What is Tax Increment Financing (TIF) and how are they used in West Chester?

There always seems to be confusion about TIF financing, i.e. how they’re created, how they’re used and what they can be used to pay for.

This article answers those questions and explains how they’re used to improve our Township.

Primarily, TIF investments are used for infrastructure and community improvement projects within the boundary of a specific TIF District. Think of it this way, “A TIF district is a self-sustaining, clearly defined, geographical area within the greater boundary of West Chester that financially, stands on it’s own and is sustainable. The revenue, i.e. property taxes, collected in that TIF district are used for expenses within the TIF to develop, improve and sustain public infrastructure”.

It’s important to note that the taxes collected in West Chester TIF areas are ALL from Commercial/Industrial businesses AND the schools are made whole in the collections! Residents DO NOT pay taxes into the TIF districts, but instead directly into the Township’s General, Roads, Police, Fire and EMS funds which keeps our Township operational. See my recent article on ‘West Chester Revenue Sources – Where Does All the Money Come From?’ for more info on where the money comes from to keep the Township going.

The idea of Tax Increment Financing, or TIF, was first used in California in 1952. Since then, it’s been widely used by communities around the United States to provide funding to either develop raw land or re-develop (gentrify) blighted areas.

From the Ohio Township Handbook a TIF is:
“an economic development mechanism available to local governments in Ohio to finance public infrastructure improvements and, in certain circumstances, residential rehabilitation.”

So here’s how they work:

Step 1: Identify a large amount of farm land (or blighted property) that’s uniquely positioned close to a primary road or highway (think about the Union Centre Blvd interchange on I-75).

Step 2: TIF’s are boundary or geographic specific which means the area is clearly defined with coordinates. Essentially you draw a box around the land you want in your TIF.

Step 3: Next the current value is assessed by the County Auditor and a beginning tax basis is established. In this case, the farm land is zoned agricultural so the current tax valuation is relatively low. For our purposes, let’s say the beginning TIF tax valuation is $100,000.

Step 4: The local jurisdiction bets on the future or appreciated value of the TIF district after it has been developed (or redeveloped) and takes out a bond (loan) to pay for public infrastructure like roads, bridges, water, sewer, etc. Let’s say the future TIF tax valuation is $1B.

Step 5: As developers, entrepreneurs and risk takers commit to projects, the local jurisdiction builds more public infrastructure to meet the needs of the district.

Property tax collection in TIF districts are called PILOT payments or ‘Payment In Lieu of Taxes’. These PILOT payments are made on the appreciated value only which is a direct result of the TIF investment in the area. Ultimately the same amount of money a property owner would normally pay in regular property taxes, but they are distributed differently, i.e. a greater portion of the taxes goes to the local jurisdiction. For instance, in West Chester commercial property taxes in non-TIF areas are distributed as follows in 2019:

• 61% to Lakota Schools,
• 21% to West Chester (Police, Fire, Roads, General Fund), and
• 13% to Butler County.
• 3% Butler Tech
• 1% Metro Parks
• 1% Midpointe Library

PILOT payments in TIF Districts are distributed differently. Generally speaking, 64% still goes to Lakota Schools & Butler Tech, but now West Chester gets the remaining 36%. West Chester uses this money to finance the debt (make bond payments) and to build more infrastructure in the TIF districts.

Three important points:

1. TIF money can ONLY be used for the benefit of the TIF district,
2. TIF money spent by the Township for-the-benefit of specific projects, i.e. a new mixed use development, is ALWAYS paid back to the TIF through taxation of the new development, and
3. TIF’s retire after a set period of time, usually no more than 30 years.

West Chester Township has seven (7) TIF districts. They’re listed below with their current ‘Cash Balance’ AND separate ‘Debt Fund Cash’ at this writing.

• Union Centre Blvd TIF, Cash Balance $34,678,697 + Debt Fund Cash $7,414,137
• Central Business District TIF, Cash Balance $7,795,228 + Debt Fund Cash $0
• 747 TIF, Cash Balance $23,322,217 + Debt Fund Cash $264,104
• Tylersville Road TIF, Cash Balance $52,428
• Tylers Place/I-75 TIF, Cash Balance $296,880
• Cin-Col Road TIF, Cash Balance $63,987
• Cin-Day Road TIF, Cash Balance $39,468

In the past, West Chester TIF funds have been used for various public improvements including road improvements in the Union Centre area, construction of West Chester Fire Headquarters and Fire Station 71, acquisition and renovations of the West Chester Safety Services Center/Police Department and construction of amenities such as the West Chester Library. Most recently, TIF funds have been used to build the new Fire Station 73 on Duff Dr, the Olde West Chester Pocket Park, now named 1823 Plaza, and the Union Centre Blvd DDI Interchange Improvement which includes the hardscaping and landscaping.