EL DORADO — El Dorado city manager, David Dillner appeared before the Board of County Commissioners to present information on a proposed a Tax Increment Financing project for the City of El Dorado.
Tax Increment Financing (TIF) is a municipal financing tool used to target redevelopment to specific, defined geographic areas. It facilitates the (re)development of areas designated as blighted, environmentally contaminated, conservation areas, and enterprise zones.
TIF captures new, incremental property tax dollars generated from the defined geographic area to fund public improvements necessary for development.
Current state law allows for increased property tax increment to fund various public infrastructure components necessary for development such as: the acquisition of property within the redevelopment area; site preparation, including utility relocations; sanitary and storm sewers and lift stations; drainage conduits, channels, and levees; street grading, paving, and curb and guttering; street lighting fixtures, connections, and facilities; and underground gas, water, heating and electric services located within the public right-of-way.
Primary revenue comes from incremental increases in property tax revenues otherwise distributed to local taxing authorities. TIF does not capture the state school district levy (20 mills), school district capital outlay or the state mill levy (1.5 mills).
Other sources of revenue comes from the allocation of new franchise fees, sales taxes, and transient guest receipts derived from the development area, and any other general revenue appropriated by the city. Also, private sources or contributions can be used as well as federal and state loans. Grants may also be used to fund eligible expenses.
The city may issue special obligation bonds, general obligation (G.O.) bonds, or private activity bonds to finance eligible development expenses.
Special obligation bonds are repaid from revenue generated from the project; investors take on additional risk and require an interest premium. G.O. bonds are backed by the full faith and credit of the city, meaning taxes may be raised to offset any revenue shortfall from the project.
Private activity bonds are special loans backed by the project revenue and the private developer. The city may also elect to facilitate projects on a pay-as-you-go basis; the developer pays for improvements upfront and is reimbursed with TIF proceeds over time.
Private developers may also receive an industrial revenue bond (and the subsequent benefits under state law), but may not simultaneously receive a property tax abatement.
The TIF process has two components and Dillner outlined steps involved with each.
First the City of El Dorado must establish a TIF District:
1. The city adopts a resolution stating its intent to create a TIF District and describes the District Plan.
2. The city adopts a resolution calling a public hearing. Notice of public hearing is provided to county, school district, and property owners, as well as published in the official newspaper.
3. Public hearing on proposed TIF District is held. Following the hearing, the city adopts a resolution making certain findings in support of the creation of a TIF District.
4. The city passes an ordinance establishing the TIF District.
5. No privately owned property may be acquired or redeveloped using TIF if either the BOCC or BOE determines that the TIF District will have an adverse effect on either entity.
The second component of the TIF process is to establish a TIF project:
1. The city, in consultation with the planning commission, develops a project plan for specific development proposals within the TIF District.
2. The project plan must include a feasibility study to review the costs and benefits of the project and the projected revenue to be derived by the development.
3. The city adopts a resolution calling a public hearing. Notice of public hearing is provided to county, school district, and property owners, as well as published in the official newspaper.
4. Upon conclusion of the public hearing and upon making the appropriate findings, the city may adopt an ordinance accepting the redevelopment plan. The ordinance must be adopted by the city commission by no less than a two-thirds majority.
5. The city issue bonds to finance the project, except that G.O. bonds may not be issued until a protest petition period expires.
While a project has not currently been identified, the city is laying the groundwork to move forward with a Tax Increment Financing project.