Town Council meets with the Sunnyvale 4A Development Corporation

The Sunnyvale 4A Development Corporation and the Town Council heard a report from Hawes, Hill, and Calderon on Tax Financing on June 23rd.

Bill Calderon presented the information to the group in a joint workshop.

Tax Increment Financing, or TIF, was authorized by the State Legislature in 1983. Over 100 cities are currently participating in this program.

To better explain the process, Lincoln Institute of Land Policy and Visiting Fellow of the Department of Economics, Richard F. Dye and co-author, David F. Merriman define TIF as follows:

“Tax increment financing (TIF) is an alluring tool that allows municipalities to promote economic development by earmarking property tax revenue from increases in assessed values within a designated TIF district.

“Proponents point to evidence that assessed property value within TIF districts generally grows much faster than in the rest of the municipality and infer that TIF benefits the entire municipality.”

The authors continue, “Our own empirical analysis, using data from Illinois, suggests to the contrary that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

“An important finding is that TIF has different impacts when land use is considered. For example, commercial TIF districts tend to decrease commercial development in the non-TIF portion of the municipality.”

Eligibility criteria are that a city or county must conclude that one of the following is true of conditions within the zone:

1. The area must be predominantly open with physical and economic constraints to development;
2. an area’s tax base is relatively low;
3. there is significant potential to stimulate new development;
4. defective or inadequate sidewalks, utilities, or street layout;
5. faulty lot layout in relation to size adequacy, accessibility or usefulness.

Dye and Merriam further explain TIF “rules” thusly:

“The rules for tax increment financing, and even its name, vary across the 48 states in which the practice is authorized. The designation usually requires a finding that an area is 'blighted' or 'underdeveloped' and that development would not take 'but for' the public expenditure or subsidy.

“It is only a bit of an overstatement to characterize the 'blight' and 'but for' findings as merely pro forma exercises, since specialized consultants can produce the needed evidence in almost all cases. In most states, the requirement for these findings does little to restrict the location of TIF districts.”

Basically, the program allows the Town of Sunnyvale to negotiate with developers to make a resource available that allows development by helping those developers with financing and recouping some of their costs.

“TIF expenditures are often debt financed in anticipation of future tax revenues. The practice dates to California in 1952, where it started as an innovative way of raising local matching funds for federal grants,” states Dye and Merriam. “TIF became increasingly popular in the 1980s and 1990s, when there were declines in subsidies for local economic development from federal grants, state grants, and federal tax subsidies (especially industrial development bonds). In many cases TIF is 'the only game in town' for financing local economic development.”

If implemented, the Town would appoint five to 15 board members for two-year terms to oversee the program.

Mayor Jim Phaup expressed his thanks on behalf of the Town Council for the presentation.

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