New income for Gas City for the industrial park and other areas will likely become available in 2022, which will help make improvements to the city.
Gas City officials will likely officially adopt the new expansion of the tax increment financing (TIF) area on Nov. 16 during a special meeting. TIF areas will only gain revenue from new development begun in the TIF area, such as new for-profit development coming to the industrial park in the future.
The new TIF area expansion will have a 25 year lifespan, which will increase the income to the redevelopment commission (RDC) until its expiration date.
Bakertilly Municipal Advisors principal Matt Eckerle and IceMiller partner Heather James served as TIF experts and educated government officials of Gas City about the specifics and implications of TIF. IceMiller is also the legal firm the city is using for the TIF expansion.
Experts stressed to officials and the public that an expansion in the TIF area will not have any adverse effects or increases for taxpayers in terms of property tax or personal property. Rather, the difference in assessed value (AV) is what is garnered.
“Everyone continues to pay their taxes as they usually do. The difference is that the increase in the AV is actually captured and then held in the redevelopment commission’s TIF allocation fund during the life of the TIF area,” said James. “A redevelopment commission doesn’t have any other power over the area. There’s no secret eminent domain power.”
Common uses for TIF revenue are economic development, quality of place projects, blight redevelopment and supporting education.
James elaborated on what exactly the revenue could be put towards for education and how legal parties determine whether a city is utilizing the money properly.
“Redevelopment commissions want to assist schools oftentimes. So, if you’re contemplating funding something that meets the parameters I mentioned – capital in nature, in the plan, economic development with a purpose in serving or developing the area – then certainly it’s an option to fund something that also happens to be beneficial to the school,” said James. “(This law) allows the redevelopment commission to use up to 15 percent of the allocated TIF it receives annually for specific school programs.”
Without adjustments for incoming properties, the I-69 industrial park allocation area, which includes designated taxpayers such as American Woodmark and Wal-Mart, is expected to earn the RDC $3,022,300 in 2022 through TIF.
One of Gas City’s most recent TIF area expansions is the Olynger Development Allocation Area, which was created in 2019 and added around 18 acres to the area south of State Road 22.
The TIF will expire in 25 years from when the first obligation payable is incurred for the area by the RDC.
“There has not been an obligation yet issued for that area. I believe it’s only capturing the new McDonald’s,” said Eckerle. “That’s generating around $28,000 a year right now.”
If new development moves into the Olynger allocation area, the annual TIF revenue will increase. As well, since the first obligation has not been issued, the TIF has not begun to expire, meaning that the RDC has infinite time to begin this new development.
A new category of TIF has been introduced through legislation recently. The statute recognizing residential TIF was adopted in 2019 and amended in 2020. Due to its recent introduction, Gas City has not made any movements toward adopting a residential TIF that could be used for housing improvements.
According to Eckerle and James, residential TIF has complicated qualification criteria and does not earn the city much money for its efforts. However, if a wealthy investor were to front the money for improvements to housing, the residential TIF could then be used for reimbursement.
Most TIF areas are commercial areas that fall in-line with the wording of the statute. However, James highlighted that some condos and apartments have also been deemed as commercial properties rather than residential properties, so this could be a way to bypass the intricacies of the residential TIF.
Civilians of Gas City should be familiar with residential TIF as the plans to introduce residential TIF may develop in the near future.
TIF experts assured officials that TIF can only benefit the city as decreases in AV in one area will be fixed by increases in another area to maintain the baseline AV for the city.
Despite some recent abatements that the city has approved, such as those for American Woodmark, TIF still garners revenue for the property, just much less than before the abatement was issued, which means that TIF revenue from other areas may need to cover this loss in revenue.
Experts also highlighted how TIF could be used to pay off bonds and leases, which have been issued for projects such as the performing arts center, in conjunction with other taxes generated by the city.
“TIF isn’t always looked at as the most secure form of payment,” said Eckerle. “So, it’s not uncommon for policymakers to make the decision to leverage other revenue sources in addition to TIF. What that means is using income taxes or property taxes.”
According to Eckerle, utilizing property tax is looked upon more highly in the bond market, but income tax is also acceptable. This additional revenue offsets the possibility of a decrease in AV denting the annual TIF revenue that was to be funneled into bonds, which casts a safety net for the city.
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