Economic Development Tools
Economic Development Requires a Complete Toolkit
Nearly 10 years ago, when Upper Arlington first began building its economic development program, the first move was to create a state-approved Community Reinvestment Area (CRA) in North Arlington. This CRA offered property improvement tax abatements to qualifying projects. Shortly after the creation of the CRA, a Tax Incentive and Development Agreement was executed with the Horizons Companies to relocate within the CRA in the former DeSantis mansion, which was converted from a residence to their corporate headquarters.
In 1999, the City leaders created an Economic Development Fund with a $500,000 appropriation to be used for low-interest loans, grants, and other economic development-related initiatives. That appropriation was expended by City Council upon a recommendation by the UACIC, which evaluates projects and makes distributions to those that qualify.
Since 1999, a number of economic development incentive programs have been in use to promote and encourage investment and business expansion in our commercial districts. The tools available to the UACIC include:
- the Economic Development Fund: low interest loans and grants awarded to qualifying projects.
- a Community Reinvestment Area: providing tax abatements on property improvements (focus area north of Henderson, west of Sawmill and east of St. Rt. 33.)
- an Enterprise Zone: tax abatements on real and/or personal property improvements and new investments (valid for the entire City of Upper Arlington)
- Tax Increment Financing: the use of incremental increases in real property taxes generated by new redevelopments to fund public improvements for qualifying projects.
- Municipal Job Creation Tax Credit: a credit against a business’s corporate municipal income tax liability based on new employee payroll income tax for qualifying projects.
When TIFs Make Sense
- TIFs (Tax Increment Financing) provide a funding source for improving infrastructure.
- Public improvements that are supported with TIF revenue must benefit the properties that generate the revenue.
- Only potential new revenue is redistributed as a result of the TIF; existing property taxes continue to be paid as before.
Tax Increment Financing — or TIF — is authorized by state law to serve as a financing tool for improving infrastructure (roads, water lines, etc.). This tool uses future unanticipated property tax revenues as an investment to spur further growth of the community. Most of the time, communities choose to use TIFs when they feel funding is needed to make improvements that benefit the public as well as the project at hand. By helping a new project get off to a good start, a TIF therefore improves the chance that the project will be a successful long-term addition to the community.
TIFs share some commonalities with a more well-known form of incentive — tax abatements. Both tools exempt the project from paying a portion of the property taxes for a pre-determined percentage and timeline. The difference is that a property owner who receives a TIF must make “payments in lieu of taxes,” which are typically equivalent to the taxes that would have been paid without the TIF.
State law allows for three types of TIFs. The most often used form, a project-based TIF, is created solely for commercial property. The TIF is typically proposed when the infrastructure is inadequate for current and future commercial development.
No matter which TIF is used, the maximum term is 30 years and the maximum percentage of the new property value that can be exempted is up to 100%. If either the term exceeds 10 years or the percentage is greater than 75%, the City may need to seek approval from and provide some compensation for the School District and/or the County Commissioners. It’s important to note that when a property is designated for a TIF incentive, all property taxes currently paid on that property will continue to be paid in the same manner.
TIF revenues, which come from the “payments in lieu of taxes,” are collected from property owners just like any other real property tax is collected. When these payments are received by the County Auditor, these previously unanticipated revenues are distributed to the City to be placed into a restricted fund. The use of these funds must go toward the infrastructure outlined at the time the TIF was approved.
Used strategically and with great care, a TIF can be an indispensable tool for expanding the tax base for our community, schools, and county and are a good way to fund infrastructure improvements. (look for this article in the November Business Monthly publication of the UA Chamber of Commerce)
If you have questions about moving your business to or investing in Upper Arlington, please call Robert Lamb, the Community and Economic Development Manager for the City of Upper Arlington: 614.583.5046.