Tax Increment Financing – TIF Districts
The City of Huntsville has established Tax Increment Financing (TIF) districts since 2000 as permitted under Alabama law. A TIF is a tool that allows municipalities to promote economic development using revenues from future funding streams.
The principle is simple – the City makes public improvements in a defined geographic area (a special district) with the intent of stimulating economic development. As the development occurs, the value of the property increases within the district, and so do revenues generated from property taxes paid by the owners.
Through a TIF, the City is allowed to use the revenues generated by the incremental increase in property tax values to pay for the improvements it made to support the development and to help pay for other public infrastructure improvements such as new schools.
June 2022 TIF Report
View the June 2022 TIF Presentation
TIFs Do Not Raise Taxes
People commonly misunderstand a TIF to mean that property taxes have been raised within the district. This is not the case—under Alabama law, only voters can approve a change in property taxes.
TIFs only use the increase in revenue from existing taxes that occur as the value of district property rises over time. Also, no City, school or county property tax income is reduced because of the TIFs; it is only the natural tax growth that is captured.
The Huntsville Board of Education and Madison County Commission/Limestone County Commission partnered with the City in approving the TIFs because of the potential benefits to the whole community.
Schools – Roads – Jobs
The City is spending TIF money on public improvements and economic development. Long-term investment in schools, roads and industrial parks that thousands of people use every day.
Over the past 20 plus years, the city has seen millions of investment dollars in housing, stores, office buildings and manufacturing facilities directly attributable to the TIF. The City expects to continue to see similar improvements for all active TIFs in the years to come.
The citizens of Huntsville involved in all areas of the economy are benefiting financially. Equally important are the children attending new and better schools, people advancing in the workforce, diversification in the economy, and increasing choices in restaurant and retail shopping for our citizens and visitors alike.
Local government benefits, too. Sales tax growth has remained above regional and national averages from which city and county governments and schools derive more operating money. Because more people that live outside the City are attracted to Huntsville’s diverse retail and restaurant options, they generate sales tax revenues that wouldn’t be captured in the city otherwise. Also, school property taxes not included in the TIFs are growing which increase operation and capital funding to our schools.
Financial Stability
The money the City has borrowed to pay for the public improvements will be repaid with TIF property taxes. Credit rating agencies consider this more stable than using sales taxes for debt service, and the City maintains a triple-A credit rating, the highest in Alabama, since establishing the TIFs.
TIF DISTRICTS
Goal – Stimulate retail development in the west. Huntsville is the regional shopping destination, but it was competing with the unique retailers found in nearby large cities. By diversifying retail shopping opportunities, more people would “shop Huntsville.” The district, which opened in 2002, was comprised mostly of the sixty-acre property known as Westside Center. The adjacent roads were improved at a cost of $2.3 million, $700,000 less than expected. The $50 million Westside Center is anchored by Huntsville’s first Super Target store and has stimulated the development of new businesses and annexations throughout the area. TIF 1 ended in 2006. Nine years ahead of schedule, because of better-than-expected tax collections.
Goal – Build a new Huntsville High School and stimulate retail development in the central part of the City. The district was established in 2000. The most important project in TIF2 was the renovation and construction of a ‘New’ Huntsville High School, which at the time, was the City’s oldest school. The City provided $10 million to the Huntsville Board of Education for this purpose. The second project helped to revitalize the aging Parkway City Mall. Because parking space was very limited on the thirty-acre size of the property, the City agreed to provide $5.5 million to help build a mall parking garage. The developer gave the garage to the City for free public parking and pays all cost of operations. The $60 million new Parkway Place Mall includes premier anchor and specialty retailers for this area. To lessen concerns about long-term tax values, the City required the developer to guarantee the annual tax payment.
Goal – Build new schools in west Huntsville. Huntsville citizens know that City stability and growth depend largely on a quality education system. The Huntsville City Schools have a good national reputation, but enrollment was generally in decline prior to 2001. This is directly related to a slowdown in residential development and population growth in the City. School facilities were aging citywide and lacking in the west side. Strong population growth and new facilities in the county exacerbated the situation. Using TIF3, the City provided Huntsville City Schools $30 million to build Providence Elementary and Columbia High and paid $10 million for adjacent road improvements. The district encompassed 15,000 acres which included large developed and undeveloped properties. Thousands of homes have been built in west Huntsville over the past ten years, inside the TIF and in newly annexed properties. TIF 3 ended in 2012, eleven years ahead of schedule, because of better-than-expected tax collections.
