Retaining Local Property Taxes for Local Projects
Tax increment financing funds new projects without spending cuts, tax increases
There are many opportunities for public improvements in Elkins, but they all involve significant costs. What if there were a source of funds for city projects that didn’t require raising taxes or cutting spending on other services and projects?
On Thursday, the Elkins council will hear a presentation about just such a funding source: tax increment financing (TIF). TIF is a mechanism created in state law to help cities and counties pay for needed projects when other financing is not available. At the heart of TIF is the concept of reserving future increases in property tax revenues for local use, while avoiding the need to increase property-tax rates.
To use this tool, a city or county government first defines a specific geographic area as a TIF district. These districts must be carefully designed to encompass properties that are likely to see significant increases in assessed value—where large redevelopment or renovation projects are planned, for example—and to exclude properties expected to decrease in value, such as dilapidated houses or abandoned commercial buildings.
Next, as a baseline, the current assessed value of all real and certain personal property in the TIF district is recorded. In a well-designed TIF district, the overall value of property it contains will increase with each annual reassessment by the county assessor. The city or county that has created the TIF district then retains the difference between the property taxes owed on the original baseline assessed property values and the higher property taxes owed as a result of the reassessed property values.
In other words, the amount of property tax revenue that flows into the countywide pot from properties in the TIF district remains flat from the baseline year, while the city or county implementing TIF can use the incremental increases in property tax revenues for local projects. Any shortfall in funds available for county schools is made whole by the state’s school aid formula.
“It’s important to understand that no one pays higher property taxes as a result of TIF,” says Jessica Sutton, the Elkins city clerk, who has been researching the viability of this funding mechanism for Elkins. “These property owners would be paying higher taxes as a result of increased assessed property value either way. But with TIF, Elkins gets to direct the spending of those incremental increases toward public improvement projects that reinforce the investments being made by those property owners and encourage additional investment in the surrounding area.”
Cities or counties interested in using TIF have to apply to the West Virginia Development Authority. Applications must include a written description and map of the TIF district and a description of projects that TIF-derived funds will be used for. The description of projects must include job creation estimates, feasibility studies, and other planning documents.
TIF revenues are deposited in a standalone bank account and must be used for the approved projects, although it is possible to apply to add new projects or amend existing project plans. By default, the TIF district will remain in existence and continue to generate revenue for 30 years. This time limit may be extended upon approval by the state development authority.
Thursday’s presentation marks only the beginning of council’s consideration of TIF as a tool for financing public improvements in Elkins; there is not yet a formal proposal and no decisions are anticipated at Thursday’s meeting.
A good candidate for a TIF district in Elkins, where assessed property values are likely to rise considerably in the near future, would include the Tygart Hotel (currently under renovation and scheduled to open in 2023 as a boutique hotel), the Elkins Railyard (the planned site of an event center), and the piece of land purchased by the Randolph County Development Authority from the former Odd Fellows property (which will be used to expand the Elkins Industrial Park).
Candidate projects for TIF funding in Elkins include:
- The Riverfront Development Project, a $2.4-$3.3 million plan for beautification, restoration, safe alternative transportation routes, and expanded recreational opportunities along the Elkins riverfront.
- The EAST Recreational Trails Project, a $1-$3 million initiative to build world-class mixed-use trails in and around Elkins.
- The Streetscape Improvement Project, a plan for improving visual appeal, infrastructure, amenities, wayfinding, and sidewalks in the downtown ($200,000 to $300,000 per block).
- Railyard Improvements Project, a $3.6 million project for roadways, infrastructure, plaza development, and other improvements both supporting the RCDA’s planned event center and increasing the site’s appeal for new businesses.
- Industrial Park Improvements Project, a $2-$3 million project to make the RCDA’s newly acquired former Odd Fellows property “move-in ready” for new businesses with roadways, sidewalks, lighting, and other infrastructure.
Presenting this information at Thursday’s 7 p.m. council meeting will be Dave Clark, executive director of Woodlands Development & Lending; Robbie Morris, executive director of the Randolph County Development Authority; Joe Nassif, managing director of Piper Sandler and a specialist in public finance tools such as TIF; and Sutton.
“With all of the exciting opportunities Elkins has right now, it’s been invigorating learning about how some of it might actually be accomplished without needing to raise anyone’s taxes, shift funds away from current services and projects, or rely on grant funding,” says Sutton. “Tax increment financing looks like a great way to hold onto local tax dollars for the betterment of our own community.”