district improvement financing dif tax increment financing tif

Smart Growth / Smart Energy Toolkit DIF/TIF

District Improvement Financing

DIFTax Increment

FinancingTIF

District Improvement Financing

DIFTax Increment

FinancingTIF

Smart Growth / Smart Energy Toolkit


What is DIF/TIF?What is DIF/TIF?

• District Improvement Financing (DIF) and Tax Increment Financing (TIF)are both economic tools that promote redevelopment by the use of tax increments.

• TIF offers tax breaks to developers.

• DIF channels tax dollars into targeted redevelopment districts.


The ProblemThe ProblemMANY municipalities in Massachusetts are faced with high unemployment rates and blighted, distressed, or simply underutilized areas. Many of these sites contain abandoned or contaminated facilities, while others are characterized by dilapidated infrastructure and commercial operations that simply are not economically viable.


Both DIF and TIF provide municipalities with innovative

tools to target districts or specific projects for redevelopment.


DIFAuthority: M.G.L., Chapter 40Q

FIRST STEPS:• Designate a district

• Certify district: State Economic Assistance Coordinating Council ("EACC")

• Term of District: 30 years maximum


DIFThe development program spells

out the goals of the district and the means to achieve them. The program will identify the following:

• Existing uses and current zoning,

• Proposed uses and any needed zoning changes,

• Existing buildings Planned construction or renovation,

• Current and planned infrastructure,

• A financial plan.


Application Forms are available from:

Application Forms are available from:

MA Office of Business Development(MOBD)Boston Regional OfficeOne Ashburton PlaceSuite 2101Boston, MA 02108Voice: (617) 788-3637 Fax: (617) 788-3695 www.mass.gov/mobd/


Once a District & Program Have Been Certified:

TOOLS FOR IMPLEMENTATION:• Acquiring land• Constructing or reconstructing

improvements (such as buildings, roads, schools and parks)

• Incurring indebtedness and pledging tax increments and other project revenues for repayment of these debts

• Posting of a bond by the City or Town (for initial funding)


TIFTIF

Authority: M.G.L., Chapter 40d§59FIRST STEPS:• Developer Agreement• Term of TIF: 20 years maximum


TIFA city or town must initiate a TIF by a

vote of its governing body approving the TIF Plan which must include:

• Designation of the area that will be the TIF zone;

• Description in detail, including plans and specifications where appropriate, of all construction and construction related activity;

• Projection of public and private costs and a betterment schedule for the defrayal of public costs;


TIF

AND• Authorization of tax increment exemption

from property taxes; • Establishment of a maximum percentage

of costs of public construction that can be recovered through betterments or special assessments against any parcel in the TIF zone eligible for exemptions;


TIF

AND• Identification of property owners in the

TIF Zone; • Executed Agreements between the city

or town and each owner of property within the TIF zone;

• Delegation of authority to enter into development agreements to one municipal agency, board or officer;


TIFTIFA TIF Zone must be in an area approved by the EACC as an Economic Opportunity Area (EOA) or found to be an area "presenting exceptional opportunities for economic development" by the Director of Economic Development.


SUCCESSSUCCESS

REDEVELOPMENT BRINGS:• Increased tax revenue;• Improved infrastructure;• Improved transportation

services;• Increased housing supply;

and• New jobs


SUCCESSSUCCESS

Is tied to careful planning which identifies the needs of the district and combination of uses most likely to succeed. While TIF focuses on job creation, DIF allows significant flexibility in planning for the district's housing and commercial needs.


SUCCESSSUCCESS

The role of private partners is crucial to achieving the desired effects. In both cases, public/ private agreements provide details and guidelines.


SUCCESSSUCCESS

DIF and TIF programs will satisfy many of the

Commonwealth's Sustainable Development Principles,

including:


REDEVELOPMENT FIRSTREDEVELOPMENT FIRST

The use of DIF and TIF encourages redevelopment of existing dilapidated sites, urban infill and revitalization.


CONCENTRATE DEVELOPMENT

CONCENTRATE DEVELOPMENT

Both DIF and TIF facilitate concentrated development in areas in or adjacent to existing downtowns. They make use of existing infrastructure and mass transit.


ARE FAIRARE FAIR

DIF and TIF provide economic incentives to developers and encourage true economic partnerships between developers and municipalities.


EXPAND HOUSING OPPORTUNITIES

EXPAND HOUSING OPPORTUNITIES

DIF allows the use of tax increments to fund both affordable and market priced housing projects. TIF can be used as an incentive for housing development in urban centers.


INCREASE JOB OPPORTUNITIESINCREASE JOB

OPPORTUNITIESBy virtue of their economic objectives, TIF and DIF Agreements are directly tied to the creation of new jobs.


PLAN REGIONALLYPLAN REGIONALLYDIF and TIF can satisfy regional needsfor industry, consumer services, health care, and employment.


