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City Council to hold public hearing on DDA TIF plan tonight


A map of the proposed DDA TIF district.

The Cedar Springs City Council will hold a public hearing and also vote on the 2017 Downtown Development Authority (DDA) and Tax Increment Financing (TIF) plan at their December meeting tonight, Thursday, December 14, at 7 p.m.

Under the city’s plan, the improvements within the development area will consist of storm sewers, resurfacing existing streets, parking lots and alleyways, creating new off street parking, lighting improvements, landscaping, and property acquisition for further improvements as needed.

DDA revenue in the first year of the plan is estimated at $17,743, with an increase each year thereafter, based on growth percentages of 2-3 percent. In total, the DDA is projected to generate $1,394,405.57 in tax increment revenue over the 20-year term of the plan.

City Manager Mike Womack explained that a TIF plan does not raise your taxes—it simply captures a portion of them and reallocates them to the DDA for reinvestment back into the community. We asked him if he could explain to readers how it works.

“City Hall has been approached by citizens with questions regarding the 2017 Downtown Development Authority (DDA) and Tax Increment Financing (TIF) development plan which City Hall has been working to finalize by the end of 2017. Tax Increment Financing can be complicated to understand but it is an important tool in promoting economic development in the downtown core of the City. It is important for businesses and citizens to understand how a TIF works and how the DDA can use the TIF to improve the City for everybody.”

He went on to explain:

“The DDA is a board of citizens and business owners with a vested interest in improving the identified TIF district. A TIF district is an area within a city that, broadly speaking, would benefit from reinvestment of money to promote the economic growth of that area. The development plan guides the DDA board in how to invest the TIF money doing things like creating new parking areas, renovating derelict properties or marketing the City to visitors.

“So once a city identifies a part of the City that meets the criteria and would benefit from a TIF, how does it work? A TIF district essentially reallocates funds from property taxes to encourage investment within the district. An important thing for property owners within the TIF district to understand is that their property tax rates do not automatically go up with the creation of a TIF.   

“The way TIFs shift funds around to encourage development is by freezing the allocations to various taxing bodies (e.g. City, County etc.) at their levels as of the start of the TIF. For the life of the TIF (typically a maximum of 20 years), the amount received by these taxing bodies from property taxes collected within the TIF will remain constant. Any increased tax revenues collected as a result of an increase in property values then go into the TIF fund and can be used by the DDA board for a wide range of purposes identified in the TIF Plan.

“Here is an example of a hypothetical TIF to demonstrate how the process works: A city decides that an area is in need of redevelopment, usually a downtown area. The City Council reviews the proposal and determines that the area would benefit from TIF reinvestment. Property tax rates are not affected by the TIF. At the beginning of the TIF, the aggregate property value of all land in the TIF is $1,000,000, and annual property tax revenue is $40,000. This $40,000 is split between a handful of taxing bodies such as the City and the County. After the TIF is created, the taxing bodies know that they will continue to receive that $40,000 per year for the life of the TIF. Perhaps after a couple years, property values within the TIF increase to $1,100,000, which leads to annual tax revenues of $44,000. This extra $4,000, instead of being distributed to the taxing bodies, is deposited in the TIF fund for the DDA to use to reinvest in the TIF area. That investment, in turn, leads to increased private business development, which leads to increased property values and more TIF income and reinvestment by the DDA.  

“Clearly, TIF districts are powerful tools available to a city that can often be complicated and are occasionally misunderstood. When used properly, however, a TIF can revitalize a community.”

Under the city’s plan, the improvements within the development area will consist of storm sewers, resurfacing existing streets, parking lots and alleyways, creating new off street parking, lighting improvements, landscaping, and property acquisition for further improvements as needed.

DDA revenue in the first year of the plan is estimated at $17,743, with an increase each year thereafter, based on growth percentages of 2-3 percent. In total, the DDA is projected to generate $1,394,405.57 in tax increment revenue over the 20-year term of the plan.

The city’s proposed 2017 DDA TIF plan can be found online at http://dev.cityofcedarsprings.org/wp-content/uploads/2017/11/11-20-17-DDA-TIF-PLAN-packet.pdf. You can email questions to the city manager at manager@cityofcedarsprings.org.

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