General Questions and Answers |
| Question: |
Are there effective incentives for assisting “Mom n’ Pop” businesses? |
| Answer: |
Many communities have small business development programs that provide, among other things, incubators, business counseling, and incentives to aid in the establishment or expansion of small businesses. Typically, these programs are available to any small business that qualifies and not just limited to retail.
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| Question: |
Once you start using incentives, how do you stop? |
| Answer: |
Incentives are tough policy decisions for any city. When to use them, how to use them and when not use them should be part of the policy discussion and deliberation. An exit strategy can also be part of the policy decision.
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| Question: |
What incentives are best used for redevelopment projects where existing infrastructure is adequate and in good condition? |
| Answer: |
There are two broad classes of incentives: those that reduce capital costs and those that reduce operation costs. There is a trend for cities to favor incentives that reduce capital cost such as reductions in or exemptions from permit and impact fees, land acquisition assistance and building construction costs.
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| Question: |
What kinds of incentives have been offered to encourage existing retail building owners to redevelop? |
| Answer: |
Generally, cities use grants or low interest loans for façade improvements or building rehab.
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| Question: |
What about incentives in “advantaged” communities, such as those located next to a major public university? |
| Answer: |
If your advantages are generating significant retail investment and satisfying the needs of the community, you may not need incentives.
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| Question: |
Are there any downsides to development districts with a user fee added on shoppers using the district? |
| Answer: |
The major downside would be if the user fee makes the district uncompetitive.
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| Question: |
How do you handle different developers asking for incentives in competing developments in the city and claiming the same tenants? |
| Answer: |
Always get a written request or application for incentives that details, among other factors, the prospective tenants for the development and what tenants have committed. Even if the commitments are conditional, it will give some indication of real intent to locate in the development.
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| Question: |
How do you encourage a community to invest the time and effort to prevent bad developments? |
| Answer: |
Closed retail stores and deserted shopping centers are more than an eyesore. They raise questions about the viability of the city as a location and can discourage further investments in all economic development activities not just retail.
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Questions about Tax Increment Financing
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| Question: |
If the taxes in a TIF District are frozen, how can this mean that a TIF doesn’t increase taxes? |
| Answer: |
The assessed valuations of all properties in the district are "frozen" in terms of their value to the taxing bodies. The taxes levied on this frozen tax base continue to accrue to the taxing bodies.
The taxes from the increases in assessed values (the increment) are used to pay the bonds used to finance the infrastructure. The TIF is a geographically targeted tax and areas outside the district are not taxed.
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| Question: |
How do communities treat large scale retail “destinations” (Bass Pro and Cabela’s) like tourist destinations, when in reality they are retail endeavors? |
| Answer: |
The laws governing TIFs vary greatly from state to state. Some require a finding of blight to qualify as a district while others permit general economic development activities.
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| Question: |
What is the average term of TIF deals and what is the typical split that the developer/retailer receives versus the community? |
| Answer: |
TIF statutes are on the books in forty-nine states but the applications are fundamentally different. Some allow a local government to use the TIF to be project specific and as a means to negotiate with a developer or retailer to finance a project.
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| Question: |
When using TIF revenue bonds, is it common to require the developer to pay any shortfall in the bond payment? |
| Answer: |
If it is allowed by the state, developer financing is a preferable alternative because it substantially eliminates the local government’s risk. The provisions of the developer agreement detail the responsibilities for shortfalls. |
