Municipalities in Idaho are authorized by Idaho Code 50-2005 to create and utilize Tax Increment Financing (TIF) to remove blight and spur redevelopment within geographically defined areas that would not otherwise see redevelopment due to extraordinary costs, and to finance needed infrastructure for support of private and public development, schools, police, housing, roads, utilities, etc.
In Meridian, TIF’s are managed by an urban renewal agency which has formed several districts set up in areas that align with City development priorities and planning efforts; and are in areas forecasted to significantly increase in value, but which may have significant impediments for development. These impediments can include installing or moving utility services or lines, building or widening roads and transportation facilities, removing blight, etc. This way growth pays for growth; the value of the new development is kept locally within a defined geographic area so that further development can be encouraged.
Urban Renewal Districts receive revenue from the increase in property tax value within the district which result from the increase in taxable property value of those improvements. At the time an urban renewal district is formed, the county assessor establishes the current value for each property in that district. This value is the “base” value. The taxing entities (the city, county, etc.) continue to receive the property taxes from the properties within the district throughout the life of the district, but those revenues remain at the level of the “base year.” It is important to note that the taxing districts of local government (schools, emergency services, etc.) continue to receive all revenue to which they are entitled under state law and applicable budget and their levy limits and are not affected.
Over time, as redevelopment occurs in the district the property values tend to rise. The increase in value over the base is called the “increment” value. Urban renewal district receives property taxes only on the amount the property increased in value. The more the property value increases after the district is put in place, the greater the revenue that is generated by the urban renewal district. When the district closes (within 20 years of its creation) the increment value is added back to the base value, and all the taxing entities now receive their full share of the tax.
Property tax rates are not directly affected by urban renewal districts. A property in a renewal district that is in the same taxing districts as a property outside of a renewal district is levied at the same rate. The only difference is that the increment within a renewal district is kept within the district, and only used for improvements within that geographically defined area. (Property owners within a district do have two-line items on their tax bill, for the base and the increment, but the total amount charged to an individual taxpayer is the same whether the property is inside or outside an urban renewal district.)
Property taxes are not increased when an urban renewal district is formed. Assuming the redevelopment activities result in growth that would not have occurred otherwise. However, activities that enable development tend to raise property values within a district, and consequently the overall increase in taxable value results in a higher tax bill. This translates into a more valuable property for the owner and in turn, more tax revenue in the district. The tax levy rate may rise slightly (perhaps insignificantly) for all property owners in a county to accommodate the TIF mechanism of the districts within the county, but the amount is returned as a benefit at the end of the districts’ life.
