Tax Increment Financing (TIF)
Introduction
This story map will educate people on Tax Increment Financing (TIF). The first section shows a visual of a hypothetical TIF project. The second section describes the TIF process and the third section identifies existing redevelopment areas in the City of Hastings. This is followed by a map showing locations of completed and active TIF projects and a visual showing the difference between taxes collected without TIF and collected with TIF.
TIF Visual
The visual shows a hypothetical example of Tax Increment Financing (TIF). In this example, a hypothetical project has a starting value of $10,000 with an annual increase in value of two percent. The taxes shown in the visual equate to one percent of the value of the property. After rehabilitation of this hypothetical property, the value has increased to $50,000 and continues to increase annually by two percent.
Before the start of a TIF project, the entire amount of property taxes are collected by taxing entities, including the city and school district. In this hypothetical example, the property generates approximately $100 in taxes per year.
During the 15-year period of the TIF project, the property taxes are divided. The base tax amount shown in blue is collected by the taxing entities. This base tax remains constant during the 15-year period and is approximately $100 per year for this hypothetical example. The remainder, or tax increment, is used to pay off the TIF loan, which pays for TIF-eligible expenses such as site acquisition, public infrastructure, etc. In this hypothetical example, the tax increment is approximately $400 per year and is shown in orange in the visual.
After the 15-year period of the TIF project, the property taxes will no longer be divided and the full amount will go to the taxing entities. For this hypothetical example, the collected taxes are now approximately $650 per year. This is an increase of approximately $550 in property taxes between when the hypothetical property was not redeveloped and after redevelopment.
Note: TIF projects can take a maximum of 15 years, but some projects do not take the whole 15 years. The taxes are divided until the TIF loan is paid off.
TIF Process
Blight and Substandard Determination Study
Prior to a Tax Increment Financing Project can be developed, a blight and substandard determination study is required to be completed. This study can be pursued by either the CRA or a developer and goes to a public hearing for planning commission and city council for adoption.
General Redevelopment Plan
Once a blight and substandard determination study is completed, the CRA can develop a general redevelopment plan for the area. This plan is required to be heard by both the planning commission and city council at a public hearing.
Plan Modification (Specific Redevelopment Plan)
A developer can submit a project and application for TIF that is reviewed by the CRA. If the project is approved, the CRA or developer can submit a plan modification or specific redevelopment plan to planning commission and city council for a public hearing to identify a specific redevelopment project. This is required for any substantial modification to the general redevelopment plan.
Construction Starts
After a redevelopment project's plan modification has been approved by city council, the CRA will enter into a redevelopment agreement with the developer, and then construction can start. The construction process will still require the application of any required building permits prior to the start of construction.
Construction Ends/Division of Taxes
The CRA will notify the county assessor to start dividing taxes when construction is completed and there is a valuation increase for that specific tax year.
Tax increment used to pay TIF loan
The tax increment collected from the new valuation created by the project is used to pay for TIF eligible expenses. A TIF project has a maximum pay-off time of 15 years, but may finish prior to the 15 years. If the TIF loan is completely paid off before the 15-year mark, the CRA notifies the county assessor to stop dividing taxes.
Hastings' Redevelopment Areas and Projects
Hastings' Redevelopment Areas
First class cities, like Hastings, can designate up to 35 percent of the city as blighted. The City of Hastings currently has 18 redevelopment areas that are designated as blighted and substandard, which accounts for approximately 30 percent of the city.
Completed and Active TIF Projects
Since the CRA was established in 1987, they have completed over 100 projects. The following map shows the projects that have been completed and the projects that are still active. A completed project is defined as a project that has paid off its TIF loan and is no longer dividing taxes. An active project is defined as a project that is currently dividing taxes to pay off its TIF loan.
Tax Comparison
These visuals show a comparison of the amount of taxes collected on properties without TIF in comparison to how many taxes are collected when TIF is used. These six projects have been completed and no longer divide taxes to pay off the TIF loan. The taxes collected and tax increment information was collected from the Adams County Assessor. The taxes collected if the TIF project had not happened was calculated based on an estimated increase in value of 1% annually.
Kensington
The historic Clarke Hotel was designed by local Hastings architect, C.W. Way, and was a luxury hotel until it closed in March 1987. That same year a tax increment financing project was started to redevelop the hotel into assisted living housing, now known as the Kensington.
The Kensington project started dividing taxes in 1988 with about $4,000 being collected by taxing entities and about $12,000 being the tax increment that went towards paying off the TIF loan. The project finished dividing taxes in 2002, which caused the amount of taxes collected by taxing entities to increase.
