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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.

VIEW MAP OF TIF DISTRICTS 

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.

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 increased amount of revenues paid in property taxes that occur as the value of the property rises within the district over a period of time.

No City, County, or school property tax income is reduced because of a TIF. It is only the natural tax growth that is captured.

Once the TIF meets its financial goal, it is closed, and all tax revenues generated within the district return to routine collection and distribution.

Schools – Roads – Jobs

The City is spending TIF money on public improvements, new schools, roads and infrastructure for economic development. The TIF helps governments finance major infrastructure improvements in short order and pay back the debt through increased revenues generated by the district’s new economic development. Residents of Huntsville all benefit financially from an improved economy.

Financial Stability

The money the City borrows from the bond market to pay for public improvements will be repaid with TIF property taxes. Credit rating agencies consider this more stable than using sales taxes.


TIF DISTRICTS

The TIF 1 district was created in 2002 for an area off of University Drive/Highway 72 west near Cummings Research Park, and primarily comprised a 60-acre property supporting a major new retail development. The City improved adjacent roads at a cost of $2.3 million, about $700,000 less than expected. In turn, a $50 million retail center opened, anchored by Huntsville’s first Super Target store. It proved to be the catalyst in stimulating development and annexations throughout the area. TIF 1 closed nine years ahead of schedule due to higher than projected tax revenues.

The goal of TIF2, created in 2012, was to build a new school for Huntsville High and to stimulate retail development in central city.  Through this TIF, the City provided $10 million to the Huntsville Board of Education for a new school. It also provided funding to help revitalize the aging Parkway City Hall. Because space was limited on the 30-acre mall site, the City agreed to provide $5.5 million to help construct a parking garage. The developer agreed to guarantee the annual tax payment; however, revenues in TIF 2 are running well ahead of projections.

Formed in 2000, TIF 3 was created in West Huntsville to support new schools in the area from Research Park Boulevard west to County Line Road. Funds in TIF 3 provided $30 million to build Columbia High School and Providence Elementary School, $10 million for roads and infrastructure in the school zones, and incentivized residential and commercial development in the western corridor.

TIF 3 closed eleven years ahead of schedule and generated $58.5 million in revenue. In closing the debt, the City saved some $15 million in interest. While the TIF was formed to provide capital income to build new schools, it provided an additional $21 million to City and County schools.

In closing TIF 3, the City returned $2.2 million to Huntsville City Schools, $1.2 million to the Madison County Commission, and $1.5 million to City operating and capital funds. Beginning in 2013, Huntsville City Schools will start receiving $4.7 million, Madison County Commission $2.8 million, and the City $3.2 million each year from property taxes formerly in the TIF.

Established in 2006, TIF 4 was established to help revitalize the City’s aging core, stimulate residential and commercial development, particularly in downtown. Through revenues generated from this TIF, the City provided $13 million to the Huntsville Board of Education to build a new Lee High School. It also provided funding to build Harris Hills Boulevard on Highway 72 East, a downtown public safety precinct, and money for improvements to the Von Braun Center and Museum of Art.

The global recession in 2008 impacted the early progress of TIF 4; however, significant investments and economic growth in recent years have the TIF moving ahead of projections.

This TIF was created in 2010 to support growing operations at Redstone Arsenal as a result of Base Realignment and Closure decisions in 1995 and 2005. To meet a need for contractor office space, the U.S. Army approved an Enhance Use Lease (EUL) policy to allow Redstone to lease property for outside development. The City established TIF 5 to support a $1 billion office park development on 400-acres of EUL property at the entrance of Redstone Gate 9. TIF 5 will collect property taxes on the development over 35 years to repay the City’s investment.

Created in 2016 to support infrastructure improvements in the western growth corridor near I-565 and Greenbrier Road. Funding from TIF 6 helped the City fund infrastructure to support the new Polaris plant.

City Council is reviewing the administration’s request to proceed with the creation of a new TIF for 5,500 acres in the City’s western growth corridor. The area includes the 1,500 acre mega-site in newly annexed Limestone County. It is also adjacent to TIF 6, which includes the Polaris plant. Having TIF 7 in place will support the newly announced Toyota-Mazda automotive production plant along with other industrial prospects interested in the western corridor.

TIF7 Presentation


Reference Reading: Tax Increment Financing by Dr. Thomas Pieplow

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