broad category and might be interpreted to include:

Infrastructure, public facility expansion or upgrades to support neighborhood revitalization

Cost of repairing, demolishing and cleaning up other blighted properties

Creation of Local Revolving Loan Funds, Façade Easement Programs, Energy Efficiency Programs

Business incubators, recruitment and marketing of CBDs

You can’t use tax money for grants to individual property owners, but you could use it to match public sector grants such as CDBG, Federal Stimulus Funding, etc.

+Redevelopment Incentive Tax Revenues: Appropriate Uses

Special Planning Initiatives (Master Plans, Urban Redevelopment Plans, TAD Plans, Code Updates)

Establishment and support of various redevelopment authorities, housing authorities, land banks, etc.

acquisition of property for public uses

Creation/ Enhancement of Revitalization Areas (Local Historic Districts, NSP Areas, etc.)

Maintenance of foreclosed properties to avoid lowering property values of neighboring homes.

Cost of inspections and operating the community redevelopment tax incentive program

+Are Their Geographic Limitations On Where Extra Taxes Can be Collected or Spent? The Constitution states that “Variations in rate of taxation as

authorized . . . shall be a permissible variation in the uniformity of taxation otherwise required.”

It is probably not a good idea to limit increased taxes to a specific district. All properties meeting the the blight definition should be taxed consistently.

However, location within specific local district boundaries may dictate different rules and requirements for appropriate remediation.

There is no geographic “rational nexus text” between where taxes are collected and where they are spent as long as they are used for Community Redevelopment.

+Design the Program to Motivate Property Owners to Take Positive Actions

May cause owner to invest in stabilizing or improving property

May encourage owner to sell to someone willing to do the work.

May cause owner to rent structures previously left vacant to pay the extra taxes.

+Consider Possible Unintended Consequences Owner may choose to demolish or destroy a useful or historic

structure to avoid paying higher taxes. You can’t collect taxes on a structure that has been removed.

Existing businesses renting in deteriorated buildings may be displaced or their rent may be increased to pay for repairs.

Increasing taxes to address blight may increase neighborhood property values, but can also affect the supply of affordable rental housing.

Ordinance provisions may be particularly hard on elderly property owners or struggling new businesses.

May not work for blighted properties held by churches, non-profits, quasi-public entities like Development or Housing Authorities.

+Promoting Preservation of Historic Buildings If you have an Urban Redevelopment Plan (URP) or Form-Based

Zoning Code you can create a unique Special Area Plan for designated land mark properties. If (as in Griffin’s ordinance) you require consistency with a URP this may allow you to set higher that average rehab standards or put stricter constraints on demolition or inappropriate site or building changes.

Cross-reference any local preservation ordinances and require compliance with any historic rehab provisions therein as a condition of removing blight designation.

You can theoretically have more liberal post-remediation payback provisions to reward property owners that go beyond the minimum in improving historically significant structures.

+Notes On Defining Blight

Constitution does not dictate a specific definition of blight, but requires that you put one in your local ordinance.

Various state statues have slightly different definitions of” blight” or “blighted” none of which are you required to use.

If you are using other statutory tools or programs based on blight designation, this ordinance probably needs to say that lack of blight determination under this ordinance does not preclude a property from qualified as blighted under other statutory programs.

Most state statutes did not envision the current mortgage meltdown. If you are thinking of using age as part of your definition, remember that with high foreclosure rates, some fairly new property may end up being blighted.

+Constitution Does Not Specify How Much of Tax Collected Must Be Reimbursed While you are required to reduce taxes for some period for

owners who mitigate blight, you don’t have to compensate for 100% of their expenses or give back all the additional taxes collected.

Remember you need to cover the cost of the rehabilitation program—inspections, planning, legal costs, staff time, etc.

You must specify the length of time the lower tax rate applies, but it could be a small percentage reimbursement spread over a long time. For example a reduction factor of .1 spread over 10 years might be more fiscally advantageous to the local government than a factor of .5 spread over 3 years.

+Do the Math on Cost Recovery

Example 1:

Blight Tax factor (millage times 3.0) is applied to a property. Owner complies with rehab plan in less than 6 months and thus owner pays a factor of only 1.5 in the remediation year, since taxes are billed semi annually.

