TIF & Property Taxes

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Text of TIF & Property Taxes

  • 1. A strategy to provide property tax relief in East St. Louis 200 N. Broadway Suite 1000 St. Louis, MO 63102 (314) 231-7318 By Mike Weber, Director PGAV URBAN CONSULTING

2. 3.

  • TIF is designed to induceprivate sector investmentin redevelopment projects.

4. 5. 6. 7. 8. How TIF Works

  • TIF district is established by City Ordinance(the City has 7 TIF districts covering almost the entire City)
  • Property taxes are then distributed in two ways:
    • Tax on base assessed value goes to taxing districts
    • Tax on gains on assessed value goes to special TIF fund

9. 10. How TIF Works(graphic illustration) 11. Streets, Sewers and Other Public Improvements 12. TIF & Public Works

  • TIF funding for new streets & other public works should be in support new private development.

13. TIF & Public Works

  • When possible TIF can fund street improvements in existing neighborhoods.

14. TIF & Public Works

  • TIF is NOT intended or designed to serve as funding source for normal maintenance and reconstruction of streets and utilities.
  • While the need for new streets and sewers is enormous, TIF can only cover a small portion of the costs(see next chart ) .
  • TIF dollars must be spent within the TIF district generating the TIF dollars.

15. 16. Why are property tax rates so high in East St. Louis? 17. Property Taxes

  • Property tax rates are determined by dividing the tax levy request by the rate setting equalized assessed value (EAV) within the taxing district.
  • The higher the rate setting EAV, the lower the tax rate.
  • If there is no growth in EAV over time, tax rates will tend to go up.

18. Tax Rate Computations

  • 1986 Tax base (assessed valuation): $50,000,000
    • 1986 levy request: $1,000,000
    • Tax rateto generate levy request: $2.00 /$100 AV
  • 2006 Tax base: $50,000,000
    • 2006 levy request: $1,800,000*
    • Tax rateto generate levy request: $3.60 /$100 AV
    • *The 2006 levy request reflects inflation between 1986 and 2006.

19. Property Taxes(a comparison)

  • A $75,000 home inEast St. Louiswould pay in the range of$3,100 to $3,500in property taxes.
  • InFairview Heights , the same home value would result in$1,700in taxes.1

1based on tax rate for tax code 08040 20. Contributing Factors to High Taxes

    • Population loss of 9,400between 1990 & 2000.
    • Loss of 1,880 occupied housing unitsbetween 1990 & 2000.
    • ALL INCREASES IN PROPERTY VALUE BENEFITS PRIMARILY THE TIF FUNDS.
    • More than of the City containstax exempt or vacant lots .

21. 22. 23. 24. Contributing Factors to High Taxes

  • Exemptions & TIF Constrains Tax Base:
    • Total Assessed Value $170 million
      • Less exemptions 33 million
      • Less TIF Increment Value 89 million
    • Net Taxable Value $48 million
  • Only 28% of the Citys assessed value is available for normal taxation.
  • Between 2003 and 2006, the Citys net taxable value has dropped by nearly $900,000

25. 26. Dissolve & Reduce TIF Districts

  • Over 50% of the Citys tax base is dedicated to the various TIF funds.
  • By dissolving and reducing the size of the TIF districts more of the tax base will be available to generate revenue for all affected taxing districts.
  • With a larger rate setting EAV, tax rates should go down.
  • Expected property tax savings:19% to 26%

27. 28. Effect on $75,000 Home

  • Current:
    • 2006 tax rate for tax code 01099 12.9186
    • Total property tax bill $3,230
  • Move$31 million EAV from TIF Districts:
    • Tax rate with added tax base 10.4677*
    • Total property tax bill $2,617
    • Savings of$613
    • *Assumes all taxing districts keep levy requests in line with recent trends.Also assumes loss of School District GSA is made up by increased levy.

29. 30. Effect on $75,000 Home

  • Current:
    • 2006 tax rate for tax code 01099 12.9186
    • Total property tax bill $3,230
  • Move$50 million EAV from TIF Districts:
    • Tax rate with added tax base 9.673*
    • Total property tax bill $2,418
    • Savings of$812
    • *Assumes all taxing districts keep levy requests in line with recent trends. Also assumes loss of School District GSA is made up by increased levy.

31. Actions Required & When Effective

  • City Council needs to pass ordinances dissolving and reducing size of TIF districts.
  • If accomplished in 2007, it will affect tax rates in 2008.

32. Other Considerations

  • The City will continue to use TIF to induce private development and redevelopment projects.
  • If needed, new project-based TIF districts will be created.
  • The effectiveness of property tax relief is predicated on all affected taxing districts cooperating with the City in this effort!