Get the Facts on Tax Increment Financing
December 10, 2013
Citizen comments in opposition to the Confluence Project have stated concerns about funding the City’s capital contribution.
“I believe the project will not pay for itself and will only temporarily increase the tax base,” submitted via email to Eau Claire City Council by Lisa Herrmann.
“In my opinion this is a complete waste of taxpayer dollars for a project that will not generate dime one hard revenue for the City,” submitted via email to Eau Claire City Council by Carl Vande Vrede.
In order to answer these, and other concerns, lets first look at Tax Increment Financing (TIF).
What is a TIF District?
TIF districts are one of the few remaining economic development tools local governments can use to attract new business, invest in infrastructure and rebuild blighted areas. A tax increment is the difference between the amount of property tax revenue generated before TIF district designation and the amount of property tax revenue generated after TIF designation.
Only property taxes generated by the incremental increase in value of the TIF district are available for TIF projects—such as Phoenix Park and the Confluence Project. Tax rates do not change when a TIF district is designated. TIF funding for capital improvements, when structured as proposed for the Confluence project, DOES NOT increase general fund spending or taxes.
TIF Districts Do Not Reduce Tax Revenues to Schools, Parks
Also, TIF districts do not reduce tax revenues to other taxing bodies such as schools. Taxes collected on properties included in the TIF at the time of designation continue to fund schools, parks, libraries and other taxing districts and are not reduced by the creation of a TIF district. Only taxes from future development projects—which would not happen with out TIF funding—go to re-pay the funds advanced to complete the TIF eligible projects.
Make sense? Alright, now lets look at Confluence Project funding.
Confluence Project Funding and TIF Districts
The Confluence Project will be developed in Tax Increment District 8 (TID 8). The City’s share of funding the Community Arts Center (CAC) is $5 million, and TID eligible expenses necessary to develop the Mixed Use Building (MUB) site are $5.9 million.
The City’s capital contribution through TID 8 is proposed to fund “up front” the $5 million CAC investment and $3.3 million of the MUB infrastructure.
This is accomplished with approximately $2 million in funding available from the existing TID 8, and the balance from an overlay district that includes the Confluence site. The Confluence MUB is valued at $25 million yielding an estimated property tax payment of $588,000 annually. This guaranteed tax payment will fully fund the repayment of the City’s capital contribution to the arts center AND the mixed use building.
Developers, Not Taxpayers, Are Responsible for Creating Increased Tax Revenues Through Development
TID 8 is proposed as a “Pay-As-You-Go” concept. This means the $2.6 million balance of the contribution to the MUB infrastructure will not be paid until tax revenues are generated by future development within the TID area. This places the risk of TID revenue performance on the developer, not the taxpayer.
Long-Term TIF District Tax Revenues Will Benefit Other City Services
Once TID 8 fully funds the City’s Confluence investment, the TIF district’s tax revenues benefit other taxing bodies. At the end of the TIF, all the tax revenues generated by the revitalized downtown property go to underlying taxing bodies, which provides an ongoing tax revenue increase for schools, parks, libraries and other bodies without raising taxes.
The fact is the Confluence Project will rejuvenate a blighted area, generate new economic development downtown and increase City tax revenues without raising property taxes!
Choose Growth for Eau Claire.
- Support the Confluence Project through the City of Eau Claire’s online forum E2C2.
- Email your support to Eau Claire City and County representatives.