 Frequently
Asked Questions |
|
|
What is a TAD?
A Tax Allocation District (TAD) is established for the purpose of publicly financing certain redevelopment activities in underdeveloped areas. Redevelopment costs are financed through the pledge of future incremental increase in property taxes generated by the resulting new development. Typically, upon creation, TADs have vacant commercial and residential properties, blighted conditions and numerous vacant buildings or are in need of significant environmental remediation.
How is a TAD created?
The Georgia Redevelopment Powers Law was enacted in 1985 to give additional powers to local municipalities in order to facilitate the redevelopment of blighted or economically depressed areas. One of the powers that was granted to local governments in this law was to issue tax allocation bonds to finance infrastructure and other redevelopment costs within a tax allocation district. In order for an area to be designated a TAD, the government must verify that the area is need of redevelopment. These findings are reported in a Redevelopment Plan, which demonstrates why the area needs to be redeveloped and how the municipality plans to revitalize the area. The plan provides the redevelopment agency with the powers to improve dilapidated facilities and to use tax increment financing to achieve the goals of the redevelopment plan.
What is the difference between a Tax Allocation District and Tax Increment Financing?
The TAD is the geographic area in which TIF can be used. These terms are used interchangeably in Atlanta, but most other municipalities refer to their TADs as TIF districts.
How do TADs improve communities?
TADs create short and long-term benefits to communities. For example, the Atlantic Station TAD was created in order to provide funding for clean-up of an environmentally contaminated site and construction of basic infrastructure. The direct result of this investment is a vibrant new community that will provide over 4,000 residential units and create 30,000 new jobs in the City of Atlanta.
Will property taxes be raised?
No. A redevelopment agency does not have the authority to levy or increase property taxes. It is important to note that the increased tax revenue from the sale, development, or rehabilitation of property reflects a rise in property value and not an increase in tax rate.
What is a tax increment?
A tax increment is the difference between the amount of property tax revenue generated before TIF district designation and the amount of property tax revenue generated after the TAD designation. Establishment of a TAD does not reduce property tax revenues. Property taxes collected on properties included in the TAD at the time of its designation continue to be distributed to the school districts, county, community college and all other taxing districts in the same manner as if the TAD did not exist. Only property taxes generated by the incremental increase in the values of these properties after that time are available for use by the TAD. The only change is that during the life of the TAD the property tax revenues are distributed differently with the incremental increase going into a special fund to finance some of the redevelopment expenditures within the TAD.
What is a bond? What is a TAD bond?
A bond is similar to home mortgage, but for a larger project and greater amount of money. A TAD bond is the mechanism through which funding is created to incentivize new development in designated underserved areas. TAD bonds are issued to "monetize" the projected future increases in property tax revenues, so that funding is available to subsidize a portion of development costs up front.
Why is there a need for Tax Allocation Districts?
Tax Increment Financing is a widely used economic development tool that offers local governments a way to revitalize their communities by expanding their tax base, offsetting, in part, federal and state funds that are no longer available. TADs can act as the catalyst to attract further private investment into economically depressed areas. For instance, the City of East Point established a TAD to facilitate the development of Camp Creek Marketplace in a historically underserved market, thus providing hundreds of new jobs and access to retailers. TADs help local governments attract private development and new businesses which create jobs, attract customers, and in turn generate additional private investment. Essentially, the creation of a TAD generally leads to an increase in tax revenues, above what already existed.
How do you apply for TAD funding?
The following is a summary of the TAD application process: - The applicant meets with ADA for discussion(s) of conceptual project overview
- ADA determines the project's eligibility
- The applicant completes and submits the TAD application and application fee
- Projects are then presented to the Advisory Boards, who make recommendations to the ADA Board in support of or against projects
- Developers of approved projects will enter into a Development Agreement with the City and ADA
- ADA Board must approve conditions of the Development Agreement and bond amount
- The City Council must then approve bond documents and bond amount
- Tax Allocation Bonds are sold and the proceeds from the capital are distributed by ADA to the developers as outlined in the bond documents
What are the opportunities for public input?
a. Prior to TAD creation, the Redevelopment Plan is available for the public to review.
b. Some TAD legislation requires the implementation of community advisory boards to review projects and make recommendations to the ADA Board.
What major redevelopment costs are eligible for TAD funding?
The Redevelopment Powers Law outlines the possible uses for TAD funds. In Georgia, eligible redevelopment costs include capital costs for the construction or improvement of public works, new buildings, renovation, repair or demolition of existing building, grading and clearing land, and all soft costs associated with these activities, cost of land assemblage, and costs for conducting environmental impact or other studies. However, the Redevelopment Plan for each district specifies the permissible uses of the funds which support the goals outlined in the Plan.
Who controls TAD funds?
The Atlanta Development Authority, in cooperation with the City, controls the TAD accounts.
Are you allowed to use funds derived from one TAD to assist with another area?
The Redevelopment Powers Law stipulates that the increment generated in a TAD which is derived from increases in property taxes must be spent within the TAD from which it came.
Who monitors the TAD process?
ADA's Tax Allocation District funding group manages and administers the TADs within the City of Atlanta.
When does a TAD District terminate?
Typical TAD Districts exist for 25-30 years, depending on the term of the bond. However, any TAD may be terminated earlier if all bonds are paid-off and the municipal board votes to terminate the district.
How does a TAD differ from an Enterprise Zone?
Property taxes are abated in Enterprise Zones for a period of five years, then are gradually increased over the following five years. In a TAD, property owners pay normal property taxes, but the incremental increase in property taxes is deposited into a special fund for payment of redevelopment costs.
Is there a limit to the number or size of TADs Atlanta may create?
According to the Redevelopment Powers Law, the City cannot create a new TAD if the total taxable value of the existing TADs plus the proposed TAD is greater than 10 percent of the tax digest (total value of taxable property) for the City.
Do other cities and counties provide this type of financing?
Currently, 48 of the 50 states allow localities to use some form of tax increment financing. Most notably, Chicago had experienced significant success in attracting development to back to the City though 122 TIF districts which have assets of $174.3 million. Locally, eleven tax allocation districts have been created: seven are located in Fulton County - five in the City of Atlanta, one in the City of East Point and one in unincorporated Fulton County, three in Cobb County - one each in the Cities of Acworth, Marietta and Smyrna, and one in unincorporated Clayton County. Thus far, bonds have been issued in the Westside and Atlantic Station TADs in Atlanta and the Camp Creek TAD in East Point.
How does TAD financing work?
Example: Property Owner/Developer Smith wants to build a mid-rise, mixed-use project to include 20,000 square feet of retail on the ground floor, 200 apartment or condominium units on floors 2 thru 10, and a parking deck. Total cost of approximately $23 million might produce annual property taxes of $335,000. Assuming new taxes at a $325,000 increase over base year, pre-development property tax levels of only $10,000, this $325,000 increase or increment can now be used to fund a bond issue of approximately $3 million.
Net proceeds (after transaction costs) can then be invested directly into the new development in the form of a grant. In this way, the TAD subsidizes the cost of redevelopment for projects unable to gain sufficient conventional funding.
|
