This February, local south Florida leaders gathered for a one-day workshop dedicated to stimulating the regional economy through brownfield redevelopment. Charles Ray, Vice President of Government Initiatives and Brownfields at PPM, was among seven speakers at the event and explained how local governments can use tax increment financing (TIF) to provide steady income streams for redevelopment in areas of blight.
While there are a number of commonly used funding mechanisms for local governments, including Community Development Block Grants (CDBG) and the Economic Development Administration (EDA), Ray explained that TIF is a creative source of revenues that can work in local governments of all sizes and provides flexibility in application.
Upon approval, TIF provides a steady income stream for 40 years and its monies can be applied to a variety of projects, such as public infrastructure, environmental work, land acquisition, demolition, planning costs, and other elements associated with redevelopment.
Ray pointed to the city of Palmetto, FL as a prime example of the benefits of TIF. Years ago, a coal ash plant operated on the bank of the Manatee River and sat on approximately fifteen acres. When it closed, the land sat blighted and unused for years due to the costly environmental cleanup the site would have required. Eventually, the city of Palmetto designated the area for TIF to finance brownfield redevelopment. In turn, real estate developers built luxury high-rise condos on the site. “Just imagine the cash flow that came from that to the city of Palmetto,” Ray emphasized.
While TIF statutes vary from state to state, common goals and policy exist. Typically, a local government will submit a Community Reinvestment Act (CRA) plan to the local taxing authority, often the county. The plan should identify the area for redevelopment and explain the goals. The plan should also include a map illustrating the geographic area to be addressed and determine the amount of funding benefit the area should receive. Once both the city and the taxing authority approve the plan, the taxing authority will establish a tax level to remain in effect for 40 years.
As a result of this level, any additional ad valorem property tax revenue above that generated in the CRA plan approval year is siphoned into a trust fund at the rate agreed upon in the plan. Cities can request between 50 and 95 percent of the increased tax revenues be transferred into the trust fund. The trust fund can then be used by the local government to fund any number of redevelopment efforts.
Ray explained, “These funds can be used on a ‘pay as you go’ basis, where the revenue is spent on small development projects as the money becomes available, or the local government can employ a ‘pay as you use’ financing approach, where the TIF revenues are used to pay debt service costs over the life of a project.” Additionally, TIF funds can be invested with the county or state for other CRA redevelopment projects and even used as the matching funds for other grant applications.
“This tool is available across the country. How the funds are used is dependent upon the local government and how knowledgeable they are of this creative financing. It’s more common to see in larger cities than in smaller towns, but those small towns are still eligible,” Ray said.
PPM can help local governments make sense of redevelopment financing options. The PPM team has expert knowledge of community development and decades of experience working with local municipalities to restore blighted areas and remediate environmental issues that hamper growth.