Tax Increment Financing Districts

Tax Increment Financing Districts is sponsored by State of Vermont. Municipalities with a designated downtown or growth center may create a tax increment financing (TIF) district to help pay for the public infrastructure (streets, sewer, water, or parking facilities) Category: Recreation & Trails.

**Q. Who creates a TIF District? A.

** In Vermont, municipalities create TIF Districts. But the State, through application to the Vermont Economic Progress Council, approves utilization of incremental Education Property Tax revenue for TIF debt, if approval criteria are met. **Q.

What is required of a municipality to create a TIF District? A. ** A municipality must: * Create a TIF Plan that meets the requirements of Vermont statute.

* Hold one or more public hearings on the TIF Plan. * Have the select board or city council find that creation of a TIF District will meet the purpose of TIF Districts as stated in statute. * Vote to create the District, adopt the TIF District Plan, pledge a certain portion of the incremental municipal tax revenue toward the District debt, and authorize municipal staff to submit an application to the State.

* The TIF Plan must be considered by the Vermont Economic Progress Council to ensure that the District and the expected outcomes meet statutory approval criteria. * Once approved, the municipality must follow the statutory process to incur TIF District debt to build public infrastructure. **Q.

Can a municipality create a TIF District that only uses incremental municipal property tax revenue? A. ** Yes.

A municipal-only TIF District does not require approval by the State. **Q. Can any municipality create a TIF District?

A. ** Any municipality can create a District that utilizes only municipal increment to service infrastructure debt. If a municipality currently has a TIF District approved to utilize incremental education property tax revenue, that municipality may only apply for approval of a new TIF District using incremental education property tax revenue once the current debt is fully paid off.

**Q. Do the owners of property within a TIF District get a reduction, abatement, or any type of deal on their property taxes? A.

**No. All property owners, including developers that own property within the District, continue to pay the property taxes due on the value of their property. This includes the taxes due on the value of the property at the time the TIF District is created and any additional value added by rehabilitation or new construction. **Q.

Is the municipality building infrastructure that normally would be built by developers? A. **Vermont law only allows the tax revenue generated from within a TIF District to be used to pay for public infrastructure.

The public infrastructure may assist or encourage a developer to build their project and may reduce the overall costs to the developer, but the cost of the direct infrastructure that a developer needs to complete their project is borne by the developer. (Ex.

A municipality may use TIF financing to pay for new sewer or water lines down a street needed to get the development to occur, but the water hookups and sewer connections to the main line are paid for by the developer.) **Q. Does the creation of a TIF District, in itself, raise property taxes for taxpayers who are not improving their properties?

A****. **No. Property taxes generally only go up for properties that make improvements. However, property taxes can increase due to other factors such as an increase in the State Education Property Tax rate, a reappraisal of all properties in a municipality, or inflation.

But these causes could occur with or without the TIF District. **Q. Once a TIF District is created and approved by the State, can a municipality immediately incur debt and build public infrastructure?

A. ** No. The municipality must seek voter approval for each instance of debt, usually a bond. Regardless of the type of debt chosen to finance the TIF infrastructure and related costs, there must be at least one public hearing, followed by a vote of the majority of voters in the municipality.

**Q. What happens if the developers never build/improve? A.

** Then no incremental property tax revenue would be generated, and the residents of the municipality are responsible for the debt. To prevent this, municipalities wait until developers are ready to build and usually sign development agreements with developers before any infrastructure is built. **Q.

How does a TIF District end? ** **A. ** The life of a TIF District ends when all the infrastructure debt is retired.

**Q. What are all the deadlines and timelines involved in a TIF District? A.

** A TIF District is considered created as of April 1 of the calendar year the select board or city council votes to create the District. The municipality has five years from the date of creation to incur the first instance of infrastructure debt. If debt is incurred within five years, the municipality has ten years from the date of creation to incur all infrastructure debt for the District.

The retention period, during which the approved portion of incremental municipal and education property tax revenue may be set aside for TIF debt, lasts for 20 years from the year the first debt is incurred. The term for each debt instrument is up to the municipality. The life of the District ends when all debt is retired.

* October 15, 2017: Select Board votes to create a TIF District * April 1, 2017: Formal date of creation of District; values as of 4/1/2017 Grand List are Original Taxable Value * March 31, 2022: Deadline to incur first debt * March 31, 2027: Deadline to incur all TIF debt if first debt incurred by 3/31/2022 * November 8, 2019: First debt incurred * 2019–2039: Retention Period (any increment over Original Taxable Value retained to pay TIF debt)