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NCE COMMITTEE
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MISCELLANEOUS RESOLUTION #01 193 August 2, 2001
BY: Finance Committee, Sue Ann Douglas, Chairperson
IN RE: TREASURER'S OFFICE - POLICY FOR COUNTY PARTICIPATION IN
DOWNTOWN DEVELOPMENT AUTHORITIES (DDAs) AND LOCAL DEVELOPMENT
FINANCE AUTHORITIES (LDFAs) WITH TAX INCREMENT FINANCING
To the Oakland County Board of Commissioners
Chairperson, Ladies and Gentlemen:
WHEREAS the Oakland County Board of Commissioners strongly
supports the economic growth of Oakland County; and
WHEREAS one of the tools used to promote this economic
growth is Tax Increment Financing, used in conjunction with
Downtown Development Authorities (DDAs), and Local Development
Finance Authorities (LFDAs); and
WHEREAS twenty-eight (28) of the County's cities, villages
and townships are using tax increment financing as a tool to
promote their economic growth; and
WHEREAS the Board of Commissioners, through adoption of
Misc. Resolutions #90144, #97157, #99010 and #01002, established
the current Oakland County Tax Increment Financing Program,
including 1994 legislative amendments allowing the County to
exempt its property taxes from capture by any newly created or
expanded Tax Increment Financing District; and
WHEREAS the original intent of the law was to address the
needs of downtown commercial areas; however, the imprecise
language in the law allows communities to establish questionable
districts with Tax Increment Financing; and
WHEREAS, to ensure adherence to the original intent of the
law, the County intends to exercise its prerogatives of
negotiation and, if necessary, opt-out option by adopting the
attached policy for future consideration of County participation
in Tax Increment Financing; and
WHEREAS the proposed policy is supported by the County
Executive and the tax increment financing Ad Hoc Review
Committee.
NOW THEREFORE BE IT RESOLVED that the Oakland County Board
of Commissioners adopts the attached Policy for County
Participation in Downtown Development Authorities (DDAs) and
Local Development Finance Authorities (LDFAs) with tax increment
financing.
BE IT FURTHER RESOLVED that the Oakland County Parks and
Recreation Commission be advised of any proposed Downtown
Development Authorities (DDAs) and Local Development Finance
Authorities (LDFAs) with tax increment financing during the
negotiating process.
Chairperson, on behalf of the Finance Committee, I move
adoption of the foregoing resolution.
FINANCE COMMITTEE:
Motion carried unanimously on a roll call vote.
POLICY FOR COUNTY PARTICIPATION
IN
DOWNTOWN DEVELOPMENT AUTHORITIES
WITH
TAX INCREMENT FINANCING
BACKGROUND:
Downtown Development Authorities (DDAs) and Local Development Finance
Authorities (LDFAs) are established under the authority of Michigan Public Act 197 of
1975, as amended (MCL 125.1651) and the Local Development Financing Act (Public
Act 281 of 1986— MCL125.2151), respectively. When the governing body of a
municipality determines that it is necessary for the best interests of the public to halt
property value deterioration and increase property tax valuation where possible in its
business district, to eliminate causes of that deterioration, and to promote economic
growth, the governing body may, by resolution, declare its intention to create and provide
for the operation of an authority. After giving proper notice and holding a public hearing,
the municipality's governing body may adopt an ordinance establishing the authority and
designating the boundaries of the downtown district within which the authority shall
exercise its powers. The authority is empowered to develop plans, acquire and construct
public facilities for the purposes of halting the deterioration of property values in the
downtown district, as well as promote the economic growth of the downtown district.
To finance the aforementioned public improvements, DDAs may capture property tax
revenue on increased property values through tax increment financing plans. In addition,
the LDFA Act authorizes cities, villages and townships to create local development
finance authorities to carry out governmental programs to eliminate the causes of
unemployment, underemployment or joblessness.
