Centerville is among several communities that say they are finding opportunities to utilize tax increment financing (TIF), an economic development mechanism that helps local governments finance public infrastructure improvements. The city has used the TIF model on its Cornerstone project.
A city, county or township can apply TIF legislation to a parcel of land, which allows payments from increased property values that result from its development to pay for public improvements that directly benefit that parcel.
“It’s a terrific tool,” Montgomery County Transportation Improvement District Executive Director Steve Stanley said. “The basic idea of tax increment financing is you capture value that is created by the investment you made in the development itself. That investment produces the revenue that supports it, and then you have something that you wouldn’t otherwise have.”
Stanley suggests breaking down what can seem like a complex concept by considering a private business that wants to build a manufacturing facility on half of a large farm field.
Traditionally, the business would construct a private driveway off of a public street to reach its building. The business would pay for that driveway and the value of the property would increase with the development.
If a local government, however, wanted to enhance use of the entire area, it could apply TIF legislation to that property and others in the vicinity.
Payments from the increased value of the property would instead go into a separate fund that could be used to build a public road all the way through the field or to construct a cul-de-sac that could serve businesses on either side.
“That way you are capturing the value as it increases. The public infrastructure broadens the economic base for the local government and enhances the viability of the first building,” Stanley said.
The Columbus suburb of Dublin, for example, has 40 TIF districts that the city says has resulted in more than $205 million in TIF-related public infrastructure and generated more than $811 million in private investment.
“This extraordinary private value benefits all taxing entities. Without utilizing Tax Increment Financing, it is very likely that this level of private value growth would not have occurred within the city,” Interim Director of Finance Matthew Stiffler said.
Stanley points to examples like the Austin Interchange and connecting roadways in Miami Twp., Miamisburg and Springboro; the areas served by the improvement of the State Route 201 and 202 Interchanges on Interstate 70 in Huber Heights; and the Cornerstone of Centerville development as recent successful TIF districts.
Centerville began collecting on the Cornerstone TIF in 2016. The development has grown steadily, allowing the city to invest approximately $12.2 million through tax increment financing and local spending that leveraged a total investment of $18.75 million in public infrastructure through Phase IV of the development.
Public infrastructure includes roads, sidewalks, sidewalks, water and sewer utilities, lighting and streetscapes.
“Without tax increment financing, Cornerstone would not have happened. There was no mechanism to deliver the public infrastructure. TIFs, however, are self-sustaining. We can use the funds generated by the incremental investment from added property values to deliver public infrastructure,” Centerville City Manager Wayne Davis said.
School districts and municipalities continue to receive an amount equal to property taxes on the base value of the land and, depending on locally negotiated compensation agreements, share TIF revenues.
After the TIF legislation has expired, jurisdictions gain significant additional benefits as they then receive the full value of normal property tax, according to Stanley.
The area where Costco sits, for example, was valued at just over $1 million when the TIF district was established. Today, the assessed value of the land and building are north of $6.1 million, according to the Greene County Auditor’s Office.
Stanley says school districts within areas of high property or income wealth are often more sensitive to tax increment financing; however, “that is usually overcome on a community basis through good relationships and capable public officials,” he said.
Centerville’s mayor said the city would consider subjecting new developments to TIF designation in the community.
“Infrastructure is essential for the success of a development,” Mayor Brooks Compton said. “As a strategic element of our local government, we are trying to create a sense of community and redevelop properties in a way that helps everyone.”
TIF is controversial because it’s become a financing source, and in some cases a slush fund, for some municipalities to speculate on private redevelopment projects according to the Lincoln Institute of Land Policy, a think tank based in Cambridge, Massachusetts that studies fiscal issues.
“TIF has become little more than a subsidy for the private sector, diverting revenue away from schools and other important services, and contend that many TIF programs are woefully lacking in transparency,” the Lincoln Institute concluded in a study of the issue.
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