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Demystifying Tax Increment Financing (TIFs)

Gain insights into Tax Increment Financing (TIFs) with an overview of how TIFs work, new expanded TIF districts, development programs, and properties. Explore the benefits, processes, and strategies involved in TIFs to help jump start economic development. Follow a comprehensive presentation to Saco City Council by experts in the field.

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Demystifying Tax Increment Financing (TIFs)

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  1. De-MysTIFyingTax Increment Financing (TIFs)Overview of Tax Increment Financing & a Look at New Expanded TIF Districts, Development Programs, and Properties Jump Start Presentation to Saco City Council December 10, 2018 Denise Clavette, Director Emily Cole-Prescott, Econ. Dev. Specialist Zach Mosher, City Planner Planning and Development Department

  2. Agenda • Understanding What TIFs Can Do • Development Programs & Terms • TIF Districts • TIF Strategies & Progress • Recommendations

  3. Understanding What TIFs Can Do

  4. What is Tax Increment Financing • A great tool to catalyze economic development • Allows municipalities to “shelter” increases in valuation (up to 30 years), avoid losses due to state and county fiscal formulas • TIF revenue: can fund infrastructure enhancements related to / required for project development (public or private) and/or project costs; and • A comprehensive development program can fund many municipal projects to enhance the economic development climate • Development program needs to meet statutory requirements and local process

  5. Benefits of TIFs • Assist in achieving economic development goals of comprehensive plan, or other planning / vision plans • Attract new investment (i.e. tax dollars), jobs, improve local economy • Accomplish significant infrastructure projects • Tax shift benefits

  6. Tax Shift Benefit • TIFs shelter new assessed value from a municipality’s state valuation • The “state valuation” = equalized total assessed value in municipality • The valuation impacts: • State education subsidies • County taxes • State revenue sharing subsidies • Local education contributions to the school district

  7. Fiscal Formulas Explained • State Aid For Education Impacts • Based on the State of Maine Essential Programs and Services funding model. Statewide mil rate is applied to a district's state valuation to determine local property taxes for education – the higher the valuation, the more funds that need to be raised locally. • Municipal Revenue Sharing Received by a Municipality • Based on population, taxes raised, and state valuation – the higher the valuation, the less $ of Revenue Sharing received by a municipality. • County Taxes Paid by a Municipality • Based on the municipality’s % share of the County’s state valuation – the higher the share of valuation, the higher the County Tax.

  8. What is a TIF District • Geographic boundary is defined (project specific, or area-wide) • Original Assessed Value (OAV) • Development Program is created and managed locally • Applications reviewed for statutory compliance by: • State of Maine Department of Economic and Community Development (DECD) • Maine State Housing Authority

  9. TIF Process • Municipality determines % of new valuation, and therefore associated revenues, to shelter within a TIF (up to 100%). What is not sheltered accrues to General Fund. • Sheltered revenues can be used to support municipal expenditures in support of or made necessary by economic development, and/or; • Can be used to ‘incentivize” private investment by a business and/or developer (through Credit Enhancement Agreement – Municipality determines % to be shared and can be any amount between 0% and 100% of all TIF revenues)

  10. HowTIFsWork(IllustrativePurposesOnly) TIFEnds (max.term) TIFCreated

  11. Lost Revenue in Every New Tax Dollar 45%LostRevenue 55%Availableto City

  12. Use of TIF program in Maine (as of 2017) • 482 TIF districts in the State of Maine • Approximately half include at least one Credit Enhancement Agreement (“CEA”) • Special types of TIF districts

  13. Special Types of TIF Districts • Downtown TIFs • Transit-Oriented TIFs • Omnibus TIFs • Affordable Housing TIFs

  14. Development Programs & Terms TIF Districts

  15. Nine TIF Districts in Saco • First Light* • Industrial Park Road Improvements • Spring Hill • Franklin Fuels • Park North / Cascade • General Dynamics • Saco Island Mill Building #4 • Mill Brook • Downtown Omnibus District * In review with DECD

  16. Saco’s TIF Districts • Approximately 1,330 total acres, of which about 758 are in the downtown district • Wide variety of development programs • Credit Enhancement Agreements • Many projects and resources have been funded over the years • First community in State of Maine to use the TIF program