As provided in sections 3(4) of Act 197 and 4(3) of Act 281, a governing body of a
taxing jurisdiction whose ad valorem taxes would otherwise be subject to capture may
exempt its taxes from capture by adopting a resolution to that effect. Because school
taxes are exempt from capture, the County's proportional share of total property taxes
collected represents 21.5% of those available to be channeled into development districts.
In addition, both acts also provide that a DDA or LDFA may enter into agreements with
taxing jurisdictions and the municipality establishing the DDA or LDFA to share a
portion of the captured tax revenue of the district.
The opportunity for the County to negotiate such an agreement or opt-out of TIF occurs
when the authority is initially established or when the adopted development plan is
amended to alter or extend the district's boundaries. The State Tax Commission recently
ruled that plan amendments extending the timeframe of existing authorities does not
provide an opportunity for the County to opt-out, unless a contractual arrangement
between the County and local unit of government provides otherwise.
POLICY STATEMENT:
Downtown Development Authorities (DDAs) are public corporate entities which
contribute to the revitalization of downtown areas through the financing of infrastructure,
public facility improvements, and management of the DDA district through marketing,
promotions, economic restructuring and design functions. In addition, the Local
Development Financing Act (LDFA) authorizes cities, villages and townships to create
local development finance authorities to carry out governmental programs to eliminate
the causes of unemployment, underemployment or joblessness. Tax increment financing
(TIF) is a government financing program which contributes to economic growth and
development by dedicating a portion of the tax base resulting from economic growth and
development to certain public facilities and structures or improvements of the type .
designed and dedicated to public use.
The DDA law is a management tool utilized by local units of government to establish an
authority whose sole focus is revitalization of the designated area. The successful
utilization of DDAs with TIF in most of Oakland County's business districts has the
potential of contributing to economic growth, including, job creation, new businesses,
business retention, new and rehabilitated buildings. These tools have presumably
increased tax values throughout the entire community, not just within the designated
boundaries of the DDAs. They are catalysts for strong communities and are an essential
economic development component of Oakland County's sustainable growth strategy.
The original intent of the law was to address the needs of downtown commercial areas.
However, the imprecise language in the law allows communities to establish questionable
districts as DDAs. To ensure adherence to the original intent of the law, the County
intends to exercise its prerogatives of negotiation and, if necessary, opt-out by adopting
the following requirements leading to County participation with new and expanded
districts.
I. DECLINING PROPERTY VALUES
As part of the rationale for establishing a DDA or LDFA, the law requires a finding of a
decline in property value of a significant number of parcels. The county will use one or
more of the following measures to determine whether a significant number of parcels in a
district are experiencing a decline in value:
1. For more than 25% of the parcels in a district show that state equalized values
have declined for the last three years (or five years if sufficient data is not
available in a three-year period).
2. For more than 40% of the parcels in a district show that state equalized value has
increased less than the most recently available CPI indexes published by the State
Tax Commission and used for Headlee calculations. Use the last three years (or
five years if sufficient data is not available in a three-year period).
3. Show that for property in the district that is typically rented or leased, the vacancy
rate is at or above 15% for the last three years (or five years if sufficient data is
not available in a three-year period).
4. Show that the true cash value per square foot of building space for 30% of the
improved parcels in the district is less than 30% of the cost of equivalent new
construction for the most recent year. For most properties standard cost manuals
such as the Michigan Assessors Manual or Marshall and Swift could be used for
this test.