Ordinance specifies that after remediation the general property tax millage will be reduced by .5 for 5 years.

Result: City forfeits more property tax than it collected from the increase.

+Do the Math on Cost Recovery

In cases where the millage factor is 7,and court orders are sought in all instances of blight determination:

Citation, hearing and finding required within 45 days.

Remediation plan to be completed within the next 120 days.

Result: Higher Tax would only be imposed for six months, therefore theoretically the City would never collect more than 3.5 times the normal tax rate for one year on a given property.

+Consider Your Policy Intent

City of Albany:

… factor of . 5 is applied to the post remediation taxes. The decreased rate of taxation may be given in successive years depending on the cost expended . . . With every $25,000 or portion thereof equaling one year of tax reduction, with no property receiving more than 4 years of tax reduction.

Question: Are you trying to return to the property owner 1) all the extra taxes collected, or 2) some approximation of the actual cost of remediation?

+Things You May Not Have Thought of or may need to address . . . How would this type of ordinance work in a state

Enterprise Zone?

How would redevelopment tax incentive money be allocated in a TAD?

Should the blight designation be filed with the deed to protect innocent buyers?

In cases of foreclosure, the bank is liable for property taxes. Are you sure banks in your area are transferring titles promptly when they take someone’s property?

Are you going to automatically take blighted properties to municipal court, or just keep billing them at a higher tax rate indefinitely?

+Other Points to Consider

If you are going to require a court action, you should probably make sure the penalty for non-compliance with the court ordered remediation plan is specified.

Using this tool does not limit any of the other safety code, nuisance regulations, zoning or other statutory redevelopment powers of a jurisdiction.

Have you done an adequate survey of the scope of the problem and run scenario’s on revenues based on different interpretations of blight?

Do a well planned public information campaign before putting this tool in place. Make sure the public knows that this tool in no way broadens the local government’s eminent domain powers or affects school revenues.

+Procedural Considerations

You are required to offer some sort of hearing / appeals opportunity

Some communities appoint citizen boards of appeal, others may have administrative or judicial appeals.

+Eliminating Substandard Housing

Conduct an analysis of all housing in the City of Griffin

Rate all Structures as follow:

Excellent 7 to 9 Good 10 to 12 Fair 13 to 15 Deteriorated 16 to 20 Dilapidated 21 to 28

The City Housing Condition Survey:

+ Griffin Housing Conditions Survey Results

8.79%

11.52%

16.65%

8.63%

54.40%

Excellent

Good

FairDeteriorated

Dilapidated

+

3,479

562 7371,065

552

0

1,000

2,000

3,000

4,000

Nu

mb

er

Condition

Griffin Housing Condition Survey Results

Excellent Good Fair Deteriorated Dilapidated

+ Griffin Substandard Structure Flow ChartGriffin Substandard Structure Flow Chart

ID Substandard Structures Per IPM Code

City Attorney seeks Demolition Order from Court after due diligence on the property is completed

Photo, Placard & Green Tag Structure-Document Findings

Compose Letter to Property Owner Outlining conditions to be remedied andtime period in which to complete remedies

1. Owner Respond to letter outlining remedy2. No Response from Owner-File turned over to

Code Enforcement for issuance of a citation

Code and Building Official present case against the property for Court ActionCity Attorney is forwarded a case file to continue legal action

Notification to demo is forwarded to Public Works and Solid Waste Departments

+ Blight Tax Program Process Flowchart

No request for hearingProperty is automatically

Affirms blight determination

Property Tax is increase

Reverse blightdetermination

Owner has 45 days to request hearing

Property Tax Commissioneris notified to increase

Taxes

Municipal Court ClerkSchedules hearing

Blighted Vacant Structures Identified

No Response

Citywide Housing Survey

Notice of Conditionsis sent to owner)

Yes Response

+Eliminating Substandard Housing

City of Griffin has Demolished 14 Structures.

Owners have Demolished 37 Structures

Since 2007, 51 Structures have been demolished

+ Eliminate Substandard Housing

+Eliminate Substandard Housing

+Eliminate Substandard Housing

+