Gravitt: The death of SEATS and the survival of TIF

BY GUEST COLUMN | APRIL 01, 2013 5:00 AM

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The DI’s March 28 “City officials weigh in on SEATS,” gives an insightful report on what may be Mayor Matt Hayek administration’s Waterloo.

City officials joined members of the Johnson County Board of Supervisors to discuss SEATS funding. Hayek shot down Supervisor Terrence Neuzil’s suggestion for using area TIF dollars to fund SEATS.

My question is, what is TIF? — and like Neuzil, I want to know why TIF dollars can’t be used to fund SEATS. 

TIF — tax increment financing — is a tool for development and redevelopment, which captures increases in taxable assessed value in an allocation area and the revenue generated from that development (or growth) is used to finance public improvements.

Tax increment replacement imposes a property tax rate throughout the allocation area to generate tax to replace TIF revenues lost to tax reform.

TIF can induce capital investment in areas that otherwise may not have occurred. TIF provides a financing tool for redevelopment using increased tax proceeds generated by increased tax based in the area. TIF allows units to use increased tax receipts created by the redevelopment to fund the capital improvements needed.

The Redevelopment Commission establishing a base assessment as of the previous March 1 assessment date creates the allocation area. “Base,” or original assessed value, cannot be captured (the assessed value of property in the allocation area used to calculate the tax increment). Based assessed value is adjusted/neutralized for trending so there is no windfall of TIF revenues (before AV’s certified). Property tax rates adopted and approved for the civil taxing units are applied to the total value in the allocation area.

The property taxes paid are distrusted either to the Redevelopment Commission (increment) or the units (base). Redevelopment Commission must report to county auditors a notice of any excess assessed value within the TIF allocation area (pass-through assessed value) that may be allocated to taxing units. This notice is to be submitted by July 15 and prior to certification of 2010 assessed values to the department of local government finance.

The uses of the proceeds include paying expenses incurred by the Redevelopment Commission for local public improvements that are in the allocation area or serving the allocation area. TIF is designed to make the principal and interest payments of bonds and leases issued to finance the project. TIF proceeds pay the principal of and interest on bonds issued by the unit to pay for local public improvements that are in allocation area. TIF proceeds are sued in reimbursing the “unit” for expenses made for local improvements. The amount of Tax increment replacement is to be estimated by governing body. The amount of replacement is greater of zero (0) or the net amount by which:

Laws enacted by the Legislature and actions taken by the department of local government finance; after the establishment of the allocation area decreased revenues below the sum required to make all payments due in the next year from tax increment revenues.

Mary Gravitt
Iowa City resident

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