(Iowans for Tax Relief) Cities and counties in Iowa often use Tax Increment Financing (TIF) as an economic development tool that reallocates property tax revenue for urban renewal. The original intent of TIF was to develop blighted areas or spur job creation. In many instances, TIF has been a valuable tool that encourages and enables growth, but criteria for TIF has been interpreted broadly over the years and therefore subject to abuse at times.
Once a TIF zone has been created, property values within the designated TIF area are frozen, creating a base valuation that continues to provide revenue to all applicable taxing authorities (cities, counties, schools, etc.). However, the additional property tax revenues from the TIF zone provide revenue only to the city or county that created the TIF. In Iowa when it is the local schools that do not receive those tax dollars from increased valuations, our state government backfills that amount by sending additional dollars to the school district. Taxpayers in that school district end up having to pay double, once on their property tax and a second time when their state income taxes are used to fund the additional payments to schools.
Current TIF guidelines create concerns for taxpayers and questions need to be asked on a case by case basis. Are the TIF districts already attracting private investment? Would the redevelopment happen even without the TIF designation? Is economic development simply shifting from one area within a region to another? Ultimately TIF should not favor one taxpayer over another.
This week HF 2063 was introduced by State Representative Gary Mohr (R-Bettendorf). This bill’s goal is to ensure that TIF activities adhere to the true intent of the program by placing some common-sense guide rails around the program. Among other actions, this bill would :
- Define blighted areas.
- Establish duration limits for urban renewal areas that do not have time limits.
- Limit the use of renewal funds that help businesses relocate.
- Require school taxes not be divided under TIF but actually paid to the schools.
ITR is still researching all of the details of this brand new bill but this is a good example of legislation that intends to put the taxpayer first!