Tax Increment Financing

West Hills Business Center Presentation to: Northwestern Lehigh School District
June 15, 2011

LCIDA

Tax Increment Financing

What Are TIFs/How Do They Work?
Tax Increment Financing (TIF) is an economic development financing tool which can utilize increases in property taxes, resulting from private development within a specified area, to finance needed capital improvements within that same area. A portion of the new taxes or tax increment generated by a development project is designated by the affected taxing bodies to cover the debt service payments of a bond or note that finances the eligible improvements. In many cases, the improvements that are financed via a TIF constitute publically owned infrastructure.

LCIDA

West Hills Business Center

Tax Increment Financing

What Are TIFs/How Do They Work?
The Tax Increment Financing Act of 1990 (amended 1992), Act 113, 35 P.S.6930.1 et seq., permits Local Industrial Development or Redevelopment Authorities to administer a TIF project in accordance with the affected local taxing bodies. Today 49 states and the District of Columbia have such legislation. The process starts with a local Authority working with a private development project in need of assistance with excessive costs related to necessary improvements to support the project. In the majority of cases, the required assistance involves funding mandated public infrastructure improvements.

LCIDA

West Hills Business Center

Tax Increment Financing

What Are TIFs/How Do They Work?
The basic process involved in developing a tax increment financing project is as follows: - The local industrial development authority, in this case, LCIDA, makes presentations to the affected taxing bodies (i.e school district, local municipality, county) requesting they designate a representative to serve on a TIF Committee to assist the Authority in developing a Tax Increment Financing Plan.*
*This is the purpose of our presentation to you tonight.

- The resulting TIF Plan must include, among other things, an exhaustive description of the project/district and a detailed economic feasibility study and assessment of the fiscal impact on the municipal tax base.

LCIDA

West Hills Business Center

Tax Increment Financing

What Are TIFs/How Do They Work?
Upon completion of the TIF Plan, the Authority then presents the plan to the taxing bodies and requests that they either optin or opt-out of the plan.
In this context, the three taxing bodies (county, municipality and school district) agree to allocate all or part of the increased taxes, received from properties within the TIF District, to the Industrial Development Authority to meet principal and interest payment obligations to the holders of the bonds or notes.

Finally, the county or the local municipality designates by ordinance or resolution a certain geographical area as a TIF District.

LCIDA

West Hills Business Center

Tax Increment Financing

What Are TIFs/How Do They Work?
Things to remember: The allocations made by each of the taxing bodies in support of the project do not need to be the same and the taxing bodies retain 100% of their Base taxes. Once the TIF loan is repaid, the TIF District is dissolved and all tax proceeds go to the respective taxing bodies. TIF is not a tax abatement program - unlike the Local Economic Revitalization Tax Assistance Act (LERTA) and the Keystone Opportunity Zone (KOZ) programs.

LCIDA

West Hills Business Center

Tax Increment Financing

What Are TIFs/How Do They Work?
EXAMPLE TIF DISTRICT BEFORE DEVELOPMENT GENERATES A TAX BASE OF$10,000 AT COMPLETION OF DEVELOPMENT THE DISTRICT GENERATES TOTAL TAXES OF$100,000 THE TAX INCREMENT IS +$90,000 THE TAXING BODIES AGREE TO ALLOCATE 70% OF THE TAX INCREMENT TO THE IDA OR...$63,000

LCIDA

West Hills Business Center

Tax Increment Financing

What Are TIFs/How Do They Work?
EXAMPLE (continued) IDA BORROWS $500,000 THROUGH THE ISSUANCE OF BONDS AND REPAYS THE IDAS BOND OBLIGATIONS WITH THE $63,000 RECEIVED EACH YEAR. THE TAXING BODIES RETAIN THE $10,000 TAX BASE AND 30% OF THE TAX INCREMENT ($90,000), FOR TOTAL TAXES RETAINED OF $37,000 VERSUS THE ORIGINAL $10,000.

LCIDA

West Hills Business Center

Tax Increment Financing

How is the TIF Guaranteed?
Recourse from the note holder or bond holders, in the event of default, will be limited to the funds made available through the tax increment financing or the NID. The School District, Township and the County will have no liability in the event of default. No full faith and credit guarantee will be provided by any of the taxing bodies. The TIF legal documents will provide that property owners within the TIF District will be prohibited from seeking tax reassessments of their properties below a floor that is adequate to service debt. In the event the School Board disagrees with the results of the planned Lehigh County Reassessment, the TIF will not preclude the School Board from challenging the reassessment. As a reinforcement mechanism to offset potential deficits in TIF revenues to support the required debt service, a NID will also be created.

LCIDA

West Hills Business Center

Tax Increment Financing

How is the TIF Guaranteed?
The Pennsylvania Neighborhood Improvement District Act allows municipalities to establish a Neighborhood Improvement District (NID). Property owners in the NID can be assessed fees based on debt service shortfall and collected as property tax. The revenues generated from the assessments in the NID will provide funds necessary to ensure that payments of principal and interest under the bonds will be made. The NID that will be formed will include only the tax increment district which will be the proposed development site only.

LCIDA

West Hills Business Center

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Tax Increment Financing

West Hills Project Overview
Location: I-78, Exit 45 (New Smithville)

Consists of:

233 Acres 3,800 Linear Feet Frontage on I-78 Planned Development- 2.3 Million Square Feet Institutional Quality Industrial Buildings High Quality Business Park Environment

Product:

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West Hills Business Center

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Tax Increment Financing

Property Location

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West Hills Business Center

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Tax Increment Financing

West Hills Project Status
Industrial Zoning Approved Plans: Final Subdivision Plan (Township) Final Land Development Plan (Township) Approved Permits: PENNDOT - Highway Occupancy Permit PA Dept of Environmental Protection NPDES US Army Corps of Engineers Section 404 of the U.S. Clean Water Act

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West Hills Business Center

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Tax Increment Financing

Why is a TIF Needed?
Public Infrastructure Deficiencies
I-78 Exit 45 New Smithville
PENNDOT has Designated the Bridge Over I-78 as Functionally Obsolete Sub-Standard Vertical and Horizontal Clearances Signals and Turning Lanes Needed

Waste Water Treatment Plant

Currently a Failed System Which is Subject to PADEP Moratorium Will be Upgraded to Meet Current PADEP Standards Will Add Capacity for West Hill Business Center (WHBC), Weisenberg Elementary School, Diner

Electrical Service
Substation Upgrades and Extension to WHBC

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