  17. Saco’s TIF Districts: Acreage Cap • Per 30-A M.R.S.A. §5223 (3)(C), a municipality’s acreage within a TIF District is capped at 5%. • Downtown Development and Transit-Oriented TIF Districts are exempt from this calculation. *Source: Downtown (TIF #15) Development Program

  18. Saco’s TIF Districts: Valuation Cap • Per 30-A M.R.S.A. §5223 (3)(C), a municipality’s valuation within a TIF District is capped at 5%. • Downtown Development and Transit-Oriented TIF Districts are exempt from this valuation cap. *Source: Downtown (TIF #15) Development Program

  19. First Light Development Program District • OAV: $62,400 • Acreage: 10 • Term: 30 years, from July 1, 1997 – June 30, 2028* • FY 2019 Q1 Fund Balance: $55,670 • CEA with First Light: 40% of captured assessed value for five years** • Program Highlights: Can be used to fund acquisition, improvement and development of land for additional industrial parks • Funded Projects: Funds applied to City’s economic development program for a variety of programs, including acquisition of industrial park land *With DECD for review of term extension. **This was reduced to four years, with the fifth year applied to the City’s fund, with DECD’s approval. 71-1-1

  20. Industrial Park Road Improvements Development Program District • OAV: $5,169,200 • Acreage: 33.07 • Term: 20 years, from July 1, 2008 to June 30, 2028 • FY 2019 Q1 Fund Balance: $917,836 • CEA: Peoples Choice Credit Union: Payments made to company to offset costs of traffic improvements, capped at $100,000 • Program Highlights: To fund costs of various traffic improvements in the area of Industrial Park Road • Funded Projects: Street and site improvements along Industrial Park Road; CEA with Peoples Choice Credit Union ROWs not shown

  21. Spring Hill Development Program District • OAV: $5,746,000 • Acreage: 135 • Term: 20 years, from July 1, 2002 to June 30, 2022 • FY 2019 Q1 Fund Balance: $1,317,811 • Program Highlights: Costs for traffic mitigation fund for Rte. 1 improvements • Funded Projects: Contributed to traffic mitigation fund ROWs not shown

  22. Franklin Fuels Development Program District • OAV: $167,500 • Acreage: 6.86 • Term: 30 years, from July 2, 2008 to June 30, 2039 • FY 2019 Q1 Fund Balance: $68,607 • CEA: Currently, with White Rabbit LLC, limited to incremental taxes from new actual value capped at $125,000 • Program Highlights: Funds costs associated with Credit Enhancement Agreement with White Rabbit LLC; can fund operations and programming associated with various economic development initiatives • Funded Projects: CEA with White Rabbit LLC

  23. Park North Development Program District • OAV: $5,516,400 • Acreage: 323.48 • Term: 30 years, from July 1, 2008 to June 30, 2038 • FY 2019 Q1 Fund Balance: $145,778 • CEA: Park North Development LLC, first $200,000 of incremental value paid to company; follows 70% company and 30% City for next 30 years, until end of TIF District • Program Highlights: Currently, the second largest TIF District in Saco; may be used to fund economic development programs and revolving loan fund capitalization • Funded Projects: Developer is expanding sewer infrastructure and road improvements

  24. General Dynamics Development Program District • OAV: $5,900 • Acreage: .11 • Term: 6 years, from July 1, 2014 to June 30, 2020 • FY 2019 Q1 Fund Balance: $0 • CEA: General Dynamics, capped at $100,000 • Program Highlights: Reimbursements to developer capped at $100,000 total, based solely on .11-acre section of property • Funded Projects: Incentivized General Dynamics to expand facility in Saco

  25. Saco Island Mill Building #4 Development Program District • OAV: $280,000 • Acreage: 5.04 • Term: 30 years, from July 1, 2015 to June 30, 2045 • FY 2019 Q1 Fund Balance: $53,450 • CEA: Chinburg Properties; 80% to company in years 1 through 8; 60% in years 9 through 30, capped at $5 million • Program Highlights: May support costs associated with Shuttle bus service, PACTS sign project, Multi-modal train platform, and economic development programming for the City and regional entities • Project Funded: Incentivized redevelopment of mill building into apartment housing for the City and region

