ࡱ> Nh( 8/ 0DArialNew Romantt x: 0DWingdingsRomantt x: 0 DTimes New Romantt x: 0 ` .  @n?" dd@  @@`` 80ll5 5  5       0AA@8! " Yʚ;3ʚ;g4JdJdDb x: 0ppp@ <4dddd@ 0t <4!d!d@ 0t  r0___PPT10 2___PPT9 E2GR@ADDP8&C(9&B(1?t `Community Development Services of Montana ~ 2005O  =[Measuring the Tax Increment|Where s the Money? Tax Increment Workshop Helena May 25, 2006??%Tax Increment Financing Authorization&&  Authorization per MCA 7-15-4282 The urban renewal plan, industrial or technology district ordinance may contain a provision or be amended to contain a provision for the segregation and application of tax increments. Filing tax increment provision plan per MCA 7-15-4282 Clerk of municipality files certified copy of the plan or ordinances or amendment with the Department of Revenue and with the clerk or appropriate officer of each of the affected taxing bodies. (e.g.school districts).!6  6  G;Tax Increment Determination fDetermination and Reporting of Values Upon receipt of the tax increment provision, the Department of Revenue (Assessors Office) is responsible for the annual calculation of the base (original), actual and incremental taxable values. The Department of Revenue is responsible for reporting the values to the municipality and other affected taxing bodies. |&ZZ= ZZ Z&=F:%Tax Increment Measurement Definitions&& Base, Current and Incremental Taxable Values - Definitions Base (Original) Taxable Values - The actual taxable value of all property within an urban renewal area, industrial, technology, aerospace transportation and technology district prior to the effective date of a tax increment financing provision. Establishes the  base year as of January 1. Actual Taxable Values -The taxable value of all property in these districts for the current year calculated from the assessment roll last equalized. Incremental Taxable Values  The amount by which the Actual Taxable Value at any time exceeds the Base Taxable Value. ;Z7Z;XH<Tax Increment Calculation Calculation of Tax Increment  Whole area or district: Actual (Current Year) Taxable Values - Base Year (Original) Taxable Values = Incremental Taxable Values Increment Taxable Value X Mill Rates (except University 6 mills) = Tax Increment Receipts $ Due 7ZZ ZZ Z7'$)J?#Tax Increment Calculation - Example$$ Calculation of Tax Increment  Whole District Example: 5,000,000 (Current Year Taxable Value) - 2,000,000 (Base Year Taxable Value) = 3,000,000 (Incremental Taxable Value) 3,000,000 (Increment Taxable Value) X .600 (Mill Rates - except University 6 mills) = $1,800,000 (Tax Increment Receipts $ Due) 7ZZ  ZZ Z7+'()9,QE#Tax Increment Mill Rates Determined$$ Process for determining mill rates per (MCA 7-15-4286). Mill rates of taxing bodies must be calculated on the basis of the sum of the taxable value of all taxable property located outside the renewal area or district and the base taxable value of all taxable property located within. The mill rate determined must be levied against all property within as well as outside the area or district. 9Z " Z " Zo " ZZ Z9o  RFMill Rates Determined - Example  0 15,000,000 Taxing Jurisdiction Taxable Value 5,000,000 Renewal Area or TI District Taxable Value 20,000,000 Total Taxable Value of Taxing Jurisdiction 2,000,000 Base Taxable Value of Area or District 15,000,000 Taxing Jurisdiction Taxable Value 17,000,000 Basis for Mill Rate Determination 600 Mills required to be levied 20,000,000 X .600 = $12,000,000 Taxes 17,000,000 X .600 = $10,200,000 Taxing Jurisdiction 3,000,000 X .600 = $ 1,800,000 Renewal Area $12,000,000 Taxesno 7 38o/*&SGLT I Calculation  Specific To Property'' The calculation of the tax increment is on ad valorem basis  for each property: Property by property determination Identify inclusive properties  Maps, GIS coordinates Set a flag or status field to identify properties in district Create file (database) with parcel identification # (PIN) Track parcel by parcel valuations  market, taxable and base (original) Retain historic base valuations for each parcel in case of future adjustments Q " ZZ$ " ZE " Z " Z " Z ZQ$E  .L@8T I Collections  Allocation PThe collection of the tax increment is an allocation of the taxes receivable to the appropriate fund. Property record system creates the tax statement with the special district An interface program to the accounting system builds the taxes receivable files Split of tax receipts by parcel with tax increment receipts segregated to special revenue fund NOT a new or additional tax  just an internal allocation of funds f0 " dZ " Z> " Z Zf>@4Special Revenue Fund *Tax Increment Receipts are segregated to a Special Revenue Fund Operating and development fund for programs Unspent revenues, cash balances, investments are carried over to next fiscal year No  use-it-or-loss-it for budgeting purposes Long term planning becomes more critical - particularly the identification of redevelopment projects requiring multi-year or debt financing (bonds or other instruments)2AU " AUI=Special Revenue Fund Funds continue to be segregated each year. Costs that may be paid by tax increment financing (MCA 7-15-4288): Land acquisition, demolition and removal of structures and relocation of occupants. The acquisition, construction and improvement, connection to or direct assistance for infrastructure (sewers, sidewalks, streets, parking lots, utility and telecommunication lines etc.). Costs incurred in connection with redevelopment activities for urban renewal including programs for voluntary or compulsory repair and rehabilitation of buildings and improvements. Administrative costs associated with the management of the urban renewal area or special districts. 