TIF Increment Financing Guidelines
What is it?
Tax increment financing (TIF) is a concept, which was developed as an economic development strategy for assisting in the development or redevelopment of economically distressed or blighted areas of a municipality, where such development or redevelopment would not occur solely through private investment within the reasonably foreseeable future.
How is it used?
Tax increments are simply increase in property tax revenues over and above a base value established by the municipality in the base year. The purpose of TIF is to facilitate development or redevelopment of an economically disadvantaged area. This is done through the use of the tax increment captured to make public improvements, or assisting in private initiatives, within the zone, thereby enhancing the value of real property located within the zone and any structures attached thereto. This can be done through either direct cash payments to fund project costs or through various financing methods, including the issuance of TIF bonds and notes.
- A developer may pay the cost of approved public improvements associated with a private development and be reimbursed over time from the increment associated with the development of the area.
- Public improvements may be paid for directly with increment funds to encourage further development in the zone.
- Public improvements may be funded by the sale of bonds that will be repaid over time out of tax increments.
Reinvestment Zones - Waco has three established tax increment financing zones (see map):
- Reinvestment Zone Number One for Tax Increment Financing (TIF#1): West of the river, the zone extends from Gurley Lane up to Lake Shore Drive. East of the river, the zone extends from Chapel Hill to Waco Drive, and from Herring Avenue to the confluence of the Bosque and Brazos Rivers. The zone, which was established in 1982 in anticipation of mixed-use development along the Brazos River expires in 2022.
- Reinvestment Zone Number Two for Tax Increment Financing (TIF#2): Established in 1983 at the request of a developer, this zone is bounded by the Brazos River and MLK Jr. Boulevard on the east and Waco Drive and Herring Avenue on the north and south. The zone will expire in 2023.
- Reinvestment Zone Number Three for Tax Increment Financing (TIF#3): Bounded by the Bosque River, Lake Shore Drive and North 19th Street, this zone, which was established in 1986 at the request of a developer in anticipation of a mixed-use development project will expire in 2026.
TIF funds can be used to fund the following types of projects:
- the installation of public works/utilities;
- project costs related to the cost of buildings, schools or other educational facilities owned by or on behalf of a school district, community college district or other political subdivision of the state
- railroad or transit facilities;
- affordable housing;
- the remediation of conditions that contaminate public or private land or buildings;
- the preservation of the façade of a private or public building; or
- the demolition of a public or private building.
The following is a sample of TIF approved projects:
- Museum District Plan: plan that addresses traffic flow, landscaping, pedestrian and vehicular circulation, and parking in Texas Ranger/Sports Hall of Fame, Baylor University area. $53,061
- Sul Ross Project: funded property acquisition, landscaping, fencing, plumbing and parking lot improvements associated with Sul Ross Elementary. $199,000
- Behrens Loft Apartments: water and sewer utilities extension, streetscaping and lighting, sidewalk improvements. $77,500
- MLK Bicycle/Pedestrian Trail: extension of the riverwalk from Herring Avenue on the west side to area adjacent to the old railroad depot (Bridge Street). $157,850
- American Football Coaches Association: parking lot, sidewalk and landscape improvements, water and sewer services, concrete and drainage work. $346,135
The following questions are provided to help potential applicants determine project eligibility:
- Does the proposed project leverage dollars? Are other sources of support being sought, if so from whom? How much of the projects cost will come from sources other than the TIF?
- Will the proposed project benefit the general public?
- Is the project consistent with TIF Goals and Objectives? The City of Waco's Comprehensive Plan? Brazos Corridor Development Plan?
- Does the completion of this project assist in the development or redevelopment of an economically distressed area where development/redevelopment is not occurring solely through private investment?
Administrative Structure & Process:
The City Council appoints a Board of Directors to oversee the development of project and financing plans and act in an advisory capacity concerning development activity and expenditure of increment funds in each of the three zones. The board consists of eight members - the City Council appoints five members, and the participating taxing entities (McLennan Co., Waco ISD, McLennan Community College) appoint one member each.
Potential applicants are encouraged to contact the City Manager's Office to ascertain whether portions of the proposed project may be eligible for TIF funding. If so, an application may be submitted to the City Manager's Office for formal consideration. Eligible TIF funding requests will be presented to the TIF board, which then makes a recommendation to the City Council. If the project is approved by City Council, the City of Waco will enter into a contract for the reimbursement of the amount of TIF-eligible work approved by City Council.
All contractor(s) doing the work on the project must secure appropriate permits before any work is done. All completed work must be certified in compliance with applicable City codes and construction standards prior to any TIF funds being expended.
NOTICE: Any work on the project that is done prior to TIF funding approval (by the City Council) will NOT be eligible for TIF funds. Please set aside time to discuss your project plans with the City Manager's office (economic development staff) PRIOR to any work being done so that they may explain what items can be considered for TIF funds, and assist you through this process.