II. PERFORMANCE STANDARDS
To utilize the County's share of a community's TIF Revenue, the following performance
standards and point values are established for qualifying 1) new DDA/LDFA with TIF
requests, and/or 2) requests for expansion of area boundaries by an existing DDA/LDFA
with TlF:
1. Adopt/Amend a Downtown Management Plan based upon the "Main Street 4-
Point Approach" of Organization, Promotion, Design and Economic
Restructuring. (Point Value: 20)
2. Adopt/Amend Community Master Plan to accurately incorporate the Downtown
(DDA) Plan. (Point Value: 20)
3. Commit to actively seek "Main Street Oakland County" status and membership.
(Point Value: 20)
4. Utilize all (100%) of TIF Revenue for redevelopment efforts, i.e., those activities
specifically authorized within the Act, including operating expenses of the
DDA/LDFA. (Point Value: 20)
5. Employ the Oakland County Planning and Development Division's Downtown
Development Database Geographic Information System (GIS) to measure the
annual and cumulative, since inception of the DDA, performance and
effectiveness. The following economic development activities within and around
the boundaries of the DDA district will be measured by the GIS System: (Point
Value: 20)
a. Building Rehabilitations, including number and square footage
b. Façade Rehabilitations, including number and cost
c. New Construction, including number and square footage of
buildings
d. Adaptive Reuse of Existing Buildings
e. New Businesses Created
f. Average Cost Per Business Created
g. Business Retention
h. Business Expansion
i. Job Creation, including: 1) Management/Administrative, 2)
Professional, 3) Retail, 4) Office, 5) Service
j. Private and Public Investment
k. Increase in tax base as measured by State Equalized Value (SEV)
and State Taxable Value (STV)
1. Ratio of Reinvestment into the Downtown District (The average
number of dollars generated in the Downtown District for every
dollar — TIF, Millage, Special Assessment and/or Local Budget
Contribution — used to implement the downtown development
plan.
6. Supplement TIF Revenue with DDA Millage (up to 2 mills), Special Assessment
and/or designate Municipal Budget Contributions to demonstrate local
commitment and funding for the downtown development program. (Point Value:
20)
The County will use the following scoring mechanism, in relation to the aforementioned
Performance Standards, to determine the specific number of years the County would
participate in the Tax Increment Financing of DDA/LDFA. Each community, based
upon the number of points scored in compliance with the Performance Standards, may be
approved for County participation in the TIF for a specific number of years, per the
following schedule:
A. 120 Points =25 Years
B. 100 Points =20 Years
C. 80 Points = 15 Years
D. 60 Points = 10 Years
E. 40 Points = 5 Years
F. Less than 40 points = automatic opt out
Category A, approval for 25 years, would allow a DDA/LDFA with TIF to bond for large
capital improvement projects over a 20-year period as projects are planned and developed
in the next three to four years. Category B, approval for 20 years, would allow a
DDA/LDFA with TIF to bond for smaller projects over a 15-year period as projects are
planned and developed in the next three to four years. Categories C through E approval
would allow a DDA/LDFA with T1F to proceed with long-range planning and downtown
management programs. A community whose request scores in the C through E
categories could come back through the County's TIF Review Process to request a longer
approval period for project bonding, etc., if they have increased their compliance with the
County's TIF Performance Standards.
P7S OLUT iON
Couiity Executive Date
Resolution #01193 August 2, 2001
Moved by Patterson supported by Taub the resolutions on the Consent
Agenda be adopted (with accompanying reports being accepted).
AYES: Appel, Brian, Buckley, Causey-Mitchell, Coleman, Crawford,
Dingeldey, Douglas, Galloway, Garfield, Gregory, Law, McPherson, Melton,
Millard, Moffitt, Moss, Obrecht, Palmer, Patterson, Sever, Suarez, Taub,
Webster, Amos. (25)
NAYS: None. (0)
A sufficient majority having voted therefor, the resolutions on the
Consent Agenda were adopted (with accompanying reports being accepted).
STATE OF MICHIGAN)
COUNTY OF OAKLAND)
I, G. William Caddell, Clerk of the County of Oakland, do hereby certify that the
foregoing resolution is a true and accurate copy of a resolution adopted by the
Oakland County Board of Commissioners on August 2, 2001 with the original record
thereof now remaining in my office.
In Testimony Whereof, I have hereunto set my hand and affixed the seal of the
County of Oakland at Pontiac, Michigan this 2nd_day oifAugust, 2001.
G.` William Caddell, County Clerk