How TIFs Work
There is obviously much misunderstanding about TIF and it's relationship to the proposed building at 200 Renaissance... please add comments to help educate the masses.....
Tax Increment Financing (TIF)
There is obviously much misunderstanding about TIF and it's relationship to the proposed building at 200 Renaissance... please add comments to help educate the masses.....
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How TIFs Work
The basic principle behind TIF financing is that, in order to pay for upfront costs — usually infrastructure — the locality freezes the taxes at a site’s predevelopment levels and then uses the expected post-development increases in taxes as a revenue stream to finance a bond or loan, which then pays for the upfront (infrastructure) costs. There are, however, numerous variations on the theme. At one end of the spectrum are cities and states that use TIF only for private development gap financing and the TIF district is small and welldefined, often coinciding with the project that will be financed. At the other end of the spectrum are communities that designate large areas of the city, or even the entire city, and then use the TIF revenue much like general obligation bonds in order to fund capital projects that can’t be financed through operating funds.
In response to Ms Clark’s editorial comment in the Clarion-Ledger this morning, I am surprised that she is against the use of TIF bonds. I think that the Renaissance development is a great asset to the city of Ridgeland and that the city and county were very smart is the issuance of these bonds to secure the development of up to sixty retailers, restaurants and an upscale grocery.
I wonder is she is against the other TIF bonds that have been issued by the city or county including the one for the Harbor Pointe development? What about TIF incentives for the Lowe’s in Ridgeland? Many cities use these bonds to secure economic development. Flowood was wise when they used these incentives to assist in the development of Dogwood Festival. Pearl used them to develop Riverwind which eventually led to the development of BassPro and Trustmark Park. Madison also used TIF money to develop Colony Crossing which now houses many retailers, restaurants and a new Kroger.
As to her comments about pulling developments out of Northpark Mall, doesn’t the city of Madison appear to have been wise when they used TIF money to assist in the development of Grandview? That development will now house the “flagship” of the Belk stores which was announced yesterday. We need to be fighting to get these developments in our city. If we keep fighting against these high end developments, we won’t need to worry about our sales taxes being “earmarked” to pay off TIF bonds. We can let other cities gain these developments and let the tax dollars go somewhere else.
You quoted a resident who felt it is not right for Ridgeland to issue TIF incentives to attract businesses to Ridgeland. It is naïve to think cities are not going to compete for business. I understand residents wanting to support Jackson. One of the best ways to support the city of Jackson is to live, work and shop there.
Ms Clark is correct in Mr. Bailey’s disregard of the cities zoning laws. While I do support his Renaissance development, I do not agree with some of the tactics he has used while developing it. He has waited until the last minute to get approval for a building in which he has secured tenants that the city wants. He is almost holding the city officials hostage in making this decision. While I would rather see the tenants in buildings of lesser height, I will accept them in a 13 story building rather than not at all.
As a resident of Ridgeland and an employee working in the city of Ridgeland, I support Butler Snow and Horne CPA Group coming to Ridgeland.
Sam Scott
Ridgeland, MS
I would like to comment on the letter to the editor you forwarded by Ms. Janet Hendrick Clark in opposition to the zoning variance. Please feel free to use this communication in any way you feel is reasonable.
It appears that a large number of people opposed to the zoning variance do not understand the issues and are being confused by arguments raising points that are outside the scope of this particular request. Opponents of the variance are also throwing around as "facts", mere suppositions and opinions - most of which are incorrect. These tactics wrongly inflame and mislead Ridgeland residents. The decision must be made based on relevant facts only.
One case in point is the argument that this development will pull tenants out of downtown and cause Jackson to decline. That issue pertains to the development and growth of Ridgeland and Madison County in general. It has nothing to do with this one building. Further, failing to welcome or encourage new businesses to locate in Ridgeland will not ensure the well being of downtown Jackson. If only it were that simple.
Another source of confusion is the all or nothing nature of the arguments. The only issue under consideration is the added height of the building, and its impacts both favorable and unfavorable. One building or another will be built on that site and this must be kept in mind. Discussions should be limited to the difference in burdens and benefits between a shorter building and this building, not between this building or nothing.
Regarding the "legality" of this request, most of us are aware that requests for zoning variances are hardly illegal or underhanded. It is an integral part of doing business in this country and utilized regularly. The law specifically allows for such petitions and it disingenuous to state or imply otherwise.
