Mayor Battle announces closure of TIF

A financial tool used to provide millions of dollars toward school improvements and job creation will retire in August, two years ahead of projection and nine years before its required closing.

On Wednesday, Huntsville Mayor Tommy Battle announced that the City of Huntsville will soon make its last bond payment to close a tax increment financing (TIF) districts. Mayor Battle was joined by both Finance Director Penny Smith and Huntsville City Schools Chief Financial Officer Andy Craig.

The principle is simple – the City makes public improvements in a defined geographic area (a special district) with the intent of stimulating economic development. As the development occurs, the value of the property increases within the district, and so do revenues generate from property taxes paid by the owners.

Through a TIF, the City is allowed to use the revenues generated by the incremental increase in property tax values to pay for the improvements it made to support the development and to help pay for other public infrastructure improvements such as new schools.”, explained the City of Huntsville online.

People commonly misunderstand a TIF to mean that property taxes have been raised within the district. This is not the case—under Alabama law, only voters can approve a change in property taxes.

TIFs only use the increase in revenue from existing taxes that occur as the value of district property rises over time. Also, no City, school or county property tax income is reduced because of the TIFs; it is only the natural tax growth that is captured.

Created in 2001, TIF 3A was projected to end in 2024. Projected to-date taxes for the TIF were $37.4 million, but taxes collected totaled more than $46.2 million for a performance rate of 23.7% (collected taxes over projections).

Mayor Battle explained that TIFs are key factors in both job creation and infrastructure improvements. He said TIF 3A was noteworthy because it allowed eight schools in Northwest Huntsville – Johnson High, Rolling Hills Elementary, West Mastin Lake Elementary, ASFL/Davis Hills Elementary/Middle, Ed White Middle, Highlands Elementary and Lakewood Elementary – to make $12 million in capital improvements.

“This TIF is an example of how great investments ultimately go back into our schools and provide the best education possible,” Mayor Battle said. “It not only improved education, but it also provided thousands of jobs at the North Huntsville Industrial Park.”

Finance Director Penny Smith described these benefits as generational because they not only impact students and workers now, but they’ll also be felt far into the future. She also said paying off debt and closing the TIF early is indicative of the City’s due diligence.

“It really shows we’re planning to meet the demands of a growing City,” she said. “Not only did we pay off our debt for capital projects on time, but we paid it off early. That funding now goes back into the community and benefits our schools and creates jobs.”

Eight TIFs have been opened since 2000, and TIF 3A is the third to close. TIFs contribute directly to continued growth and public improvements because municipalities can borrow money for projects within a designated district and then repay bonds using property tax proceeds.

“They allow us to make an investment in an area through infrastructure, schools and attracting and retaining businesses,” Smith said. “It raises the overall value of the properties, and it’s a great way for us to invest in our community.”

The origins of TIF 3A began in 1999 with the purchase of 500 acres to build North Huntsville Industrial Park (NHIP). Two years later, Toyota Motor Manufacturing purchased a substantial portion of the property to erect its first North American V8 engine plant.

Anticipating additional tenants at the NHIP, the City created TIF 3A in 2001. The 5,600-acre TIF includes the park and surrounding areas. In the years since, Toyota expanded its footprint through additional expansions and the park welcomed new tenants, Meta and Aerojet Rocketdyne. TIF 3A also provided more than $13 million in infrastructure improvements at the park.

The City of Huntsville has established Tax Increment Financing (TIF) districts since 2000 as permitted under Alabama law. A TIF is a tool that allows municipalities to promote economic development using revenues from future funding streams.

The Huntsville Board of Education and Madison County Commission/Limestone County Commission partnered with the City in approving the TIFs because of the potential benefits to the whole community.

Click here to learn more about TIF 3A and read the City’s latest TIF report.

Images provided by the City of Huntsville.