Most Recent Action
Earlier this year, the TN General Assembly approved legislation that will have a significant impact on economic development efforts for local governments.
The Uniformity in Tax Increment Financing Act of 2012, also known as Public Chapter 605, strengthened a powerful tool for job creation and economic development in our state and your community.
Tax Increment Financing-or TIF- gives cities and counties tools to retain, recruit, and grow business and industry. Additionally, Public Chapter 605 provides clarity, consistency, and transparency in existing law.
Tax Increment Financing is a method utilized by local governments to pay for community improvements with future tax revenues. For example, a blighted neighborhood might have dilapidated buildings worth only $50,000 in property value. Using a TIF, the local government could build new infrastructure or even replace the run-down buildings with new ones and other improvements to increase total property values in the area to $750,000. The $700,000 difference in property value increases property tax collections. The increased property tax revenue is used to recover the cost of the TIF improvements. In short, it's a way to allow new development to pay for itself.
Above is a link to a guide developed by the Comptroller's office about Public Chapter 605. The guide outlines tax increment financing generally, explains components of a tax increment financing plan which remains mostly unchanged by the new law, and describes how Public Chapter 605 changes TIF law in Tennessee.
For questions or concerns after reading through the guide, please contact the Comptroller's office at 615-741-2501.
last updated 11/10/2012
Comptroller Revises TIF Legislation
Last year, Comptroller Justin Wilson filed legislation intended to consolidate and harmonize statutes related to Tax Increment Financing (TIF). As a result of committee deliberations, testimony, and subsequent discussions with affected parties; including TML, the legislation was revised and passage seemed likely before the end of the 2011 legislative sessions.
However, questions emerged concerning the constitutionality of utilizing public monies to advance private endeavors and a requirement for a public referendum was inserted into the bill. Once the referendum was included, any support for the legislation evaporated and further consideration was delayed.
In early January 2012, the comptroller met with TML, MTAS and other interested parties to preview a draft of a revised TIF bill. All in all, the revised bill is far superior to last year's legislation; however, this year's proposed revision is not without controversy. While the revised version eliminated the referendum, it requires the comptroller and the commissioner of ECD to make a determination that the project is in the best interest of the state when seeking to finance a project for more than 20 years or when seeking to utilize TIF revenues for privately-owned sites, equipment or facilities.
The comptroller maintains the state's attorney general and bond counsel insist the declaration is necessary to avoid potential constitutional pitfalls. Meanwhile, attorneys representing the Tennessee Chamber and Industry and other development interests maintain there is no constitutional question and therefore the comptroller's and commissioner's declaration is unnecessary.
Other key points:
- Base Taxes: The tax increment will be calculated based on the actual property tax paid with respect to the covered properties for the year prior to the date the plan was approved.
- Allowable TIF costs include: public infrastructure costs, costs of site acquisition, site improvements, or debt service. Comptroller and commissioner of ECD required to declare project is in the "best interest of the state" to grant an exception.
- Duration: Redevelopment projects are limited to 30 years; economic development projects are limited to 20 years. The Comptroller and ECD Commissioner are required to declare project is in the "best interest of the state" to grant an exception.
- Administrative Costs: Allows up to 5% of the TIF revenues to be utlized to cover administrative costs associated with assessing and collecting taxes due and payment of TIF obligations.
- Excess Revenues: In the event that TIF revenues exceed debt service, the excess must be used by the housing authortiy, community redevelopment authority or industrial development board to pay administrative expenses (subject to 5% cap), retire additional principal and interest, or revert to the local government general fund.
