TIFFIN– In order to address projects in the older part of town, the Tiffin City Council will expand its Urban Renewal Area, and subsequently increase its ability to collect Tax Increment Financing (TIF) revenues in the future.
At a Nov. 28 meeting, Clear Creek Amana (CCA) Superintendent Dr. Denise Schares appeared during the public comment portion of the council meeting to talk about the city’s intent to expand Tiffin’s Urban Renewal Plan and create an additional TIF designation within the city.
Schares said she wanted to make sure the council was aware of the impact of expanding TIF on the school district’s financing.
“(CCA) is the highest TIF’ed school district, as a percentage of valuation, in the entire state,” said Schares. “When you hear the kids saying, ‘We’re number one,’ I don’t think they meant for that to be TIF valuation.”
TIF is a funding mechanism that allows cities to freeze the tax base in designated areas of urban renewal or economic development, then collect and keep the additional taxes generated above the base once development and improvements occur. Cities may use the increased tax revenues to pay for improvements in the designated area or to provide economic incentives to developers. Because TIF revenues are kept by the city, it means other local taxing entities– like the county, community colleges and school district– do not benefit from the higher property taxes until after the city’s debt is repaid.
Schares shared dollar figures to illustrate the school district’s concern.
She explained the state’s formula for funding education results in a per-pupil reimbursement, this year at $6,037. Part of that is generated through a uniform levy of $5.40 across all Iowa districts.
“If you are a property-poor district, it generates less of the total $6,037 per pupil. A property-rich district would generate more dollars. Then the state makes up the difference, up to 87.5 percent of that per-pupil cost, and that per-pupil cost is what fluctuates with allowable growth,” Schares said, noting that CCA has 1,671 resident students currently enrolled.
“Where TIF really impacts us is that additional 12.5 percent. For us, that represents $754.62 per student. That means when property is TIF’ed, the taxes collected are diverted from the school district valuation pool.”
Schares said she understands the need for creating TIF areas.
“There are very reasonable uses of those funds proposed for infrastructure. The intent of TIF is to promote development and growth where there wouldn’t be otherwise; however, when residential areas and other areas are TIF’ed, the school district receives the students, but not the valuation to fund the education of those students,” Schares said.
Diverted taxes have to be made up by additional levies paid by all taxpayers within the school district, she added. “The tax burden is shifted to another entity, and I am not sure people really understand that. The overall impact can be very significant, particularly in this district where we are heavily TIF’ed.”
Tiffin Mayor Steve Berner emphasized that amending the city’s Urban Renewal Plan would only expand TIF into the old part of town.
“It will be designated slum and blight, so we can provide some infrastructure,” Bener said. “The TIF portion of the old part of town, I think, will have a fairly small effect on the school, because the increase in valuation is all that is taken.”
A slum and blight designation has no sunset date for the collection of TIF dollars, Schares noted, so there is a concern that the new valuation could be off the tax rolls indefinitely.
“Where the impact comes is, if indeed that old town is an area of economic development, the step up in basis is not realized. We just wanted to share our hope that it is used in a very judicial manner and with the intent it was initially set up to do,” Schares said.
Councilor Peggy Upton assured Schares that the council is sensitive to TIF impacts.
“I hope the school is aware we have been working to reduce the amount of TIF’ed areas within our district,” said Upton. “The theory is that we will create an enlarged tax base the school will benefit from in the future. I see your point about not letting it go into infinity, but I think it is the intent of the current council to be more restrictive about those sorts of things.”
“We appreciate that. We want to be good partners, we just want full understanding of the impact of your actions,” Schares replied.
Ultimately, the council’s action was to change to the City’s Urban Renewal Plan to add the old town area. The amendment brought all previously-approved capital improvement projects into areas that will allow the city to use TIF to pay for them.
In addition to amending the city’s Urban Renewal Plan, the council approved its first reading of an ordinance authorizing tax dollars levied in TIF’ed areas to be spent on projects within the expanded Urban Renewal area. A 4-0 vote advanced the measure to the Dec. 12 meeting for the second reading.
In a final TIF-related item, the council approved a resolution to use TIF funds already on hand to reimburse development company PR Builders/IPL Development LLC for the city’s portion of sewer improvements. Developer Mark Portwood secured the city’s participation in the costs for such improvements as his company built a new residential subdivision, but because Portwood had to install a larger system than originally estimated, and because it ultimately resulted in the potential to service 1,700 acres of future development, the project cost him $233,731 in overages. The council’s actions will allow Portwood’s reimbursement through a grant funding process.