16 - Tax Increment Financing Discussion

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CHAPTER 3ltTAX INCREMENT FINANCING ACT ofthe TAX CODE Tax Increment Reinvestment Zones (TI'RZ) are special districts created to help attract new investment to an area. They have historically been used to finance the omst ofredevelopment and encourage new development in areas that uvom|d otherwise not attract sufficient market development in a timely manner. Taxes attributable to new improvements (tax increments) are set aside in a special fund to finance public improvements within the boundaries of the zone. These funds are most commonly used to fund street, water and sewer improvements but are also be used for street lighting, parking structures, sidewalks, park amenities, and yandscapimg. Each of these elements contributes to the viability o[the neighborhood and promotes quality development. A number of Texas cities have one or more T1RZ districts with the common goal of stimulating or accommodating new private investment and thereby increasing real' estate values aind improving quality oflife. When aspecific geographic area isdesignated asaTiRZ,the property values mmthat date become the "benchmark" or the base values. Only the additional tax revenue generated from new development, nedeve|o0ment,orincneasud*a1uesonesistimgdeve|opmmentareaUocatedtutheT]RZ. Therefore, the district does not increase the tax rate but only reallocates all or a portion of the revenue from the inc/eased tax base back to the area for . If debt is incurred, the TKRZ must remain in p|aceatleast until all such debt ioretired. To be designated a reinvestment zone, an area must substantially arrest or impair the sound growth of the municipality, retard the provision of housing, or constitute on economic or social liability and be a menace to the public health, safety, or welfare because of the presence of one or more of the following conditions: a) substandard or deteriorating structures, inadequate sidewalks or streets, faulty lot layouts, unsanitary or unsafe conditions, defective or unusual conditions of title, , the deterioration of site or other improvements or conditions that endanger life or property; gr b) an area that is predominately upum and because of obsolete platting, orother factors, substantially impairs the growth of the area. As an alternative, a TJRZ may be initiated by property owners who ovvm a minimum of 501% ofthe appraised value inthe proposed zone, The process for establishing aTTRZisgenerally esfollows: • City prepares preliminary reinvestment zone financing plan; ~ Plan is provided to each governmental entity that levies taxes on real property within the zone; m City meets with other taxing entities to discuss the boundary of the district and amount of the tax increment to be contributed; • City conducts public hearing(s) and approves boundary of district by ordinance; • City appoints TIRZ Board consisting of 5-15 members (including one api�olintee each from PISD, [9(, and county, plus state senator and state representative); and m T|RZ board prepares a "project plan" and a "financing plan" and submits to council for adoption. Cities are authorized to: