CITY
OF
CITY COUNCIL
POLICY MANUAL
POLICY NO. 124
TAX INCREMENT FINANCING POLICY
The
purpose of this Policy is to establish the official position and procedures of
the City of Merriam, Kansas, for considering applications for Tax Increment
Financing ("TIF') used for economic development and redevelopment purposes
in accordance with the provisions of K.S.A. 12-1770 through 12-1780.
1.02 SCOPE
The City recognizes that the proper use of Tax Increment Financing can promote, stimulate and develop the general and economic welfare of and quality of life in the City. The City is committed to the high quality and balanced growth and development of the community; to preserving the City's unique character and distinctive atmosphere; and to revitalizing and redeveloping areas of the City. Although the City does not encourage the practice of subsidizing private business with public funds, insofar as the City's objectives are substantially advanced by the expansion of the tax base and enhancement of the local economy, the City will consider, on a case-by-case basis, the approval of TIF projects where, but for the availability of TIF, such projects would not be economically viable. It is the policy of the City that any decision regarding the approval of TIF projects will be made in accordance with the guidelines, criteria, and procedures outlined in this Policy. Nothing herein shall imply or suggest that the City be under any obligation to approve a TIF Project for any applicant.
1.03 DEFINITIONS
For
the purpose of this Policy, the words or phrases as used in either the Kansas
Constitution, applicable State statutes, or this Policy shall have meaning or
be construed as follows:
Applicant. The individual or business
and its officers, employees, and agents requesting approval of the TIF Project.
Associated
therewith: As used with respect to
tangible personal property shall mean being located within, upon, or adjacent
to buildings or added improvements to buildings.
Blighted Area: An
area of real property qualifying as such, in the opinion of the Governing Body,
pursuant to K.S.A. 12-1771.
City: The
City of
Conservation
Area: An area of real property
qualifying as such, in the opinion of the Governing Body, pursuant to K.S.A.
12-1771.
Feasibility
Study: A comprehensive study,
prepared as required under K.S.A. 12-1771, which shows the benefits derived
from the TIF Project will exceed the costs and the income therefrom will be
sufficient to pay for the Project.
Redevelopment
Plan: A description of a TIF
Project, which includes the requirements of K.S.A. 12-1772.
TIF District: An area determined to be a
redevelopment district by the Governing Body pursuant to the requirements of
K.S.A. 12-1771.
TIF Project: The improvements to real
property for which Tax Increment Financing has been approved.
Tax Increment: The difference between the
amount of ad valorem property taxes
assessed against the TIF District prior to completion of the TIF Project and the
amount of ad valorem property taxes
assessed against the TIF District after completion of the TIF Project. For example, if the taxes assessed prior to
completion of the TIF Project were $5,000, and the taxes assessed after
completion of the TIF Project were $50,000 annually, the "tax
increment" would be $45,000.
1.04 PROVISIONS
A. Legal Authority
Pursuant
to K.S.A. 12-1771, the City may create TIF Districts in blighted areas,
conservation areas, and enterprise zones created pursuant to K.S.A. 12-17,110. Certain costs of improvements within the TIF
District may be reimbursed to the developer or paid through the issuance of
special obligation bonds or full faith and credit bonds. Funds to pay the reimbursement or to retire
the bonds are generated by the tax increment and other sources that may be
pledged by the City. This authority is
discretionary and the City may provide for Tax Increment Financing in an amount
and for purposes more restrictive than that authorized by statute.
No
privately owned property shall be acquired and redeveloped under the provisions
of the Act if the Johnson County Board of
B. Eligible TIF Expenses
The Act specifies permissible TIF expenses, including:
a.
acquisition of property within the TIF Project area;
b.
payment of relocation assistance;
c.
site preparation;
d.
sanitary and storm sewers and lift stations;
e.
drainage conduits, channels and levees;
f.
street grading, paving, graveling, macadamizing, curbing,
guttering
and surfacing;
g.
street lighting fixtures, connection and facilities;
h.
underground gas, water, heating, and electrical
services and connections located within the public right-of-way;
i.
sidewalks and pedestrian underpasses or overpasses;
j.
drives and driveway approaches located within the
public right-of-way
k.
water mains and extensions;
l.
plazas and arcades;
m.
parking facilities;
n.
landscaping and plantings; fountains, shelters,
benches, sculptures, lighting, decorations and similar amenities; and
o.
all related expenses to redevelop and finance the
Redevelopment Project.
The costs of construction of
buildings or other structures to be privately owned are not eligible TIF
expenses.
C. Bond
Authority
The
City may use proceeds of special obligation bonds or full faith and credit tax
increment bonds to finance the undertaking of a redevelopment project, as
provided in K.S.A. 12-1774. The maximum
maturity of any such special obligation bonds or full faith and credit tax
increment bonds shall be twenty (20) years.
The City may also issue industrial revenue bonds or private activity
bonds to benefit a developer located within a TIF District.
1. Special Obligation Bonds
The City may
issue special obligation bonds to finance permissible expenses of the TIF
District. Such bonds shall be payable,
both as to principal and interest: (1) from property tax increments allocated
to, and paid into a special fund of the City;
(2) from revenues of the City derived from or held in connection with
the undertaking and carrying out of any Project; (3) from private sources,
contributions or other financial assistance from the state or federal
government; (4) from the increased franchise fees and city sales tax, or (5)
from any combination of these methods.
Special
obligation bonds are not general obligations of the City, nor in any event
shall they give rise to a charge against its general credit or taxing powers or
is payable out of any funds or properties other than those sources set forth
above. Should the annual increment fall
short of the amount necessary to pay the principal and interest of the special
obligation bonds issued under this Policy, the remaining amount payable is the
responsibility of the applicant, not the City.
If a special obligation bond issued under this Policy is offered to the public, an investment grade rating must be assigned to the issue; if the bond is privately placed, it may be issued without a rating, but must be sold to an accredited investor as that term is defined by securities industry standards.
2. Industrial Revenue Bonds
Industrial
revenue bonds may be issued by the City pursuant to K.S.A. 121740 et seq. to benefit a developer within
the TIF district. All state law benefits
associated with such bonds shall be available, except that no ad valorem tax abatement shall be
available.
D. Reimbursement Authority
Pursuant
to Attorney General Opinion 96-45, TIF can be used to reimburse a developer for
eligible TIF expenses as opposed to issuing bonds; this is the preferred method
of granting TIF benefits. Under this
method, the City agrees to reimburse the developer for eligible TIF expenses
over a period of time not to exceed twenty (20) years with interest on the
outstanding reimbursement amount. The
reimbursement amount and interest is paid solely from 411 or a portion of the
tax increment, and the developer takes the risk that the portion of the
increment pledged for reimbursement will be insufficient to retire the eligible
TIF expenses and interest.
E. Amount of Tax Increment Financing Available.
1. Criteria
The primary objectives of the City in granting TIF for economic development are: (a) promote, stimulate and develop the general and economic welfare of the state of Kansas and the City; (b) promote the general welfare of the citizens of Kansas and the City through assisting in the development, redevelopment, and revitalization of central business areas, blighted areas, conservation areas, and environmentally contaminated areas located within the City; (c) create new jobs and retain existing jobs; and (d) expand the economic and tax base of the City. The City recognizes that a simple system of determining the amount of TIF to be granted in order to reach these objectives may not always be equitable if applied uniformly to different kinds of redevelopment plans. As a result, in determining the actual amount and duration of TIF to be granted, the City shall consider the factors and criteria set forth in this Policy under the Analysis of Costs and Benefits, as well as the amount and duration of previous TIF Projects supported by the City.
2. Capital
Investment.
To
be considered for TIF, an individual or business should be making a minimum
capital investment in the City of $1,000,000.00. The term "capital
investment" means the acquisition cost of land, buildings and tangible
personal property constituting capital assets for accounting purposes. The
minimum amount of capital investment required for TIF Projects, as provided
herein, may be waived by the City based upon the unique nature of the project
as determined by the Governing Body.
Prior
to granting TIF, the City shall prepare, or direct to be prepared, a cost
benefit analysis examining the costs and benefits to the public of the proposed
TIF Plan. The Cost-Benefit Analysis
shall be performed on a model approved by the City and shall be in addition to
the Feasibility Study. The cost of
preparing the Cost-Benefit Analysis shall be paid by the applicant. This cost will be in addition to the
application fee required under this Policy.
The City shall use the Cost-Benefit Analysis to assist in its
decision-making process, but the results of the analysis will not be
determinative or obligate the City to any course of action. The Cost-Benefit Analysis shall consider, but
not be limited to, the following factors, as applicable:
1. The market value of the applicant's
investment in real and personal
property;
2.
The property tax, sales tax, franchise fees, transient
guest tax, and other tax and fee revenue that may result and directly benefit
the City;
3.
The number and average employee salary of full-time
equivalent jobs that will be created;
4.
The expenditures that local government will need to
make to provide streets and utilities, police and fire protection, and other
services as a result of the TIF Project;
5.
The expenditures for police and fire protection,
recreation, street maintenance, social programs, etc., for the new residents
associated with the TIF Project;
6.
The expenditures for public capital investments (library,
streets, airport, sewer plants, etc.) for the new residents associated with the
TIF Project;
7.
The expenditures by the local school district(s) to
provide the facilities and to educate the students of the new residents
associated with the TIF Project;
8.
Other public or private expenditures associated with
attracting a new business;
9.
The kinds of jobs created in relation to the types of
skills available from the local labor market;
10.
The degree to which the ultimate market for the
applicant's business products and services is outside the community,
recognizing that outside markets infuse "new money" to the local
economy;
11.
The potential of the applicant's business for future
expansion and additional job creation;
12.
The indirect costs and benefits the applicant's
business may have by creating other new jobs and businesses, including the
utilization of local products or other materials and substances in
manufacturing;
13.
The compatibility of the location of the applicant's
business with land use and development plans of the City and the availability
of existing infrastructure facilities and essential public services;
14.
An evaluation of the applicant's current and projected
financial strength and market viability.
15.
The number and average employee salary of full-time
equivalent jobs that will be retained in the City, community, or State as a
result of the applicant's decision to locate or remain in the City; and
16.
The value added, including intangible costs and
benefits such as City reputation, congestion, environment, and quality of life
to the City and community as a result of the unique nature of the applicant's
business.
G. Application Of "But-For"
Principle
All
TIF applications shall be considered in light of the "but-for"
principle, i.e., the TIF must make such a difference in the decision of the
applicant that the Project would not be economically feasible but for the
availability of TIF. The Governing Body
does not encourage the subsidy of private businesses with public funds, the
indirect consequence of TIF, unless some measurable public good results, as
determined by the City, and the public subsidization can reasonably be expected
to make a significant difference in achieving one or more objectives of the
City.
H. Unfair Competition
In
reviewing TIF proposals, the Governing Body shall consider whether or not such
financing is likely to create an unfair advantage for the applicant over any
existing competing business within the City.
I. Distribution of Ad Valorem Taxes
All
tangible taxable property located within a TIF District shall be assessed and
taxed for ad valorem tax purposes
pursuant to law in the same manner that such property would be assessed and
taxed if located outside such district,
and all ad valorem taxes
levied on such property shall be paid to and collected by the county treasurer
in the same manner as other taxes are paid and collected.
Some
or all of the increment in ad valorem property
taxes resulting from a redevelopment district may be apportioned by the City to
a special fund for the payment of the eligible TIF expenses of the TIF Project,
including reimbursement or the payment of principal and interest on any special
obligation bonds or full faith and credit tax increment bonds issued.
J. Condemnation
The use of condemnation, permitted under K.S.A. 12-1773, will be considered by the Governing Body only upon a finding that the applicant has attempted, in good faith, to acquire the property privately. In the event condemnation is approved by the Governing Body, the applicant shall be responsible for all costs associated with the proceedings, including court and litigation costs, attorney's fees and the final condemnation awards made.
K. Waiver of Requirements
The
Governing Body reserves the right to grant or deny TIF for the development or
redevelopment of a District under circumstances beyond the scope of this
Policy, or to waive any procedural requirement.
However, no such action or waiver shall be taken or made except upon a
finding by the Governing Body that a compelling or imperative reason or
emergency exists, and that such action or waiver is found and declared to be in
the public interest. The Governing Body
shall not waive any procedural requirement of State law.
1.05 PROCEDURES
The following basic
procedures shall govern the approval of TIF Projects within the City. All requests for Tax Increment Financing
shall be considered and acted upon in accordance with this Policy.
The applicant shall apply for approval of a TIF Project by filing with
the City Clerk five (5) copies of a written proposal on a form provided by the
Finance Department. The proposal shall
include, but is not limited to: (a) a
proposed comprehensive plan that identifies all the proposed redevelopment
project areas and that identifies in a general manner all of the buildings and
facilities that are proposed to be constructed or improved in each
redevelopment project area; (b)
description and map of the proposed redevelopment district; (c) description of the proposal boundaries of
the redevelopment district; (d)
information regarding expected capital expenditure by the applicant; and (e) a
proposal for development assistance. The
City Clerk shall distribute the copies to: City
All proposals
shall be accompanied by an application fee of
$1,000. This fee is in addition
to other fees which may be required by the City, including fees for the
issuance of tax exempt or taxable bonds, costs incurred for preparation of the
Feasibility Study as required by K.S.A. 17-1441, costs associated with the Cost
and Benefit Analysis required by the City and costs incurred, if any, for
review and work done by the City's Financial Advisor and Bond Counsel. Actual costs incurred for review shall be
billed by the City Clerk for payment within thirty (30) days of the review process.
C. Initial Review Procedure
On
receipt of the completed proposal and the required fee, the City
D. Review
by Finance, Administration and Operations Committee
The
Finance, Administration and Operations Committee ("Committee") shall
review requests and applications for TIF, evaluate the proposed TIF District
and verify that redevelopment is necessary to promote the general and economic
welfare of the City, gather and review
such additional information as may be deemed necessary to determine if the
applicant meets the objectives of this Policy, conduct preliminary discussions
with the applicant, discuss terms of an agreement to be drafted by the City
Attorney or his/her designee for Governing Body consideration and to recommend
to the Governing Body whether the proposal should be favorably considered. In reviewing the information, the Committee
may utilize the services of consultants, including but not limited to bond
counsel and financial advisers.
Committee records, including proposals submitted for TIF, may be
withheld from public disclosure as provided under the Kansas Open Records Act,
but shall be available for public inspection when otherwise required by law.
E. Governing Body Action
1.
Reviewing and Establishing
the TIF District
Upon receiving
the recommendation of the Committee, the Governing Body shall determine whether
to reject the TIF proposal or to further consider the request. Upon a favorable vote for further
consideration, the Governing Body shall take action to establish a TIF
District, unless such District is already in existence. The Governing Body must conclude that
redevelopment of the proposed area is necessary to promote the general and
economic welfare of the City. If such a
finding is made the Governing Body may adopt a resolution.
a.
TIF District Resolution
The resolution shall state that the City is considering the establishment of a TIF District; additionally, it shall: (1) give notice that a public hearing will be held to consider the establishment of a redevelopment district and to fix the date, hour and place of such hearing; (2) describe the proposed boundaries of the redevelopment district; (3) describe a proposed comprehensive plan that identifies all of the proposed redevelopment project areas and that identifies in a general manner all of the buildings and facilities that are proposed to be constructed or improved in each development project area; (4) state that a description and map of the proposed redevelopment district are available for inspection at a time and place designated; and (5) state that the Governing Body will consider findings necessary for the establishment of a redevelopment district.
No elected or appointed officer, employee or committee of the City, and
no Chamber of Commerce, Board, Development Council, or other public or private body or
individual, shall be authorized to speak for and commit the Governing Body to
the provision of TIF, nor to the establishment of a TIF District. Such resolution shall be an expression of
good faith intent, but shall not in any way bind the City to establishing a TIF
District.
b. Notice
and Hearing
No TIF District shall be established, nor TIF granted, by the City prior to notice and a public hearing as required by K.S.A. 12-1771. Upon request, the City Clerk shall provide any public agency with a copy of the proposal and a description and map of the proposed TIF District. The applicant may, but is not required, to attend the public hearing.
c. Establishing the TIF
District
Upon the conclusion of the public hearing and determination by Merriam City Attorney that the proposed area complies with K.S.A. 17-1771, the Governing Body may establish the TIF District by ordinance. Any addition of area to the TIF District or any substantial change to the comprehensive plan shall be subject to the same procedure for public notice and hearing as is required for the establishment of the District.
2.
The Redevelopment Project
The Governing Body and the Planning Commission will consider the redevelopment project as proposed. Together, they will prepare a redevelopment plan. The Planning Commission must determine that the Plan is consistent with the comprehensive general plan for the development of the City.
a. Redevelopment
Plan
The
redevelopment plan shall include: (1) a summary of the Feasibility Study; (2) a reference to the redevelopment district
that identifies the redevelopment project area that is set forth in the
comprehensive plan that is being considered;
(3) a description and map of the area to be redeveloped; (4) the
relocation assistance plan, as required by K.S.A. 17-7777; (5) a detailed description of the buildings
and facilities proposed to be constructed or improved in such area; and (6) any
other information the Governing Body deems necessary to advise the public of
the intent of the Plan.
A
copy of the redevelopment plan shall be delivered to the Johnson County Board
of Commissioners and the Board of Education of any school district levying
taxes on property within the proposed redevelopment project area. Upon a finding by the Planning Commission
that the redevelopment plan is consistent with the comprehensive general plan
for the development of the City, and determination by the Governing Body that
said Plan shall be further considered, the Governing Body will or may adopt a
resolution.
b. Redevelopment
Plan Resolution
The
resolution shall state that the Governing Body is considering the adoption of
the Plan. Such resolution shall: (1) give notice that a public hearing will be
held to consider the adoption of the redevelopment plan and fix the date, hour and place of such
public hearing; (2) describe the
boundaries of the TIF District within which the redevelopment project will be
located and the date of establishment of such a district; (3)
describe the boundaries of the area proposed to be included within the
TIF Project area; and (4) state that the
redevelopment plan, including a summary of the Feasibility Study, relocation
assistance plan and financial guarantees of the prospective developer and a
description and map of the area to be redeveloped are available for inspection
during regular office hours in the office of the City Clerk.
Where the Governing Body
determines that it will or may issue full faith and credit tax increment bonds
to finance the redevelopment project, in whole or in part, the resolution shall
also include notice thereof.
The date fixed
for the hearing shall be no less than 30 or more than 70 days following the
date of the adoption of the resolution fixing the date of the hearing.
3. Hearing
At
the public hearing, a representative of the City shall present the City's
proposed redevelopment plan. Following
the presentation of the Plan, all interested persons shall be given an
opportunity to be heard. The Governing
Body for good cause shown may recess such hearing to a time and date certain,
which shall be fixed in the presence
of persons in attendance at the hearing.
Following the public hearing, the Governing Body may adopt the redevelopment plan by ordinance passed upon a 2/3 vote. Any substantial changes to the Plan as adopted shall be subject to public hearing.
No full faith and credit
bonds or special obligation bonds may be issued until the sixty- day protest
period expires after the date of the public hearing.
F. Acquisition
of Land
The
City may proceed to acquire property within the TIF District by purchase or
eminent domain (with 2/3 vote of the Governing Body) and implement the
Plan. However, the City may not exercise
eminent domain in conservation areas.
The
City
REFERENCES
K.S.A.
12-1770 through 12-1780; 12-17,110;
and 12-1740.