EDSR INFORMATION 08-11-1997 - Laserfiche WebLink

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BRIGGS AND MORGAN • first $100,000 of market value had a class rate of 3% rate, with the remainder at 4.6%; 0 however, that"first tier"3% rate was a_one-time only in each county for each taxpayer. Now the first $150,000 of market value has a class rate of 2.7%, with no one-time limitation, except for contiguous properties owned by the same "person," and everything over$150,000 has a 4% class rate. That 4% figure has been a "target" class rate for some time, and the Legislature has now established a new target C/I class rate of 3.5%. Rental and other kinds of properties also received significant reductions in their class rates. This obviously will affect, and probably negatively, the amount of tax increment which existing TIF districts will generate. There has been a $2 million fund established at the Department of Revenue to offset tax increment authorities which have certain such "losses" due to these tax changes, such as not being able to meet bond or contract obligations. There is also limited ability to pool otherwise non-poolable increment to meet such shortfalls. It is my intention in the near future to elaborate on this fund and also on the new "abatement" tool in separate memorandum. For now, a few preliminary observations about "abatement": (1) Abatement comes with a lot less baggage than TIF. For example, the use restrictions, local contribution requirements and other expenditure limitations are not present. Projects which don't qualify for TIF may well qualify for abatement. In general, abatement doesn't pack near the financial wallop as TIF does. (2) In some respects, abatement is more cumbersome and less useful than TIF. It compartmentalizes each of the taxing jurisdictions (county, city, and school). Each would have to approve the abatement of its share of the taxes. The maximum term of the abatement is generally ten years. (3) General obligation bonding cannot be done under abatement without a bond referendum; by contrast, if TIF is expected to cover 20% of the cost of a project, general obligation bonds can be issued without election. (4) Representative Abrams was one of the proponents of abatement. One of his watchwords is "accountability" and on that basis he does not sound entirely enamored of TIF. The TIF changes mandated the establishment of a "recodification" task force composed of six members from the House and six from the Senate. This supposedly is not meant to be a "substantive" or policy- driven exercise. However, simply picking up the law and putting it somewhere else in the statute, whether it is next to other similar laws or not, is in my view rearranging the furniture. Some things may be gained and some lost in the move. It will not"s"implify" anything unless the Legislature is willing to change the rules of all the various vintages of tax increment districts retroactively. One wonders whether the objective of some might simply be to leave this new, • and generally less useful abatement tool on the books and delete TIF. 357509.1 5