Tax Increment Financing in West Virginia
What is Tax Increment Financing (TIF)? TIF uses the projected increase in property tax revenue
to be gained by developing an area to assist in paying for the development project
TIF can be a useful tool in helping to fund economic development
TIF helps fund projects that otherwise would not get built
Tax increment financing became possible in West Virginia after passage of Amendment One to the West Virginia Constitution on November 5, 2002
The TIF handbook
The West Virginia Development Office has developed a comprehensive TIF handbook outlining how to use tax increment financing in West Virginia
The handbook includes Information on tax increment financing in general Specific information on what qualifies for TIF under the West
Virginia law and how to get development or redevelopment project areas or districts or development or redevelopment projects approved
Sample applications for the use at the local level for project proposals
Applications that local officials will submit to the West Virginia Development Office
Who can use TIF?
Tax increment financing is a tool that can be used by counties and class I and II municipalities in West Virginia
Projects that receive TIF funding can be proposed by a county, a municipality, another government entity or a private developer However, every project must have the support of the local county
or class I or II municipality who have the responsibility of getting approval for TIF-funded projects
Where can TIF be used?
Tax increment financing can only be used for projects within a development or redevelopment project area or district
Such project areas or districts can be established in advance of a project idea or at the same time a project is being proposed
Projects must directly and substantively benefit the area in which they are located
TIF financing is reserved for projects that otherwise would not get built
Development or Redevelopment Project Areas or Districts Development or redevelopment project areas or districts can exist
for no more than thirty (30) years
A development project area or district is a discrete, contiguous geographic area that has not previously been developed or is underdeveloped
A redevelopment project area or district is a discrete, contiguous geographic area that needs upgrading and can be classified as either (1) a blighted area or (2) a conservation area
The development of a development or redevelopment area or district would result in: An increase in jobs, Enhancement of the tax base, and Encourage commerce, industry, or manufacturing to locate their
operations in West Virginia
Development or Redevelopment Projects A development or redevelopment project must promote the
economic development of the project area or district by: Eliminating a blighted area, Preventing the deterioration of an area into a blighted area, Increasing employment, and/or Encouraging the location of commercial or industrial activity and jobs in
West Virginia
Examples of projects that might use Tax Increment Financing: Creating an industrial site – including installing sewer, water, and electric
lines to the site Cleaning up a environmentally blighted area and preparing the land for
future development Building a road that improves access to an area
How does Tax Increment Financing work? A development or redevelopment project area or district is
established
The county assessor certifies the base assessed value
A development or redevelopment project gets approved
Each year, over the life of the TIF-funded project, the county assessor will certify the current assessed value of the property in the development or redevelopment project area or district
The difference between the amount of regular levy property taxes on the current assessed value and the amount of regular levy property taxes on the base assessed value is the tax increment
How does Tax Increment Financing work? TIF can be used when a development or redevelopment
project is expected to generate a positive increment In other words, TIF works when a project is expected to increase
property values in the project area or district
The incremental increase in regular levy taxes are used to help finance the project in one of two ways:
(1) Pay-as-you-go
(2) Issuing Tax Increment Financing Bonds or Notes
TIF: An example
TIF bonds are to be issued in Kanawha County Property has base assessed value of $500,000. Regular levies on this property are $1.5476 per each $100 in
assessed value. (As a result, local levying bodies are currently collecting $7,738 in regular levies on this property.)
If TIF bonds are issued to help fund the project, property values are expected to rise to $1.5 million in 2005 and then by an additional three (3) percent per year after that.
The local levying bodies will continue to receive $7,738 in regular levies from this property throughout the financing period.
The increment will be used to make payments to holders of the TIF bonds issued for this project.
At the end of the financing period, all tax revenues will revert back to the local levying bodies.
Example of Tax Increment Financing
$23,214
$41,927
$48,605$54,705
$7,738
$36,167
$31,198$26,911
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033
Year
Pro
per
ty T
ax R
even
ues
Base
TotalAnnual Increment in 2015: $23,460
Annual Increment in 2025: $34,189
Annual Increment in 2005: $15,476
Establishing a Development or Redevelopment Project Area or District Hold public hearings; Obtain from the county assessor the base assessed
value of all taxable property with a tax situs in the proposed project area or district;
Submit an application to the West Virginia Development Office;
Adopt a county order or enact a municipal ordinance approving the development or redevelopment project area or district; and
Establish the tax increment financing fund (TIF fund).
TIF Fund
The TIF fund is the fund in which the tax increment in a development or redevelopment project area or district is deposited by the county sheriff.
A TIF fund is established after an order or ordinance is approved establishing the project area or district.
The county or municipality must establish a process to be used to allocate any excess increment that accrues in the TIF fund for the project area or district and that is not tied to a specific project proposal
This could happen if property values increase faster than expected
Getting Approval for a TIF-funded Development or Redevelopment Project Receive a detailed application from a developer;
If the project proposal includes use of TIF bonds, consult with outside bond counsel and investment bankers or commercial bankers about the feasibility of using TIF bonds for this project;
Determine whether the proposed TIF bonds or notes will be tax-exempt from federal taxes
TIF bonds are always exempt from West Virginia taxes; Verify all information in the project application; Hold public hearings; Establish a memorandum of understanding (MOU) with any outside
developer on competitive bidding and local labor practices; Submit an application for project approval to the West Virginia
Development Office; and Adopt a county order or pass a municipal ordinance approving the
development or redevelopment project plan.