Finally, and perhaps most important, is the inappropriate assertions regarding Tax Increment Financing. The use of TIF bonds is not the issue here because whether the variance is granted or not, the decision will have no impact on financing methods to be used at this site.. The use of TIF bonds is well established and used throughout the country to encourage particular types of development. Regardless of one's position regarding TIF bonds, they have nothing to do with this variance request. Further, the statements about the loss of millions of dollars are incorrect because an empty lot generates no sales taxes and little property taxes so what is the loss measured against? Besides, the arguments completely ignore the facts that tenants and customers of the new building will spend money in Ridgeland for homes, dining and shopping, which will also increase our tax revenues.
We urge everyone to sort through the misleading opinions and arguments and base their decisions on the facts.
Sincerely,
Gary P. McCarthy MD
Kitt McCarthy JD
The Tax Increment Financing (TIF) was unanimously approved 3 years ago by the Ridgeland Board of Aldermen and the Madison County Board of Supervisors.
The only issue now is what type buildings and tenants are going to be in the building (offices and retail outlets and restaurants) which will be generating the property taxes and sales taxes used to repay the infrastructure development bonds; and how fast the bonds can be paid off; or how much is left over to be used for other requirements.
I read the letter sent in to the Clarion Ledger and thought that a little bit of info on Tax Increment Financing (TIF) might be helpful. TIF has become a widely used tool all across America to give incentive for development to occur, that in the long run, either would not occur or would greatly benefit the city or county by it occurring more rapidly than without the TIF.
How it works – A property has a property tax on it already. Then a developer proposes to change the property by putting on that property a new building and changes in the property that increase the value of it and thereby increasing the taxes. In most cases, the buildings will hold retailers that will also produce additional sales tax revenues for the city.
The increase of taxes, property & retail, is the increment in the name. The states trying to help cities get development created a law that allowed the cities to issue bonds that would be paid off by this increase in taxes on the property, hence, the creation of TAX INCREMENT FINANCING.
The bonds financed by this manner of financing could only be used for payment of infrastructure that would inure to the public benefit, such as roads, water lines, sewer, control of water run-off, etc.
A good example of this is the site on which Lowes is located. Previous to its redevelopment, it had some old warehouses that had some businesses in them but traditionally produced very little revenue for the city. Developers proposed to bring Lowes to the City and bring another large source of retail taxes to the City. The store would not come unless the City agreed to pay for infrastructure improvements using TIF. For instance, in this project, the property dropped 31 feet from the entry at Ridgewood Rd down to where it ends near Center St. It is my understanding that the TIF financed the dirt used to back fill, drainage requirements, water/sewer and road improvements to Ridgewood & County Line. Using TIF allowed the City to redevelop an eyesore and gain current and future tax increases from the redevelopment.
Some misnomers about TIF. The project that is coming to the property estimates what the Increase in Taxes is going to be. The City’s financial advisors and the CFO for the City revue the estimates and come up with a figure of the estimated Tax Increase that they are willing to recommend to the elected officials to use to pay off bonds. The entirety of the estimated increase in revenue is seldom if never used to figure how much bonds will be issued. In other words, the financial advisors are conservative in their estimates. If they are not, and the TIF fails, they lose their jobs.
But this does not mean they are perfect. TIFs have failed, usually because the project loses a key retail tenant or didn’t have tenants in the first place. The City protects itself by refusing to issue the bonds until the facilities that the increment is based on are finished. So, the developer has to front all of the costs for the things that the TIF will pay for until the city officials are satisfied with the ability of the TIF to pay for itself.
So, let’s review,
TIF’s SELDOM, if NEVER use all of the TAX INCREASE to pay for the bonds, so the city still should get new revenue from the project.
The City can only obligate its taxes that it will receive from the project to pay off the bonds. The County has to obligate its own portion of the taxes for the TIF
The School systems taxes are separate from the City & County and CANNOT be obligated for repayment of TIF bonds by state law.
A key point that the TIF amount is an "up-to" amount, or a maximum amount. The actual amount of bonds issued and the length of the payback will be determined once the project is completed and there is a verifiable revenue stream available, both from ad valorem taxes and sales taxes, to pay the debt service. This produces a risk-free situation for the city and county, because they are not obligated in any way to issue bonds until it is proven they can be paid for by the development.
If the project grows, as this one has, it has the upside potential of either paying off the bonds earlier or, even at 20 years, with less proportion of the total revenue committed to the payback.
Another point is that quality retail and commercial development is the only kind of development that not only pays for itself, but generates large extra economic windfalls that benefit the residents. Residential development alone is a losing proposition for a city.
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