The Monmouth Business Attitudes and Practices Survey revealed that there is a low awareness of incentive programs offered by the City; only about half of business owners surveyed were aware of the city’s five major incentive programs. The city must market the existing incentive programs to business owners and, because funds are limited, advertise these programs as competitive funding opportunities.
Community Example: For an example of competitive building improvement grant programming, see Mount Vernon, Iowa.
Ultimate approval of TIF funding is typically vested with the City Council, which reviews each project on a case-by-case basis. However, cities may also elect to establish a TIF Review Board that inspects the financial and social costs and benefits of each project and reports these to the City Council for decision-making.
TIF funds should be spent according to a clearly defined evaluation process that promotes consistency and transparency. The Government Finance Officers Association (GFOA) suggests best practice elements that underpin a successful TIF program, including:
Making a determination of whether the project would have proceeded without TIF funding
Conducting a cost/benefit analysis for projects proposing to use TIF funds
An analysis of how the project will affect existing businesses
An evaluation of how the project will impact the tax base (GFOA, 2012)
The GFOA also suggests that communities establish clear performance measures to determine if projects that use TIF funds are meeting goals. Suggested performance measures include:
Leverage ratio (private investment to public investment)
Internal rate of return (IRR) analysis
Developer equity as a percentage of project cost (Greifer, 2012)
The City of Madison has developed a TIF Objectives and Policies Memo which outlines the city’s goals and objectives as well as operating procedures for the distribution of TIF funds. The City of Chicago uses TIF Score Cards to help City Council members interpret whether or not a project is worthy of TIF funds.
Interaction of Tax Increment Financing and Other Economic Development Tools Tax Increment Financing can, in some cases, be used in combination with other economic development incentive programs. For example, Business Improvement Districts (BIDs), Special Service Areas (SSAs) and Enterprise Zones (EZs) can all overlay TIF districts to help create revenue in the short-run until incremental revenue is realized (Greifer, 2012). Though TIF and EZ programs can overlap one another, either the TIF District or EZ tax abatement must take precedence (both cannot occur simultaneously); all other EZ benefits will remain intact (Northwest Illinois Development Alliance, 2012).
Business Improvement Districts (BIDs) or Special Service Areas (SSAs) are both mechanisms for leveraging additional tax dollars in a geographically bounded area, such as the downtown. BIDs are typically initiated by local business owners with the guidance and support of the City, while SSAs are typically initiated by the City.
Business Improvement District
Enabling legislation allows cities to establish BIDs for the purpose of providing services to one geographically identified area without needing to provide those services elsewhere in the city. A BID can be administered by a board created by participating businesses or by an existing institution, such as the Chamber of Commerce. Business Improvement Districts (BIDs) level a special assessment which is typically 1-3 percent of assessed property value. This tax is collected annually in addition to regular property taxes and the funds are shared by all property owners in the specified area. BIDs can also utilize a sales tax of up to 1.00% to leverage additional funds. Typically, a BID must be voted on by participating property owners and must pass by a majority vote; they are typically reauthorized every 1-3 years.
Community Example: See Ripon, Wisconsin for an example of an operational BID.
Special Service Area
An SSA is created by the municipality in order to raise revenue and provide additional services to a geographically specific area. The tax is an additional burden in addition to regular property taxes with the funds going to specific improvements such as streetscaping or road repairs which benefit the SSA area. The SSA functions as an “opt-out” program; at least 51% of property owners in the affected region must reject the SSA in order for it to fail. Typically, an SSA includes a sunset provision.
Artist incentive programs attract artists to the community through incentives that encourage the purchase of at-risk buildings and renovating them as live/work spaces. Artist incentive programs are, out of necessity, a cooperative effort between municipal governments and local banks in order to provide funding and interest rates conducive to extensive building renovation. Typical elements of an artist incentive program include:
Acquisition assistance, usually through fixed, low interest loans with up to 100 percent financing
Marketing assistance, such as through joint marketing or matching grant funding for marketing and promotion
Reimbursements for professional services, such as architectural or design services
Section 10 of the Illinois Enterprise Zone Act allows municipalities to establish “shopsteading” programs which allow the municipality to sell a property to a willing buyer for no more than $100; in return, the owner agrees to renovate and maintain the building according to the standards or codes set forth in an agreement between the city and the purchaser (Oglesby, 2012).
The City of Monmouth can supplement its own financial initiatives with those from federal and state government as well as from private foundations. The City of Monmouth can use grant database software, such as eCivis, to identify and apply for competitive grant or loan opportunities and use these as additional leverage in the downtown. Additionally, the City can locate granting opportunities that achieve more than one social policy goal to maximize time spent applying for grants. The Safe Routes to School program, for example, offers many funding avenues that can help children walk to school more safely by focusing on pedestrian accessibility and safety (Safe Routes to School, 2012).
Some grant and loan opportunities may apply directly to business owners; in these cases, business owners should be alerted to programs that may benefit their business and the steps necessary to successfully apply for a loan or grant. Some examples of business loans, grants, or financial incentive programs include:
SBA 504 Loans – long-term, fixed rate financing for acquiring assets or modernization
Ameren Act on Energy – energy incentives for adopting energy-efficient business equipment