2009-02-16 Work Session TIF
NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31
WORK SESSION, FEBRUARY 16, 2009 PAGE 550
ASSEMBLY
The New Hanover County Board of Commissioners held a Work Session on Monday, February 16, 2009, at 11:08
a.m. in the Assembly Room of the New Hanover County Courthouse, 24 North Third Street, Wilmington, NC.
Members present were: Chairman Ted Davis, Jr.; Vice-Chairman Jason R. Thompson; Commissioner Robert G.
Greer; Commissioner William A. Caster; Commissioner Jonathan Barfield, Jr.; County Attorney Wanda M. Copley; Clerk to
the Board Sheila L. Schult; County Manager Bruce T. Shell and Finance Director Avril Pinder.
Chairman Davis called the meeting to order and announced that the purpose of the work session is to hear a
presentation on Tax Increment Financing.
TAX INCREMENT FINANCING OVERVIEW
Finance Director Avril Pinder presented the following overview concerning Tax Increment Financing (TIF):
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Tax Increment Financing is also called Project Development Financing.
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It is a public/private partnership and defined as a financing tool that allows counties and cities to borrow
money to fund public improvements in an area with the goal of attracting private investment.
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Tax Increment Financing is used to fund development and redevelopment projects such as blighted areas or
for the economic development of a community.
·
The debt incurred by funding the project is both secured by and repaid from the additional property tax
revenue resulting from the areas new development the tax incremental revenue.
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Pros:
Stimulates private investment
o
Creation of jobs
o
Does not result in higher taxes
o
Allows for issuing bonds without voter referendum
o
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Cons:
No guarantee of private investment to create enough increment to pay debt
o
Strain on existing resources; i.e. schools, parks
o
May have to pledge additional revenues for debt, i.e. sales tax revenue
o
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Two examples of TIF projects in North Carolina:
Buncombe County and Woodfin April 2008 undeveloped property; multi-use district needing streets,
o
water/sewer, sidewalks, etc; base of $13.8 million with expected $230 million over 12 years; contains
Minimum Assessment Agreement with developer.
Roanoke Rapids March 2007 undeveloped greenfield; theater/entertainment complex; base of $292
o
million with expected $257 million over 5 years; issued $21.5 million Tax Increment Financing
bonds; contained complex security agreement with developer; limited private investment to date.
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Steps Toward implementing a TIF Project:
Create a development district
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Property deemed blighted, appropriate for rehabilitation or economic development
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Owner/developer provides site plan/build-out schedules
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Development district cannot exceed 5% of total unincorporated land area
o
Create a development financing plan
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§Proposed cost and source of funds
§Determine base valuation
§Projected incremental value
§Estimated duration of district
Hold public hearing
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Obtain Board of Commissioner approval
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Obtain Local Government Commission approval
o
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Debt Issuance Options:
Tax Increment Financing Bonds:
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§Secured by incremental tax revenue
§Developer Minimum Assessment Agreement to pay incremental taxes prior to actual
development to cover debt service
·
Synthetic TIF:
County would issue COPS installment financing to fund infrastructure
o
The Board held a brief question and answer period concerning the information presented.
A copy of the Power Point presentation is available for review in the Finance Department.
TAX INCREMENT FINANCING IN NORTH CAROLINA
Brent Jeffcoat, Attorney with McGuire Woods, LLP, presented an overview of Minimum Assessed Value as it
relates to Tax Increment Financing explaining that property owners may agree to a minimum assessed value. Such an
agreement assures that there will be incremental value and, accordingly, incremental revenues. The minimum value may
vary from year to year. That authorization allows the agreement with the property to adjust the value as needed to provide for
payment of the project development financing debt instruments.
In response to Board questions, Attorney Jeffcoat stated that a Minimum Assessed Value agreement can be made
NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31
WORK SESSION, FEBRUARY 16, 2009 PAGE 551
with multiple property owners within the development district.
Josiah Lucas, Attorney with McGuire Woods, LLP, provided an overview of the mechanics of the approval process
used by the Local Government Commission in approving a Tax Increment Financing project. The Commission will then
approve the application if, upon the information and evidence, all seven standards have been satisfied.
In response to Board questions, Attorney Lucas reported that most fees are negotiated to be paid at closing.
In response to Board questions, Attorney Jeffcoat confirmed that it is possible to use Tax Increment Financing in
conjunction with projects that require the participation of the Cape Fear Public Utility Authority.
Attorney Jeffcoat presented an overview of successful Tax Increment Financing projects in South Carolina that
include an Opera House in the town of Newberry, the University of South Carolina branch in Beaufort, and the City of
Kannapolis in North Carolina.
Vice-Chairman Thompson clarified that Tax Increment Financing is a way to develop parts of the County and
guarantee the up-front cost of the infrastructure by the land owners who are in the TIF having to agree to a tax value prior to
their build-out. It is especially helpful in areas where the property values do not support the infrastructure costs.
In response to Board questions, Attorney Jeffcoat clarified that when a Minimum Assessed Value agreement is in
place it applies to the property and not to an individual. As long as there is value in the property tax collection would be
enforced as with any other tax.
The Board held a brief question and answer period concerning the information presented.
In conclusion, Mr. Jeffcoat stated that Tax Increment Financing is a tool for local governments to use to influence
developments that the County doesnt have direct power over.
PRIVATE PERSPECTIVE ON TAX INCREMENT FINANCING
Berry Trice, on behalf of his client, presented his perspective on Tax Increment Financing. The presence of water
and sewer makes land more valuable. There is a good amount of land left around the perimeter of the County that is still
undeveloped and taxed as farm land. If the land is developed it will bring additional property tax revenues. He encouraged
the Board to let the development community know their willingness to consider projects that propose using Tax Increment
Financing.
In response to Board questions, County Manager Bruce Shell stated that it is important to have the Cape Fear Public
Utility Authoritys perspective on the feasibility of any project that involves water and sewer or capacity issues. If the
Authority is in agreement then the Board could proceed with considering a project that proposes using Tax Increment
Financing.
After brief discussion, Chairman Davis put the question to the Board if there were any objections to considering a
project that might include Tax Increment Financing.
Consensus:
The Board stated that they would have no objection to considering a project that might include Tax Increment
Financing.
Chairman Davis clarified that the Boards willingness to consider a Tax Increment Financing project is in no way a
promise of approval.
ADJOURNMENT
There being no further business, Chairman Davis adjourned the meeting at 12:37 p.m.
Respectfully submitted,
Sheila L. Schult
Clerk to the Board