Tax Increment Financing
 |
Summary of the Provisions of 2007 HB549 |
 |
HB549 establishes a new, comprehensive, statewide tax increment financing program that makes this financing method available in every city and every county in Kentucky. The first step for all programs is the establishment of a TIF development area by a city, a county, or a combination of cities and counties acting jointly. Two types of local TIF development areas are authorized. One type of local TIF development area, which is available for use on vacant land, is local only, which means that the local government cannot ask for state participation. The second type of local TIF development area, which is primarily for the redevelopment of blighted areas, qualifies for state participation if the requirements for state participation are met. There are three separate state participation programs available, each of which have different requirements for qualifications. Details are provided below.
|
Prior Law |
|
There were tax increment financing laws on the books prior to the passage of HB 549, however the most attractive program that offered state participation was available only in Jefferson County, and the other statutes were difficult to read and understand. Thus, prior to the passage of HB 549, the only TIF districts with state participation were in Jefferson County.
|
Continuation of Prior Law |
|
HB549 date limits the old tax increment financing statutes, which means that the old laws will continue to apply to tax increment financing districts created before the passage of HB549, but no new TIF development areas can be created or governed under the old laws after the passage of HB549. All new TIF development areas must be created under the provisions of HB549.
|
Development Areas Must Be Established by Local Governments |
|
Under the provisions of HB549, all development areas for TIF must initially be established by a city or county or a combination of cities and counties acting jointly. All development areas are subject to the following conditions:
The maximum size cannot exceed three square miles; and
The total amount of property within a city or county that may be in a TIF development area cannot exceed 20 percent of the total value of taxable real property within the jurisdiction(s) establishing the TIF development area.
|
Two Types of Local Development Areas |
|
There are two types of local tax development areas that can be established under HB549. HB549 provides detailed requirements for the establishment of a development area, including public hearing requirements, ordinance requirements, and parameters for agreements establishing the development area and pledging financial support. Support at the local level can be provided through the entire development area, or on a project by project basis. The two types of local development areas are as follows:
Local Only Development Areas – The local only TIF development area may be established by a local government on vacant land. The local government may pledge up to 100 percent of incremental property taxes and occupational license taxes for up to 20 years.
Blighted Urban Redevelopment Areas – These development areas may be established by a city or county in an area that meets two of seven specified blight/deterioration conditions established in HB549, such as abandonment or deterioration of structures, presence of environmentally contaminated land, and deterioration of public infrastructure. The local government may pledge up to 100 percent of incremental property taxes and occupational license taxes for up to 20 or 30 years. Projects in this type of development area are eligible for state participation if they meet the requirements.
|
State Participation Programs |
|
There are three state participation programs available. State participation is based on specifically identified projects within a development area, and incremental revenues are available from the actual footprint of the project. In other words, increments from tax revenues not actually part of the project footprint cannot be pledged to support a project. Footprint is defined as the actual perimeter of a discrete, identified project within a development area within which capital investments are made.
|
Tax Increment Financing Commission and the Division of Tax Increment Financing |
|
The Commission is as established in Section 15 of HB549 of the 2007 regular session of the Kentucky General Assembly. Specifically, the Commission shall be composed of the following members: the secretary of the Finance and Administration Cabinet (Mike Burnside), the state budget director (Brad Cowgill), the secretary of the Cabinet for Economic Development (John Hindman) the secretary of the Commerce Cabinet (George Ward), the chairperson of the Kentucky Economic Development Finance Authority (Jean Hale), the dean of the University of Kentucky Gatton College of Business and Economics (Dean Deuanathan Sudharshan), and the dean of the University of Louisville College of Business (Dean Charles Moyer.)
HB549 also establishes a division within the Department of Revenue to provide staffing services to the commission, and to handle the administrative tasks associated with the application and review process.
|
TIF Regulations |
|
|