The New York Legislature is poised to pass a bill that would overcome an obstacle that has prevented tax increment financing from being widely used in the state. The Senate unanimously passed the bill yesterday while the Assembly was making modifications to it.
"We will get this done in both houses by the end of the session," Assemblyman Sam Hoyt, D-Buffalo, chairman of the Assembly committee on local governments, said. "I'm a strong advocate of TIFs."
The Legislature took up the measure as the fiscal 2008 legislative session neared its end on June 23.
In addition, as the Legislature was dealing with the TIF bill, Senate Majority Leader Joseph Bruno, R-Brunswick, proposed the elimination of school property taxes in the state. The state would make up the aggregate $2.34 billion annual loss to school districts through direct aid. The bill was expected to pass in the Senate last night, as a similar bill had last year, but it did not have a sponsor in the Assembly.
Although state law allows TIF projects, it doesn't currently allow those projects to tap into school district property taxes. According to a report by a state property tax commission earlier this month, school property taxes account for 62% of the property taxes collected in the state outside of New York City. The lack of school property taxes for TIFs has limited the usefulness of this type of financing in the state.
Tax increment financing allows a project to be built in a distressed area using tax-exempt bonds backed by projected future property tax revenue. The project is intended to increase the value of properties in the area, and thus increase property taxes. That increase in property taxes is the "tax increment" which is used as the revenue stream for paying off the bonds that built the project.
Under the proposed legislation, school districts would not be required to participate in TIF projects, but would have to the option to do so. A school district's board would have to approve the redevelopment plan and the boundaries of the project area, would be involved in the electing of members to a public authority, allocating taxes and certifying an estimate of future year allocations. As an incentive to school districts to participate in TIFs, their allocation would be eligible for reimbursement by the state using building aid.
The bill originated at the New York State Economic Development Council, a trade group that represents economic development agencies and professionals.
"Two years ago our organization looked around at programs and economic development tools that other states have that we don't and one of those tools is tax increment financing," said Brian McMahon, executive director of the organization. McMahon said that he was working on an alternative to a provision that would allow 10% of sales tax in a the tax increment financing district to be used as a reserve for the TIF bonds because Hoyt had objected to it.
"What bond buyers and underwriters have told us even though nationally the incidents of default on TIF bonds is very small there obviously is potential for that to happen and if there is potential for that to happen they want some back up revenues," McMahon said.
Hoyt said that he was not sure if the Assembly would amend the 10% sales tax provision or leave it as it was. One thing Hoyt said he definitely wanted taken out was a provision to allow TIFs to be used for power plants and power lines.
"I didn't see [power plants and power lines] as appropriate and necessary for the ultimate goal of capturing the school tax piece, expanding TIFs to allow the capture the new school taxes," he said.
Hoyt said that his staff was working with the sponsor of the bill in the assembly, Robin Schimminger, D-Tonawanda, on amendments to the bill.
