Section 8 Real Property Tax Increment Allocation Redevelopment Act

• Library: Urban Development Subdivisions, and Annexations (2011 Ed.)

In 1982, the General Assembly enacted the TIF Act (Real Property Tax Increment Allocation Redevelopment Act), §§ 99.800–99.865, RSMo 2000 and Supp. 2010, which authorizes the use of tax increment allocation financing, popularly known as TIF. TIF differs from tax abatement programs discussed in §§1.2–1.7 above in that taxes continue to be paid on the redevelopment project, but the amount of resultant increases in tax revenue is "captured" and used by the sponsoring municipality to pay various costs of the project. Because the captured revenues are limited to incremental increases in real property taxes and "economic activity taxes," such as sales tax, affected taxing jurisdictions continue to receive the amount of revenue that they received from the designated area before the adoption of the TIF Act.

The TIF Act targets two sources of revenue:

PILOTS (payments in lieu of taxes) reflecting levies on increased real property valuation resulting from the redevelopment project

EATs (economic activity taxes) representing 50% of increased revenues from levies of sales taxes and certain other transactional taxes within the redevelopment project area

The TIF Act requires that local collecting entities allocate and pay over revenues from these sources to the municipality. The revenues are then deposited into a "special allocation fund" established by the municipality. TIF may be used to finance costs of:

land acquisition; infrastructure improvements; building renovations; machinery and equipment acquisition; professional services fees; and within certain limitations, interim project financing.

See § 99.805, RSMo Supp. 2010.

Municipalities using TIF within enterprise zones, federal empowerment zones, and blighted areas within central business districts or urban core areas (each with at least 1 building at least 50 years old) may additionally obtain up to 50% of "new state revenues" resulting from redevelopment projects. Section 99.845.4 and .9, RSMo Supp. 2010. These new revenues include either incremental increases in state sales tax revenues within the project area, other than those constitutionally or otherwise dedicated to other uses, or amounts of state income tax withheld on behalf of new employees who fill jobs directly created by the TIF project. Section 99.845.8. But municipalities must prove that incremental increases attributable to retail sales were "from new sources which did not exist in the state during the baseline year." Id. Different calculations of economic activity taxes and new state tax revenues are employed if any national headquarters relocates to Missouri from another state. Applicants for this additional allocation must obtain approval of the Missouri Director of Economic Development and must meet certain other criteria. See § 99.845.10. Funds deposited in the special allocation fund may secure bonds, notes, or other obligations issued by the municipality to finance designated redevelopment project costs.

As a redevelopment tool, TIF provides several advantages. Use of TIF bonds provides the municipality and the redeveloper with available funds at the inception of the project, when most needed. As noted above, TIF does not rely solely on real property tax relief. Instead, TIF requires the dedication of portions of all incremental increases in most tax revenues, thus avoiding arguments of disproportionate burdens on those taxing districts relying solely on ad valorem levies. (But counsel should note that 2004 revisions to the TIF Act entitle any district providing emergency services to reimbursement from the special allocation fund for at least 50%, but not more than 100%, of the district's tax increment. Section 99.848, RSMo Supp. 2010.) Additionally, TIF provides for direct representation of all affected taxing districts on a commission, which is empowered to review and recommend TIF proposals to the municipal governing body. Finally, TIF permits use of eminent domain as a tool to facilitate property acquisition and assembly.

TIF may be used by any county, city, village, or incorporated town. As a first step, the local governing body, by ordinance, establishes a TIF commission and calls for appointments by applicable jurisdictions to the commission. The composition of the commission depends on the status and location of the sponsoring local government and has been the subject of recent statutory flux. Currently, in each municipality (except municipalities in Jefferson, St. Charles, and St. Louis Counties, see below), two members are appointed by affected school districts, one member is appointed by all other affected taxing districts, and six members are appointed by the chief elected officer of the municipality with the consent of the local legislative body. In municipalities, two additional members are appointed by the chief elected officer of the county with the consent of the county commission.

In municipalities in Jefferson, St. Charles, and St. Louis Counties, however, the commission consists of 12 members:

6 members appointed by either the county executive or the presiding commissioner (approval by the county's governing body is not required)

3 members appointed by the cities, towns, or villages within the applicable county that have tax increment financing districts in a manner in which the chief elected officials of such cities, towns, or villages agree

2 members appointed by the school boards whose districts are included in the county in a manner in which the school boards agree

1 member to represent all other districts levying ad valorem taxes in the proposed redevelopment area in a manner in which all such districts agree

Note that none of the members are appointed directly by the municipality calling for creation of the commission. Section 99.820.3, RSMo Supp. 2010.

All appointed taxing entities must appoint their representatives within 30 days of receiving notice from the sponsoring municipality. If the school districts or other taxing jurisdictions fail to appoint representatives within the required period, the remaining TIF commission members may initiate action and proceed with statutory duties.

Upon notification by each appointing group that the required appointments have been made or the lapse of 30 days following receipt of notice by all entities, whichever comes first, the TIF commission may conduct business. Although it remains a recommending body, the commission may exercise any of the functions of the local governing body except final approval of a redevelopment plan, redevelopment area, and redevelopment project. Typically, the ordinance establishing...