Draw 2 circles.
One Big. One Small.
In the Big Circle, write the number 12%...this is residential growth in EAV. This area is growing well above CPI without TIF incentive.
In the Small Circle, write the number 2.7%...this is commercial growth in EAV. This area is barely growing above CPI without TIF incentive.
Now draw a third circle, make that circle overlap the Big Circle and the Small Circle. Inside that third circle write the number 9%. That is a proposed TIF district.
You'll notice, the proposed TIF district includes EAV from both commercial and residential property.
If you created a TIF in the small circle, the one that only contained commercial property, you could really argue that any growth in EAV above CPI was secondary to redevelopment induced by the TIF. You could argue that the taxes generated from EAV growth in that area would not have been there 'but for' the TIF.
If you created a TIF in the big circle, the one that only contained residential property, you could argue that the area was already growing well above CPI with no TIF incentive and any future growth would have occurred naturally, whether or not there was incentive from the TIF. You could argue that taxes generated from increase in EAV from this area would have been there 'inspite' of the TIF.
The TIF law was created for properties in the Small Circle. The intent of the TIF law is to stimulate growth in 'blighted' areas.
The TIF law was not created for properties in the Big Circle. It violates the law to TIF an area that is 100% residential with established growth in EAV at 12% occurring naturally without a TIF incentive.
Now, we have our third Circle. This circle combines property (EAV) from the Small Circle and the Big Circle.
Now one might ask how we can have TIF District that combines the SMALL CIRCLE and the BIG CIRCLE and has a growth in EAV of 9%?
The 'spirit' of the TIF law actually would not allow it. There is too much growth already present due to residential property.
Now take a look at the impact on the taxing bodies.
We have a combination of two areas where some growth in EAV would not have occurred 'but for' the TIF and the remainder of growth in EAV would have occurred 'in spite' of the TIF.
Property Taxes contributing to the THIRD CIRCLE tax base due to growth in EAV above CPI in the SMALL CIRCLE would not have been there 'but for' the TIF.
Property Taxes in the THIRD CIRCLE tax base due to growth in EAV of the LARGE CIRCLE would have been there 'inspite' of the TIF.
If the TIF District is put wholly in the SMALL CIRCLE, the taxing revenue lost to all other taxing districts would be roughly CPI...we have already been told that over 23 years of growth the cost to the schools would be small roughly $50,000 a year. For a TIF FUND grown for 23 years in the SMALL CIRCLE the school's lost revenue would only be $1,150,000.
If the TIF District is put wholly in the LARGE CIRCLE, the taxing revenue siphoned into the TIF FUND would have belonged to all taxing bodies because development in these areas would have occurred —˜inspite' of the TIF incentive. If you had a TIF FUND grow to $30,000,000 in the BIG CIRCLE, the proportion of that which belonged to the schools would historically be 60%, regardless of caps. For a TIF FUND grown to $30,000,000 in the BIG CIRCLE the school's portion would be $18,000,000.
Now the Third Circle is actually a combination of the two other circles. To estimate the impact on our taxing bodies within the THIRD CIRCLE, you have to factor in the combination of the impact of the SMALL CIRCLE and the BIG CIRCLE.
One way to do this would be to separate out the percentage EAV of the THIRD CIRCLE contributed by the SMALL CIRCLE and the LARGE CIRCLE.
If x = Percentage contribution of small circle to third circle EAV
Y = Percentage contribution of the large circle to the third circle EAV
2.7= Percent Growth in the EAV of the SMALL CIRCLE
12 = Percent Growth in the EAV of the LARGE CIRCLE
9 = Percent Growth in EAV of the THIRD CIRCLE
X + Y = 1
2.7 (x) + 12 (y) = 9
If you solve this equation, X = roughly 33%, Y = roughly 67%
SMALL CIRCLE contributes to 33% of THIRD CIRCLE EAV
LARGE CIRCLE contributes to 67% of THIRD CIRCLE EAV
EAV is the basis for property taxation in all 3 circles.
For a TIF in the THIRD CIRCLE that grew for 23 years, the SMALL CIRCLE contribution to school's lost revenue would be 33% of $1,150,000 or $379,500.
For a TIF in the THIRD CIRCLE that grew to $30,000,000, the LARGE CIRCLE contribution to school's lost revenue would be 67% of $18,000,000 or $12,060,000.
Based on these assumptions, if you add up the amount of revenue lost to the schools from the SMALL CIRCLE share and the LARGE CIRCLE share you arrive at $12,439,500 as the combined lost revenue to the schools if you create a TIF DISTRICT in the THIRD CIRCLE.
If you believe the —˜spirit' of the TIF Law and understand the reality of naturally occurring residential growth, this is another way to look at a proposed TIF.