Without the TIF project, the property generates approximately $4,000 in taxes per year. From 1988 through 2023, the property generated a total of about $1,133,000 in additional taxes for taxing entities by using Tax Increment Financing (TIF).
Capital Group
Capital Group redeveloped a property with a group of buildings into a Walgreens.
The Walgreens project started dividing taxes in 1995 with about $900 being collected by taxing entities and about $28,000 being the tax increment that went towards paying off the TIF loan. The project finished dividing taxes in 2008, which caused the amount of taxes collected by taxing entities to increase.
Without the TIF project, the property generates approximately $900 in taxes per year. From 1995 through 2023, the property generated a total of about $524,000 in additional taxes for taxing entities by using Tax Increment Financing (TIF).
Hastings Partners Inc.
Hastings Partners Inc. redeveloped a property to house the 56-unit Regency Heights Apartments.
The Regency Heights project started dividing taxes in 1995 with about $500 being collected by taxing entities and about $60,000 being the tax increment that went towards paying off the TIF loan. The project finished dividing taxes in 2008, which caused the amount of taxes collected by taxing entities to increase.
Without the TIF project, the property generates approximately $500 in taxes per year. From 1995 through 2023, the property generated a total of about $678,000 in additional taxes for taxing entities by using Tax Increment Financing (TIF).
Fridley Theatres
The Rivoli Theater was originally built in 1927 as part of the Alexander Hotel complex and closed in 1984. The hotel was demolished and in 1995, Fridley Theatres renovated and expanded the Rivoli Theater.
The Rivoli 3 project started dividing taxes in 1995 with about $1,800 being collected by taxing entities and about $16,000 being the tax increment that went towards paying off the TIF loan. The project finished dividing taxes in 2008, which caused the amount of taxes collected by taxing entities to increase.
Without the TIF project, the property generates approximately $1,800 in taxes per year. From 1995 through 2023, the property generated a total of about $345,000 in additional taxes for taxing entities by using Tax Increment Financing (TIF).
Midland Corp.
Midland Corp. redeveloped a warehouse building by utilizing TIF to renovate the façade by adding brick. This brick fits in better in the historic downtown district.
The Dutton Lainson project started dividing taxes in 2009 with about $1,000 being collected by taxing entities and about $8,000 being the tax increment that went towards paying off the TIF loan. The project finished dividing taxes in 2021, which caused the amount of taxes collected by taxing entities to increase.
Without the TIF project, the property generates approximately $1,000 in taxes per year. From 2009 through 2023, the property generated a total of about $9,000 in additional taxes for taxing entities by using Tax Increment Financing (TIF).
Total Collected Taxes
The CRA was established in 1987 and has completed over 100 projects. This includes the transformation of a vacant hotel into an assisted living facility, the development of a new movie theater in the community, and many other developments.
This chart shows the total taxes collected by taxing entities with and without TIF for these projects. The combined estimated taxes collected without the TIF projects was about 5.5 million dollars.
Each time a TIF project is completed, the amount of taxes collected by taxing entities increases. Overall, from 1988-2023, the TIF projects caused an increase in taxes of 10 million dollars that are collected by taxing entities that would not have been available without the TIF projects.
Definitions
Base Tax: The amount of taxes collected by taxing entities during a TIF project.
Blighted area: Defined by Nebraska State Statutes as an area that is detrimental to the public health, safety, morals or welfare in its present condition and use through the presence of a substantial number of the following conditions: deteriorating structures, defective or inadequate street layout, faulty lot layout, insanitary or unsafe conditions, deterioration of site, diversity of ownership, tax delinquency, defective or unusual conditions of title, improper subdivision, conditions which endanger life or property by fire, or any combination of those factors. For a complete definition visit the Nebraska Revised Statute 18-2103.
First Class City: Defined by Nebraska State Statute as a city having a population between 5,000 and 100,000 inhabitants. For a complete definition visit the Nebraska Revised Statute 16-101.
Substandard area: Defined by Nebraska State Statute as an area that is detrimental to the public health, safety, morals, or welfare through the presence of a predominance of buildings which are deteriorated, aging, have inadequate provision of ventilation, light, air, sanitation, or open space, high density of population or overcrowding, or conditions which endanger life or property by fire. For a complete definition visit the Nebraska Revised Statute 18-2103.
Tax Increment: Increased taxes on the project that are used to pay for TIF eligible expenses.
TIF Eligible Expenses: Generally, TIF Funds can be used for land acquisition, public improvements and amenities, infrastructure, and utilities.
