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Request for Information
<br />APA is interested •,^ learning about the soft~,•are for
<br />r:anners that has been ti+•ritten for microcomt users te.g.,
<br />apple lI or III, IB1i Persona] Computer. :~orthstar•
<br />FS-80 tilodel 1I1, or an}• otherst. Specificalh•, ~,•e ~+•ould
<br />iii:e to knov~•:
<br />• t1'hat the programs do;
<br />• ~~'hat t}'pen of systems they require (memor}•, disk
<br />drive reouirements, printers, manufacturers. etc.):
<br />• h'hether the programs are available to others; and
<br />• Cost.
<br />~1'e also are interested in hearing from p'.anners t+~ho
<br />bare been using commercially mailable program (e.g.,
<br />spreadsheets, database, graphics, etc.) in their ~+•ork.
<br />~'1'hich programs are ~•ou using, and ~~•hat are you using.
<br />these programs for? Are you satisfied or dissatisfied with
<br />their performance?
<br />Please send any information to Duncan Erley, APA,
<br />1313 E: 60th St., Chicago, IL 60637, or phone
<br />312-o~S_o100, ext. 203.
<br />revenue increment financing. Eliminating this confusion
<br />~•ith tax abatement would help make TIF believers out of
<br />man}• doubting elected officials and the public.
<br />Another frequent concern expressed about TIF is that
<br />it ~+•ill adversely affect the abilih• of local government to
<br />provide services. This concern stems from the fact that all
<br />tax increases from the higher assessed ~~alue of properties
<br />in the TIF district are allocated to the trust fund, rather
<br />than to general municipal sen•ices. Actually, the ex-
<br />perience of most cities in California, according to a 1976
<br />report. by Ralph Andersen and Associates of Sacramento,
<br />is that "tax increment financing has not created serious
<br />fiscal problems for local tax agencies, and has not con-
<br />tributed in any significant way to property tax rate in-
<br />creases." Moreover, the cost of servicing a deteriorating
<br />area is frequently more than that for servicing a redevelop-
<br />ing area.
<br />An additional tax consequence of TIF is that tax incre-
<br />mentlegislation sometimes exempts school district millage
<br />from making contributions to the trust fund. And, as
<br />redevelopment occurs, all of the increased tax revenues
<br />o~+•pd the school district ~~ill continue to flow into school
<br />budgets in those states.
<br />The bond consequences of TIF generally' do not extend
<br />to affecting the city's statutory debt limit. Hoti+•ever, you
<br />can expect the scrutiny of area bankers to be especially
<br />thorough ~+•hen TIF is not considered a general obligation
<br />of the city. Although bond ratings for TIF bonds. are
<br />t}•pically class "A" or less, the bonds still can be insured
<br />by municipal bond. insurance services.
<br />Start-up costs for the redevelop:~ent agency frequent-
<br />1}• can be recaptured, Vince the increment beginsfloti+•ing.
<br />Hot'; ever legislation may limit the ~llo~•: able p)anr.ing and
<br />administrative costs to those directly attributable to the
<br />rede+•elepmeat protect. And it should be remc inhered that
<br />recapture wilt be risky until revenue actuali~~ enters the
<br />trust fund.
<br />Experience ir. states having an extensi+•e histor}• ~+•ith
<br />T1F, such as California ~:+-i,e:e some SiO~ million ~+-orth
<br />of rede~•elop:nent bonds has been issued t, suggests tha: T1F
<br />can be a pov: erful tool. In these times of budgetary cut-
<br />backs and tight money, TIF can be a dealmaker.
<br />Getting the most out of TIF, however, will im>olve com-
<br />bining it ti+•ithother available tools in order to produce the
<br />maximum in private im-estments and public im-
<br />provements. TIF should be on)y one element in an overall
<br />package of development incentives. L'sed in that rvay, it
<br />can become an aImest indispensable part of your
<br />redevelopment im•estment strategy..
<br />How to Estimate the Usable Proceeds
<br />A frequent question that arises after a tax increment
<br />financing system is unden+•ay concerns how much money
<br />trill be available for public improvements as a conse-
<br />quence of a given development project. The fastest ~+•ay
<br />to make this preliminar}• estimate isby using a program-
<br />mable calculator or computer. The author has pro-
<br />grammed a Hetis-lett-Packard HP-12C calculator to take
<br />into account such factors as current tax rate, current in-
<br />terest rates, bond }'ears to maturity', bond coverage ratio,
<br />bond issuance costs, and bond reserve requirements. This
<br />program estimates the net proceeds of a TIF bond issue for.
<br />any given increase to the tax base.
<br />However, if you do not have a programmable
<br />calculator, you can achieve somewhat slo~n•er and more
<br />laborious results by following these steps:.
<br />1. Estimate the cost of the project and the increased tax
<br />base that would result. Your local tax appraiser can
<br />help figure out the prospective increases.
<br />2. Estimate the annual tax yield by applying the cur-
<br />rent tax rate to the additional tax base.
<br />3. Estimate the annual debt service by dividing the an-
<br />nual tax yield by the bond coverage ratio. Your
<br />city's financial advisors can help-you determine a
<br />reasonable coverage ratio.
<br />4. Using current interest rates and the number of }'ears
<br />it takes long-term revenue bonds to mature, estimate
<br />the principal amount of the bonds. Eithera finan-
<br />cial calculator or a standard table of loan constants
<br />vei11 help you complete this step.
<br />5. Subtract an estimated factor for bond issuance costs.
<br />Your city"s f inancial advisor maybe able to suggest
<br />a reasonable percentage of the principal amount, say
<br />four percent.
<br />6. Subtract an estimated reserve fund amount. Again:
<br />financial advisors ma}• be of help, or use the amount
<br />of one year's debt service as an estimate.
<br />7. .After performing stein 1 through 6, you have a
<br />preliminary esti^~ate of the net proceeds of the tax
<br />increment band issue. This amount is ~+•hat you can
<br />reasenabl}• e:.~^ect your redevelopment agency to
<br />haa•e available for public purpose improvements.
<br />
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