Neighborhood Improvement Authorities

1
Neighborhood Improvement Authorities

• Michigan Municipal League
• March 7, 2008

2
Existing TIF Entities

• Downtown Development Authority (DDA)
• Tax Increment Finance Authority (TIFA)
• Local Development Finance Authority (LDFA)
• Brownfield Redevelopment Authority (BRA)
• Corridor Improvement Authority (CIA)
• Historic Neighborhood Tax Increment Finance
  Authority (HNTIFA)
• Neighborhood Improvement Authority (NIA)

3
Authorizing Statutes

• DDA (PA 197 of 1975 MCL 125.1651)
• TIFA (PA 450 of 1980 MCL 125.1801)
• LDFA (PA 281 of 1986 MCL 125.2151)
• BRA (PA 381 of 1996 MCL 125.2651)
• HNTIFA (PA 530 of 2004 MCL 125.2841)
• CIA (PA 280 of 2005 MCL 125.2871)
• NIA (PA 61 of 2007 MCL 125.2911)
• Proposed Authorities
• Water Resource Improvement TIFA (SB 47)
• Tourism Improvement TIFA (SB 26)

4
Tax Increment Financing Basics

• Tool for local economic development authorizing
  capture of property taxes levied by certain
  taxing units to be used for development purposes
• But for development theory
• Initial Value (a/k/a Base Value) of property is
  set in the first year of Plan
• Each subsequent year, the Current Value of
  property is determined
• Current Value Initial Value Captured Value
• Tax Increment Revenues (TIR) Captured Value X
  Millage Rates

5
Downtown Development Authority (DDA)

• PA 197 of 1975, MCL 125.1651
• Original TIF Act 380 in the State
• Cities, townships and villages may create a DDA,
  with one or more development areas within the
  DDAs boundaries
• DDA may levy up to 2 mill property tax
• DDA may capture tax increment revenues (TIR) from
  all property within the development area to
  finance public facilities within the development
  area
• After 1994, DDA may not capture State, K-12 or
  ISD millages except to pay certain pre-1995 bonds
  or other obligations

6
DDA Opt Out

• Other taxing units may opt out of capture for new
  DDAs or amendments to DDA boundaries
• Opt out does not apply to amendments to DDA Plan
• Plans may be amended to change duration, projects
  and improvements, boundaries of Development Area,
  etc. with no opt out

7
Tax Increment Finance Authority (TIFA)

• PA 450 of 1980, MCL 125.1801
• Similar to DDA, expanded idea to districts beyond
  downtown
• No new TIFAs may be created or expanded after
  1986
• 87 TIFAs still exist and can continue to operate
  and amend Plans
• No opt out, since no new TIFAs

8
Local Development Finance Authority (LDFA)

• PA 281 of 1986, MCL 125.2151
• Created to replace TIFA and be more focused in
  scope
• Vehicle for test case on tax increment financing
  in Advisory Opinion on PA 281 of 1986, 430 Mich.
  93 (1988).
• Cities, villages and urban townships may create
  LDFA to facilitate manufacturing and high-tech
  development
• Tax increment revenues used to finance variety of
  infrastructure improvements

9
LDFA SmartZones

• 2000 LDFA amendments implemented SmartZones
• allowed MEDC to designate 10 LDFA certified
  technology parks in connection with Universities
• SmartZone LDFAs may be used to finance business
  incubators and infrastructure

10
Brownfield Redevelopment Authority (BRA)

• PA 381 of 1996, MCL 125.2651
• Cities, villages, townships and counties may
  establish BRAs to facilitate the implementation
  of brownfield plans to promote the revitalization
  of environmentally distressed areas
• BRA has the power of tax increment financing but
  no taxing powers
• BRA can capture school taxes (SET, ISD, K-12)
• BRA can pay for a variety of environmental
  activities and, for some local units of
  government, infrastructure costs
• Powers are different in certain Qualified Local
  Units of Government (QLUG or core community)