  26. Mill Brook Development Program District • OAV: $2,090,500* • Acreage: 61.06 • Term: 30 years, from July 1, 2015 to June 30, 2045 • FY 2019 Q1 Fund Balance: $26,169 • CEA: Maine Molecular, 80% to company in years 1 through 10; 0% thereafter • Program Highlights: Can fund capital costs of recreation trail improvements and road improvements within 2 miles of the District • Funded Projects: *Technical correction pending review by DECD, from 2017 locally approved amendment ROWs not shown

  27. Downtown Omnibus Development Program District • OAV: $395,250,156.70 • Acreage: 757.8 • Term: 30 years, from July 1, 2017 to June 30, 2047 • FY 2019 Q1 Fund Balance: -$19,796 • Grants: Cutts Avenue (Economic Development Grant) • Program Highlights: Provides the City and the Downtown with the widest amount of funding options and opportunities for public improvements throughout all of the City’s TIFs • Funded Projects: Funded first payment of economic development grant for Cutts Avenue project; growth in coming years may fund a wide variety of projects, as shown on next slides detailing Development Program

  28. Downtown Development Program Within District/Municipality Within Municipality • Streetscape Improvements • Design, construction, installation of 3-phase power & Broadband/4G LTE costs • Reimbursement agreements with developers/companies • Waterway seawall • Waterway dredging • Marina infrastructure construction along Saco River • Economic development agencies (Saco Main Street & Chamber) operations & program funding • Bus shelters and transportation amenities • GIS mapping (maintenance & upgrades) • Workforce skill development/training costs • Environmental improvement costs • General economic development, including prorated salaries and portions of salaries for positions that work on TIFs

  29. Downtown Development Program Cont’d. Within/Outside District & Within Municipality Within/Outside District • Trail connections & improvements • Storm water & drainage improvements • Sewer infrastructure • Energy & gas transmission • Prorated costs of Harbormaster’s Office • Piers, floats, tourist boater amenities • Marina infrastructure • Prorated municipal equip. costs • Sidewalk rehabilitation/extension, parking improvements, lighting, crosswalks, central parking facility • Underground utilities • Road & intersection improvements • Pro-rated costs of public safety building & public safety equipment/infrastructure related to development within District • Capital costs of improvements

  30. TIF Strategies

  31. Strategic TIF Next Steps for Saco • Integrate TIF use with core objectives: tax base growth, job growth, workforce development, economic diversification, place making, community and downtown development • Go beyond use of TIFs for business incentives – shift focus to funding for public infrastructure and projects to support economic development (long-term) • Extensions of TIF Districts to 30 years • Potential boundary expansions of current TIF Districts (where it makes sense to do so)

  32. Progress Toward Next Steps • Completed comprehensive analysis of current TIF Districts, Development Programs, Credit Enhancement Agreements, and Grants • Hosted Jump Start TIF Meeting with City Administrator and City Staff, to obtain team-oriented objectives and citywide collaboration • Completed parcel review with Planning & Development Director, Economic Development Specialist, and City Engineer for potential transit district • Continue to track and report progress; guide all with planning and policies

  33. Recommendations • Amend and modify existing TIF Districts to create a comprehensive development program for all districts: • First Light (TIF #1): Development Program amendment • Industrial Park (TIF #5): 10-year extension & Development Program amendment • Spring Hill (TIF #7): 10-year extension & Development Program amendment • Franklin Fuels (TIF #8): Development Program amendment • Park North (TIF #9): Development Program amendment • Mill Brook (TIF #14): Development Program & possible boundary amendments • Create a transit-oriented TIF District • Postpone creating new TIF district(s) to maximize Captured Assessed Value (CAV) • Ready Seafood TIF District and CEA

  34. DECD Approval Letters • First Light • Industrial Park Road Improvements • Spring Hill • Franklin Fuels • Park North • General Dynamics • Saco Island Mill Building #4 • Mill Brook • Downtown Omnibus

  35. Credit Enhancement Agreements & Economic Development Grants • First Light Technology, 1998 • Peoples Choice Credit Union, 2009 • White Rabbit LLC • Park North • General Dynamics, 2014 • Chinburg Properties, 2015 • Maine Molecular Quality Controls Inc., 2015

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