6oZ+ " Zp*K>End of Tax Increment Financing Tax increment financing provision terminates on the later of: The 15th year following it s adoption Payment in full discharge of all bonds for which the tax increment has been pledged and interest on the bonds. (Extends the provision to the final maturity date of the bond(s). Funds remaining from loan programs established under an urban renewal plan and loan repayments received after the date of termination and Funds related to a binding loan commitment, construction contract or development agreement and loan repayments received after the date of termination may be retained and used in accordance with the provision of the urban renewal plan. n?M "  " ? VMAFSpecial Revenue Fund  Tax Receipts$$ 2Tax Increment Receipts are segregated to a Special Revenue Fund. However, at the time of adoption or at any time thereafter: Governing body of the municipality may provide that a portion of the tax increment be released from segregation if the remaining increment is sufficient to meet bond obligations (MCA 7-15-4287). The municipality may enter into agreements with other affected taxing bodies to remit any portion of the increment not used for current payment of costs incurred for redevelopment activities or pledged for bond obligations (MCA 7-15-4291). 4 " HBase Adjustments  Release increment%% Current Montana Code (MCA 7-15-4287) provides for the release the tax increment from segregation at any time: By an adjustment of the base taxable provided that: All principal and interest then due on bonds has been fully paid The resulting smaller tax increment is determined to be sufficient to pay all principal and interest due later on bonds Adjusted base value shall be reported to the officers and taxing bodies to which the increment provision is reported The adjusted base value is used in determining the mill rates thereafter. If insufficient the base value must be reduced to the original amount or higher amount sufficient to pay principal and interest on bonds. pZ4 " Z " Z " Z " Z " Zo4  ;0@Base Adjustments  Prior to 2001(! (  Previous language for base adjustment procedure per MCA 7-15-4293: Changes in tax rates Changes in tax exempt status of property Changes to statutory, administrative or judicial methods of appraisal of property Corrections of conditions that existed in the base year2C  " CPDBase Adjustments - Issue Issue: Comparing Apples to Apples The original language allowed a broader adjustment process that afforded protection of the tax increment taxable value due to changes such as: Tax rate reductions or Changes in methods of appraising property. Allowing the base taxable value to be re-calculated as if the change of law (e.g. tax rates) had been in effect on the original date of determination, the measurement of the increment taxable value could be consistently applied. ZE " Z " ZZ " Z#B " D86Base Adjustments  Historic For some tax increment districts  particularly those with small valuations - changes in tax rates or methods of appraising property can have significant impact. Some historical changes to rates and methods include: Elimination of class 6 (inventory) business property  1983. Change in real property tax rates from 8.55 % to 3.86% - 1986. Reclassification of business equipment (personal property) to class 8 and simultaneous reduction of class 8 tax rate from 11% to 9% - 1990. (Gradually reduced - currently taxed at 3%.) Reduction in telecommunications property tax rate from 12% to 6% - 2000. z "  " 6NC8Base Adjustments  Example 1 Example 1: Business property exemption limit Personal (business) property exemption of $20,000 (2006) Overall taxable value for business personal property decreases. Businesses are dropped off the rolls due to exemption limit. Measuring increment against a  fixed base  no base adjustment for the change in method of appraising Tracking the base for exempt businesses is an issue. Closed businesses that existed in base year and have base taxable value must also continue to be tracked. p.9 "  "  "9E98Base Adjustments  Example 2 jExample 2  Telecommunications property Telecommunications property tax rates were reduced from 12% to 6% in 2000 - a 50% reduction. Uptown Butte TID  US West: 1999 Taxable Value = 733,000 Base Taxable Value = 522,000 Incremental Taxable Value = 211,000 2000 Taxable Value = 454,000 454,000 Base Taxable Value = 522,000 261,000 (522,000 X .50%) Incremental Taxable Value = - 68,000 193,000  "  " )`""7""k"""""":""",  OBBBase Adjustments  Issues Summary"" Retaining a  fixed base (after 2001) presents issues with: Impact of significant changes to tax rates or methods of appraising property. Tracking base values due to businesses that close or drop off the tax rolls. Continued reduction in the real property tax rates slowly erodes the increment taxable values. Class four property rates declining from 3.86% in 1990. For 2005, tax rate is 3.22%. For 2006, tax rate is 3.14%. For 2007 and after, tax rate is 3.01%. j< "  "  " <H=1Major Taxpayer Issue JWhen there is a major taxpayer in a tax increment district as of the base year, any changes of the taxpayer can be significant. Changes in current taxable values due to internal or structural re-organization, changes in business purpose, sale, liquidation, and bankruptcy will have considerable impact. Loss of a major taxpayer produces  double whammy effect because base taxable value cannot be adjusted. Result is  double blow to incremental values. Best if district can be established in anticipation of major taxpayer locating in district. PZ " Zn +>2Major Taxpayer - continued jExample: NorthWestern Impact in Butte Real Property URA TID NW w/o NW Taxable Values 4,000,000 2,500,000 1,500,000 Base Values 1,500,000 750,000 1,500,000 Incremental Values 2,500,000 1,750,000 0 NorthWestern currently represents over 70% of the incremental taxable value and the resulting tax receipts. Xk4 @*> O d<.Business Retention'With a major taxpayer included in base year valuations, business retention becomes critical due to: High percentage of the incremental values and tax receipts. Base taxable values are permanent. Stabilization of tax increment requires business retention. Bonding capacity could be affected. 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