TIF Bonding

Date: 2011

 

 MEMORANDUM IN SUPPORT

Unshackle Upstate, a bi-partisan coalition of over 70+ business and trade organizations representing a growing group of 45,000 companies and employing more than 1 million people support the enactment of the aforementioned bill. This legislation allows but does not require school districts, in a municipal redevelopment area which benefits from an authorized economic development project, to pledge the incremental school district real property taxes resulting from the project, to be applied along with those from the sponsoring municipality, toward the payment of debt service on tax increment financing (TIF) bonds.

TIFs are a powerful tool, used successfully by localities throughout the United States, to stimulate investment and expand the tax base in distressed urban areas by helping to finance infrastructure maintenance, repair and expansion; revitalization of blighted areas – including brownfields; and other public improvements necessary to make development possible.

This legislation remedies a major defect in current law by making school district property tax revenues available to support the repayment of TIF bonds – making such bonds much more attractive investments than if funded by incremental municipal property tax revenues alone.

New York State’s Municipal Redevelopment Law (General Municipal Law §§ 970 –a, et seq.) currently authorizes a “municipality” but not a school district “to issue by resolution of its legislative body tax increment bonds or tax increment bond anticipation notes [TIF bonds] … which are payable from and secured by real property taxes, in whole or in part…” for the purpose of “carrying out or administering a redevelopment plan adopted by the [local] legislative body.”

TIF bonds are paid back, not from general tax revenues (i.e., they are not “general obligation bonds”) but from the increase in property tax revenue earned from properties within a designated TIF district (i.e., they are “revenue bonds”), and do not deplete a locality’s constitutional debt limit or taxing limit, and are an effective means of raising funds for redevelopment without raising local taxes or depending on hand-outs from Albany.

S. 1716-A/A. 2378-A retains the core principles of similar TIF legislation that has been previously passed by the Senate. Unshackle Upstate feels strongly that the following aspects of the bill represent a reasonable compromise between TIF legislation that passed Senate and the TIF bill that the Assembly moved out of committee in 2008:

1. They would expand allowable uses of TIF funding to include authority to acquire land for “environmental remediation and brownfield redevelopment” purposes. This is a natural and modest clarification of existing authority to use TIF bonds to restore “blighted” properties.

2. They would give municipalities the option of using a portion of sales tax revenues that result from new commercial and/or industrial activity in a TIF district toward repayment of TIF debt. This helps make TIF bonds attractive to investors at reasonable interest rates.

3. They would also give municipalities the option of using a portion of special assessment district tax revenues associated with TIF districts toward repayment of TIF debt, when and if necessary to help make TIF bonds attractive to investors at reasonable interest rates.

4. They would require municipal assessment officers to make annual “good faith estimates” of the assessed values of parcels in TIF districts and of the amount of revenues necessary to repay the following year’s share of TIF indebtedness. The Office of Real Property would be tasked with developing guidance to assist in this effort. Apart from being a prudent way to handle municipal finances, this would allow local taxing authorities to hold onto normal appreciation in the tax base not attributable to TIF-induced economic growth.

 

Unshackle Upstate strongly supports this legislation as it would serve as a positive mechanism to provide much-needed economic development opportunities to many communities in Upstate New York. Adoption of this legislation is especially timely now, given the current fiscal and budgetary downfall in our state.

Furthermore, the following organizations and agencies have supported the same or similar legislation in the past:

The Business Council of New York State

The New York Conference of Mayors

New York State Builders Association

New York State School Boards Association

City of Schenectady

Schenectady School District

Broome County Legislature

New York State Association of Counties

New York State Economic Development Council

 

For these reasons, Unshackle Upstate supports the enactment of this legislation.