No formal action is expected at this Council Work Session, but staff is expecting direction from the City Council on whether it wishes to consider review and changes to the City TIF Policy in 2023.

The City Council adopted the current Tax Increment Finance (TIF) Policy on July 9, 2018 and Council, staff and the three Urban Renewal Districts in Billings have been applying the Policy to urban renewal projects and programs. The City Council first passed a Council Initiative in October 2016 to have staff provide information to Council regarding Tax Increment Financing (TIF) and to give recommendations to the Council on developing policies and criteria for use of TIF funds. Staff made presentations on the initiative at Council Work Sessions in February, June and November of 2017. At the Work Session in November 2017, Council directed staff to draft a TIF Policy the Council could adopt through a resolution. Staff presented a draft policy at the Council's April 9, 2018 Regular Business Meeting and Council decided to delay action on the Policy at that meeting and form an ad hoc City Council initiated Committee (The TIF Policy Working Group) to rework the Policy and bring it back for Council action at its July 9 meeting. The Working Group met three times from late April through late May 2018 and ultimately provided the TIF Policy attached to this memo that was adopted by the City Council.

City staff and the three urban renewal district advisory boards and their representatives over the past few years have noted City Council comments and concerns with some elements and topics the policy addresses as TIF project requests have been brought to the Council for action. While Council has continued to utilize the TIF Policy through many TIF project actions and staff finds it to be a solid guide and reference for urban renewal processes in Billings, staff wanted to be proactive and request input from the Council on whether these warranted spending staff and Council time and resources to review the Policy and consider changes to it. The areas that City staff and the three Districts have noted Council discussion on during TIF application actions, include:

• Section 2 a. Financial Assistance Through TIF. A minimum of > $5 of private investment for every $1 if public investment is the preferred threshold to be met for each TIF application. This section has been discussed and debated extensively regarding the ratio - is it 20% public to private or is it 16.66%, etc? Should this ratio be revisited - increased or decreased and better clarified regarding what it means?

 

• Section 2 b. Financial Assistance Through TIF. Grants may be made for uses listed in Part 1 above benefiting any government owned land or buildings and for profit and non-profit businesses. There has been discussion at Council about applications made by non-profits as to how the applications are presented since there is not a tax increment implication with tax exempt organizations as well as whether there should be some sort of specific criteria for non-profit applications. It is important to note that schools are non-profit entities and the urban renewal plans for some of the Districts specifically call out support for schools and school facilities.

 

• The practice of including the purchase price of a property in the private sector ratio of the private to public investment ratio presented in TIF applications. While land purchase costs have not been historically reimbursed in TIF applications, all three urban renewal districts have processed applications where the recent purchase of the property is included in the private sector investment contribution in the applications.

 

• Return on investment period for TIF project awards. Each urban renewal district has included in its TIF request materials provided to Council a calculation of an estimated rate of return for the increased taxes of a redeveloped or developed property to return the TIF grant back to the District in the form of new tax value. This has been something the Council has valued to be included and has discussed the payback periods and how they affect the Districts and future tax values for the taxing entities. Obviously, larger awards can take longer to reach this payback threshold, although it depends a lot on the project and the TIF grant being considered what the payback period is. 

 
These are the elements City staff and the three Districts have heard raised at Council and wanted to share in terms of a discussion of review and changes to the TIF Policy. There may be other portions of the Policy the Council is aware of that have been points of concern or discussion. Staff finds the overall format and content of the Policy continues to be applicable and a good resource, and only a few areas might be the focus of some amendments.

 

This item is for information only at the Work Session. Staff is expecting the Council to provide direction tonight to staff on whether further review and amendments be developed with City Council and staff involvement to amend the TIF Policy.

There are no fiscal effects from discussing amendments to the City TIF Policy.