President’s Article: March
How URDs and TIF have shaped Missoula’s Growth
Believe me, I’m no expert in the field of TIF (Tax Increment Financing) or URDs (Urban Renewal Districts), but I do know that these topics have generated plenty of debate and misunderstanding in our community over the decades. It is inherently a complex topic and requires some study and patience to fully understand how it all works. To help satisfy my personal curiosity I did some homework, and the results of which I’d like to share with you here in a two-part series for this column.
Since I needed expertise on the matter, this led me to go to straight to the source. I first met with Missoula Redevelopment Agency (MRA) Director and fellow MDA Board Member, Ellen Buchanan, to get the lowdown on URDs and TIF. This agency takes the lead on all funding of this type for the purposes of diminishing blight in the community, stimulating growth and restraining the always present forces of gentrification. Growth does not necessarily equal gentrification, so infrastructure improvement is vital in blighted communities to help achieve all of these goals. I greatly appreciate Ellen’s time and expertise to help gain more of an understanding.
To start off, she explained that an Urban Renewal District must first be created by the City government as a step to offer TIF financing. This started here in 1978 with the creation of the MRA and the first URD (URD I) being designated in the Downtown core. The reason this action was taken was because the urban core was rife with closed and/or dilapidated buildings, lack of adequate lighting, lack of safe sidewalks and concrete alleyways, and general conditions that endanger life or property by fire or other causes. The City felt a need to revitalize the entire Downtown area and created the district. Then in 1980, the next step was for the MRA to issue TIF funding for improving infrastructure and developing private/public partnerships to stimulate redevelopment.
Getting back to TIF, the funding for this primarily comes from incremental tax increases that occur over time. When an URD is created it establishes and “freezes” the property tax base for any privately-owned property within it at a pre-district level for the purposes of the TIF. For example, when Missoula’s URD I was created, the tax base was frozen at the 1978 level. From that point on, as the property taxes within the entire URD went up as they usually do annually, the incremental increase in taxes went into the MRA-managed TIF fund account. The remaining property taxes collected went into local and state government coffers at the 1978 rate.
This TIF fund is wholly separate from the general operating fund and budget of the City that pays for police, fire, sewer, street maintenance, etc. The only taxes going in to the TIF fund account is that of increased property taxes created primarily by new development within the URDs the City has designated (there are six currently) for a finite amount of time. Other funding for the TIF fund account comes from private, state and federal grants the MRA has obtained as well.
If you’re still with me, it’s critical to understand these distinctions before getting into the use of TIF in general. TIF is a tool created by governments as a way to grow economies in areas considered to be blighted. It’s not just a Missoula thing, it’s an everywhere thing country wide. Since Montana in general has a limited revenue system other than taxes from property and income, the State approved TIF as a way for municipalities to grow their own economies without them having to raise additional taxes. Missoula is no exception.
So exactly how does the City and the MRA use TIF to stimulate development in designated blighted zones and URDs? Stay tuned for Part II next month!