FINANCIAL CONSIDERATIONS


Both DIF and TIF provide funding mechanisms for development in targeted districts:

•COSTS: - Planning/administrative

•BENEFITS: - Increased tax revenues- Improved standard of

living




TIF provides a direct upfront benefit to a

Developer in the form of tax relief. The money

saved on taxes can pay the project's construction

costs. Developers utilizing TIF benefits can also

often access other state financial incentives such

as Investment Tax Credits, Abandoned Building

Tax Deductions and Research and Development

Tax Credits.




DIF provides financial benefits to developers

by providing infrastructure and surrounding

amenities to support their projects. Early

public funding takes the initial burden off the

developer and minimizes risk.


TIF CASE STUDYTIF CASE STUDY

Worcester, MassachusettsSt. Vincent's Hospital relocation

The City entered into a TIF Agreement with St. Vincent's Hospital which enabled the hospital to move to a downtown site and expand, creating the new Worcester Medical Center.


TIF AGREEMENT:

• Tax exemptions by declining formula;• Term of 18 years;• 55 full time jobs; and• 41 part time jobs.

TIF: ST. VINCENT’S HOSPITAL





The expectations have been exceeded, with the creation of 117 full time jobs and 215 part time jobs to date.


The new Worcester Medical Center provides needed state of the art medical care to area residents in a beautifully designed setting, with the convenience of a downtown location. It is surrounded by shops, restaurants and a 1900 space parking garage. It offers needed jobs to the community and has greatly increased the city's tax base. At the end of the TIF's term, the city will realize the benefit of the increased tax revenue.




DIF CASE STUDYDIF CASE STUDY

Concord, New Hampshire

Redevelopment of 40 acresabandoned lumberyard and adjacent mill

building


DIF: CONCORD, NHDIF: CONCORD, NH

Location was a highly visible location, at the intersection of I-93 and I-393,on the edge of the Concord’s downtown.

Travelers passing through Concord to mountain vacation spots, saw only the blight. Nothing invited them to explore the otherwise, vital and charming downtown district.


DIF: CONCORD, NH

PLANNING BY THE CITY:

• Identified area need for hotel/conference center;

• Acquired land;• Issued bonds; and• Partnered with private

developer.



99 room Marriott Courtyard and Grappone Conference Center



The site now houses adjacent office buildings. The abandoned mill has

been converted into elderly housing.



Medical Center at DIF Site



The owner of the hotel/conference center pay taxes to the city. The city uses the tax increment; the tax revenue due the to difference is the current assessed value the original assessed value to pay off the bond debt.


DIF: CONCORD, NHFINAL RESULT:

• Increased $30 million dollars in tax base for the city;

• A flourishing project for the private developer;

• Increased availability of elderly housing;• Creation of new jobs, and• Prevention of the spread of blight to an

attractive site that marks the entrance to Concord.


TIF CASE STUDYTIF CASE STUDY

Leominster, Massachusetts

The City of Leominster entered into a TIF Agreement with Star Container Corporation, to encourage Star Container’s expansion plans for its packaging facility.


TIF: LEOMINSTERTIF: LEOMINSTER

Star Container had a long established, successful manufacturing presence in Leominster. The expansion consisted of an additional 54,000 square feet of floor area and the purchase of additional corrugated box manufacturing equipment.



TIF AGREEMENT:

• Eight year term;• Front loaded sliding scale of

property tax exemptions; and• No tax of increment as follows:



Year 1: 100 % of the incrementYear 2: 90 % of the incrementYear 3: 75 % of the incrementYear 4: 60 % of the incrementYear 5: 45 % of the incrementYear 6: 30 % of the incrementYear 7: 15 % of the incrementYear 8: 0 % of the increment.



Star Container invested approximately 6.2 million dollars into the facility and equipment. The Agreement provided for the creation of 25 new full time manufacturing and managerial jobs. 150 existing jobs were retained by ensuring the facility stayed at the existing site.



At the end of the TIF period, the City will gain approximately $23,000.00 annually in additional property taxes. Star Container is located in the state designated Economic Target Area of Northern Worcester County. Therefore, Star Container can seek other state economic incentives in addition to the TIF Agreement with the City.


TIF: LEOMINSTERUSE TIF TO ENCOURAGE business

compatible with city’s needs

Leominster uses TIF for manufacturing businesses because:

• Existing base in manufacturing plastics;

• Creates jobs, which pay higher than the minimum wage; and

• Greater economic benefit.


LINKS:LINKS:

MOBD: www.mass.gov/mobd/

Worchester TIF:www.worcestermedcenter.comConcord DIF:www.ci.concord.nh.us/Businessdev/Devopps/hotelctr

Leominster TIF:www.leominster-ma.gov/planning_department_index.htm

district improvement financing dif tax increment financing tif

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