Goal – Improve eight northwest City schools and stimulate industrial development. The City purchased 500 acres in northwest Huntsville in 1999, to establish a new industrial park. In 2001, Toyota Motor Manufacturing purchased a substantial portion of the park to build its first North American V-8 engine plant. The $230 million facility opened in 2003, and several expansions of the plant were made. In anticipation of this, the City created TIF3A, which includes 5,600 acres surrounding the new North Huntsville Industrial Park. TIF3A also provided $12 million for capital improvements to eight northwest schools located in the district: Johnson High, Rolling Hills Elementary, West Mastin Lake Elementary, ASFL/Davis Hills Elementary/Middle, Ed White Middle, Highlands Elementary, and Lakewood Elementary.
Goal – Revitalize downtown Huntsville. To revitalize the aging core of the City, thereby renewing residential neighborhoods and stimulating downtown residential and commercial development, TIF 4 was established in 2006. The City provided $13 million to Huntsville City Schools to help rebuild Lee High School and renovate Butler High. In northeast Huntsville, the City built Harris Hills Boulevard to incentivize retail development on Highway 72. TIF 4 was also used to build or expand new public facilities, including the downtown public The TIF Report City of Huntsville, Alabama No. 5 – March 2021 Page 4 safety precinct, the Von Braun Center and the Art Museum. The national recession began about the time TIF 4 initiatives were underway, which delayed the anticipated developments, so the tax projections were revised and TIF 4 investments were curtailed to a sustainable level. The Embassy suites hotel that opened in 2006, the new Lee High School that opened in 2012, and the Twickenham Square residential-retail-office development that commenced in 2012 are premier projects associated with TIF 4.
Goal – Provide infrastructure in support of the U.S. Army at Redstone Arsenal. The activities of the U.S. Army and NASA on Redstone Arsenal and the hundreds of community businesses that support them have been the core of Huntsville’s intellectual and economic strength since the late 1950’s. The base has grown significantly as a result of the BRAC decisions in 1995 and 2005, FBI relocation and even the recently announced decision to base US Space Command Headquarters in Huntsville. Operations and office room for government and contractor activities was limited. The Army approved the “enhanced use lease” (“EUL”) policy for Redstone, which allows the base to lease certain property for development. In 2010, the City established TIF 5, partnering with a national office park developer to create the Redstone Gateway Park, a $1 billion office park located on four hundred acres of EUL property. This Park will support Redstone initiatives for many years to come, and compliment the diverse activities occurring across the street at Cummings Research Park West. The City is constructing infrastructure and related assets over fifteen years to support the twenty-year build-out of the development. The Development is partially complete, and work continues on infrastructure and buildings in accordance with the plan. TIF 5 will collect property taxes on the development over thirty-five years to repay the City’s investment. The private developer is financing the City’s infrastructure costs, essentially eliminating the City’s financial risk related to the development, although the City will finance the costs with traditional debt when the developer’s property investments are completed and paying taxes.
Goal – Infrastructure – Western Growth Corridor. TIF 6 was created in 2016 to support infrastructure improvements in the western growth corridor near I-565 and Greenbrier Road. Funding helped the City widen and improve Greenbrier Parkway and the Chase Farm Access Road. Sewer improvements were also a part of the infrastructure projects designed to support economic development in the district. The Polaris manufacturing plant was the cornerstone project, but other industrial and commercial development built and flourished in the district.
Goal – Industrial Recruitment – Western Growth Corridor. To support the industrial recruitment of the Mazda Toyota plant. TIF 7 began in March of 2017 and was designed to recruit industry and improve public infrastructure in the City’s western corridor. The opening of the Mazda Toyota Manufacturing plant, as well as multiple large industrial suppliers, will provide sustained economic growth in Huntsville. To ensure safe and efficient travel for employees traveling to and from these industrial sites, the City widened and improved Greenbrier Parkway and Old Highway 20. These projects were a continuation of work completed in TIF 6.