11
BRA Eligible Property

• Facilities that were or are used for
  commercial, industrial or residential purposes
• Functionally obsolete property located in QLUG
• Blighted property located in a QLUG
• May include adjacent parcels and personal
  property
• Land under control of the land bank fast track
  authority (2003 amendment)

12
BRA Eligible Activities

• Environmental Activities (all BRAs)
• Baseline environmental assessments
• Due Care Activities
• Additional response activities
• Non-Environmental Activities (all BRAs)
• Demolition (if not a response activity)
• Lead or asbestos abatement
• Non-Environmental Activities (QLUGs and LBFTA
  Only)
• Infrastructure Improvements
• Site Preparation (if not a response activity)
• Relocation of public buildings with MEDC approval
• Administrative and Operating Expenses
• Title Clearance costs for land under control of
  Land Bank Fast Track Authority

13
BRA Financing

• Developer can pay for entire cost
• Developer can pay for the cost and be reimbursed
  by the BRA from tax increment revenues as they
  are captured (Reimbursement Agreement)
• BRA can use other funds State grants, Revolving
  Loan Fund moneys or other funds of the
  municipality
• BRA can issue bonds payable from TIR, with or
  without municipal pledge of its full faith and
  credit (LTGO pledge)
• Private incentives Developers may qualify for
  SBT credit of up to 10 of their investment

14
Historical Neighborhood TIFA

• PA 530 of 2004, MCL 125.2841
• Modeled on DDA Act
• TIF for cities and townships with historic
  districts
• Allows rehabilitation of historic structures

15
Corridor Improvement Authority (CIA)

• PA 280 of 2005, MCL 125.2871
• Modeled on DDA Act
• Intended to apply to commercial corridors and
  adjacent property
• TIF capture only no taxing power
• Can have more than 1 can be intergovernmental

16
Neighborhood Improvement Authority

• PA 61 of 2007, MCL 125.2911
• Modeled on DDA Act
• Cities and villages can create them to improve
  residential districts
• Residential districts are defined as 75 or more
  zoned for residential housing
• No taxing powers

17
NIA Public Facilities

• "Public facility" means housing, a street, plaza,
  pedestrian mall, and any improvements to a
  street, plaza, or pedestrian mall including
  street furniture and beautification, park,
  parking facility, recreational facility,
  right-of-way, structure, waterway, bridge, lake,
  pond, canal, utility line or pipe, building, and
  access routes to any of the foregoing, designed
  and dedicated to use by the public generally, or
  used by a public agency.
• Public facility includes an improvement to a
  facility used by the public or a public facility
  as those terms are defined in section 1 of 1966
  PA 1, MCL 125.1351, which improvement is made to
  comply with the barrier free design requirements
  of the state construction code . . .

18
NIA Financing

• NIA may pay for projects from TIR on a
  pay-as-you-go basis
• NIA may issue revenue bonds
• NIA may issue bonds payable solely from TIR or
• Municipality may issue bonds payable primarily
  from TIR of the NIA and pledging the
  municipalitys full faith and credit to the bonds

19
Key Differences from DDA

• Residential Districts vs. Downtowns
• No school tax capture allowed
• No debt millage capture allowed
• No taxing power
• 30 year maximum duration unless extended?
• Public facilities definition adds Housing,
  which means publicly owned housing, individual or
  multifamily
• Opt Out works differently at time of Plan
  approval not Authority creation

20
NIA Opt Out

• Different from DDA
• Other taxing units may opt out of capture within
  60 days after any public hearing on Plan or Plan
  amendment
• If a separate library millage, public library
  board may request exemption from capture
• Plans may be amended to change duration, projects
  and improvements, boundaries of Development Area,
  etc.
• What happens with opt out on amendment? Is it on
  whole Plan or just amendment?

21
Thank you!
Thank you!

• Patrick McGow
• Miller Canfield Paddock and Stone, PLC
• 150 W. Jefferson Avenue, Ste. 2500
• Detroit, Michigan 48226
• [phone]
• mcgow_at_millercanfield.com