The Local Application Process for Development or Redevelopment Projects The law gives counties and municipalities considerable
flexibility in establishing the process by which they will consider project proposals from developers.
A sample application form and set of standards, which have been endorsed by the West Virginia Municipal League, West Virginia Association of Counties, and the County Commissioners’ Association of West Virginia can be found in Exhibit B of the West Virginia Tax Increment Financing Handbook.
The application requirements include information on the developer, the project, and the sources of financing.
The Approval Process and the Expenditure of Funds The law allows counties and municipalities to be
reimbursed from TIF funds for of any cost incurred during the approval process
A county or municipality may need to pass an inducement resolution in order to make expenditures (that may later be reimbursed).
Counties or municipalities may also want to require private developers to pay for the approval costs This will cut down on the number of “false applications”
Public Hearings and Comment
The law requires that the public and other levying bodies in an area be given the opportunity for comment through a public hearing process.
When the development or redevelopment project area or district is being proposed at the same time as a development or redevelopment project, the hearings may be conducted either separately or together as long as they meet the guidelines outlined in the law.
Such guidelines include advance notifications of hearings through publication of such notices in local publications and letters to other local governing bodies.
During the notification period, but not to exceed thirty (30) days: All municipalities included in a project area or district proposed by a county must
provide their approval in the form of a resolution. All counties included in a project area or district proposed by a class I or II
municipality will have the opportunity to request further information, provide guidance, or make other formal requests.
Approval by the State
A county or municipality must apply to the West Virginia Development Office for approval of: A proposed development or redevelopment project area or district. A project to be financed, in whole or part, by TIF financing.
The Development Office has sixty (60) days to approve the application, reject the application, or return the application to the county or municipality with instructions.
TIF is a tool for local officials. The State role is simply to ensure that a county or municipality has met the requirements of the law, including conducting a thorough analysis of: The proposed project, its economic feasibility, and its effect on jobs and the local
economy, in both the short- and long-term, and The need for TIF financing, the terms of the financing, and the effect of TIF
financing on local levying bodies.
Detailed applications for approval by the West Virginia Development Office are included in the TIF handbook.
Orders or Ordinances
The county commission or the governing body of a municipality must adopt an order or ordinance establishing a development or redevelopment area.
The county commission or the governing body of a municipality must adopt an order or ordinance approving a project plan.
Prevailing Wage, Local Labor Preferences, and Competitive Bidding Any development or redevelopment project that has
been approved by the West Virginia Development Office that exceeds $25,000 and that receives even 1-cent of TIF money is deemed by statute to be a public improvement and is subject to the prevailing wage, local labor preferences, and competitive bidding requirements.
A county or municipality must establish a memorandum of understanding (MOU) with any outside developer in which such person acknowledges his/her obligations to pay prevailing wages and which outlines the competitive bidding process for this project
After a Development or Redevelopment Project Area or District has been established The county or municipality must ensure that the tax increment is
collected and properly allocated. The county assessor will certify each year’s current assessed value The sheriff will allocate regular levy taxes
The taxes on the base assessed value will go to appropriate levying bodies The increment will be deposited in the TIF fund
Each year in which there are non-allocated funds in the TIF fund, according to the procedures set out in its application for the development or redevelopment project area or district, it will be decided whether to: Leave the money in the TIF fund, or Redistribute the excess monies to the local levying bodies.
After a Project Plan has been Approved If TIF bonds are notes are to be issued, the county or
municipality will work with the bond counsel and underwriter and will authorize, through an order or ordinance, the issuance of such obligations.
Annually during the life of the project, the county or municipality must report to the West Virginia Development Office and in notices in local publications on the status of the project.
Every five years, during the life of the project, the county or municipality must hold public hearings on the status of the project.
Additional Information on TIF in West Virginia can be obtained from these sourcesWest Virginia Development OfficeCapitol Complex, Building 6, 5th FloorCharleston, WV 25305-0311 Toll Free Phone: 1-800-WVA-DEVO (982-3386)Phone: (304) 558-2234 Fax: (304) 558-1189www.wvdo.org
West Virginia Association of Counties2211 Washington Street, EastCharleston, WV 25311Phone: (304) 346-0591 Fax: (304) 346-0592Email: [email protected]
County Commissioners’ Association ofWest Virginia2309 Washington Street, EastCharleston, WV 25311Phone: (304) 345-4639 Fax: (304) 346-3512 Email: [email protected]/ccawv
West Virginia Municipal League2020 Kanawha Blvd., EastCharleston, WV 25311Phone: (304) 342-5564Toll Free Phone: (800) 344-7702Fax: (304) 342-5586Email: [email protected]
Bond counsels listed in the Bond Buyers Municipal Marketplace (the “Red Book”) or investment bankers or commercial bankers who may underwrite TIF bonds or notes may also be good resources.
Conclusion
TIF is an exciting new tool that allows counties and class I and II municipalities in West Virginia to compete with other states for businesses and jobs and to promote economic development and redevelopment in their local areas.
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