City dissolves first TIF five years ahead of schedule
January 31. 2014 9:05AM
Brandon’s first ever Tax Increment Financing endeavor is now a thing of the past.
Tagged as TIF #1, the Brandon City Council Jan. 20 approved Resolution No. 03-14 to dissolve it. TIF #1, which supplied $250,000 to finance the construction of Railroad Avenue to allow for access to businesses in the Corson Industrial Park, was paid off five years earlier than scheduled. The tax abatement was scheduled to go through 2019, according to Assistant City Administrator Dennis Olson.
TIF #1 was initially set up to construct a road to service Wasau Supply Company and future businesses in the industrial park. In the years to follow, Integra Plastics, The Berquist Company and Tower Tech (now Marmen Energy) have all helped in paying down the $250,000 incentive.
Olson said all three of city TIF endeavors were written to collect those tax dollars once the TIF is paid off.
“For that loan process, we get the jobs and everything else that comes with that. We’re just delaying the taxes we get for awhile in exchange for the jobs now,” Olson said. “And it’s an incentive that’s pretty common and painless.”
TIF #2 provided a tax break for the Holiday Inn Express and Convention Center, while TIF #3 is tied to the construction of Hemlock Boulevard, which is another primary access road to the Corson Industrial Park.
With the dissolvment of TIF #1, City Administrator Bryan Read said TIF #3 will cash flow better.
In other business:
• Noted the city will partner with Sioux Falls in the bid process for microsealing streets this summer.
“The concensus is after last year’s project is that everybody is OK with microseal rather than chip seal,” said City Engineer Jon Brown.
“I’ve only heard good comments and reports … so microseal’s the way to go,” Alderman Roger Brooks said.
The city has budgeted $200,000 for this year’s microseal project.
• Mayor Larry Beesley appointed Brandon Valley High School sophomore Tiati Thelen to the Brandon Safety Committee.
• Approved the second reading of Ordinance #509 to rezone property at 1800 W. Frontier St. from general business to light industrial.
• Adjourned until 6 p.m. Monday, Feb. 3.
What is Tax Increment Financing?
Tax increment financing – or TIF – is a public financing method that is used as a subsidy for redevelopment, infrastructure, and other community-improvement projects.
TIF is a method to use future gains in taxes to subsidize current improvements, which are projected to create the conditions for said gains. The completion of a public or private project often results in an increase in the value of surrounding real estate, which generates additional tax revenue. Sales-tax revenue may also increase, and jobs may be added, although these factors and their multipliers usually do not influence the structure of TIF.
When an increase in site value and private investment generates an increase in tax revenues, it is the “tax increment.” TIF dedicates tax increments within a certain defined district to finance the debt that is issued to pay for the project. TIF was designed to channel funding toward improvements in distressed, underdeveloped, or underutilized parts of a jurisdiction where development might otherwise not occur. TIF creates funding for public or private projects by borrowing against the future increase in these property-tax revenues.
Although the TIF method has been discontinued in the state it began in, California, thousands of TIF districts still currently operate nationwide in the United States.
With the exception of Wyoming, every state and the District of Columbia has enabled legislation for tax increment financing.