26 - TAX INCREMENT FINANCING - Laserfiche WebLink

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Item No. 26 memorandum TO: Mayor & City Council FROM: John Godwin, City Manager SUBJECT: TAX INCREMENT FINANCING DATE: February 10, 2016 BACKGROUND: Tax increment financing is a commonly used methodology for setting aside funds to redevelop areas within cities, especially downtowns. Essentially it sets aside any incremental tax amounts due to improvements within the area, and then allows those tax increments to be spent only for a public purpose within that district. For example, if we were to create a district, called a tax increment reinvestment zone (TIRZ), for downtown Paris, when new construction causes ad valorem values to increase, the increased revenue will be placed into a separate TIRZ fund instead of the city's general fund. STATUS OF ISSUE: It can take a long time to reserve enough funds to make a notable difference, but the sooner we begin to accumulate funds, the quicker we will have amounts sufficient to start to make a difference. By knowing increased tax payments will stay in their "neighborhood," property owners will often be encouraged to invest more readily, too. Finally, with a TIRZ in place, should a significant project or need come along, TIRZ funds can be pledged against the sale of bonds. The attached briefing provides a more detailed description. A TIRZ neither creates an abatement nor increases tax rates. BUDGET: NA RECOMMENDATION: Discussion and provide direction to staff.