Archive for September, 2012

New York School Districts Allowed to Pledge Taxes for TIF Projects

Tuesday, September 4th, 2012

On March 30th, 2012, New York Governor Andrew Cuomo signed Bill A9057D into law.  Although it mainly focuses on budget items for the 2012-2013 fiscal year, A9057D also amends certain provisions of New York’s Municipal Redevelopment Law (MRL) to broaden the State’s TIF program by allowing school districts to pledge their portion of property tax increment to TIF projects. This amendment may significantly increase the use of TIF as an economic development tool in New York.

In 1984, New York adopted the MRL, allowing municipalities to use TIF for economic development.  However, under the MRL, municipalities could only pledge their share of incremental property tax for TIF projects. Because a municipality is only one of many taxing bodies that levy property taxes and the municipal share only accounts for a relatively small portion of total property taxes levied and collected, New York’s TIF program was less able to generate and pledge incremental tax revenues for economic development. In addition, without the ability to pledge incremental taxes collected by other taxing bodies, TIF obligations were viewed as overly risky, driving away potential investors.

With the adoption of A9057, school districts in New York can now elect to participate in TIF and pledge their share of incremental property taxes to economic development projects. Under the amended MRL, the board of education of any school district must review a TIF District’s redevelopment plan and adopt a resolution approving the TIF plan before the school district’s property tax increment can be pledged. Because the school district share generally accounts for a major portion of property tax increment, it is anticipated that this change to the MRL will encourage more municipalities in New York to use TIF as an economic development tool.

Although a welcome development, with this change, the New York school districts will have control over whether to pledge their portion of property taxes. This is different from many other States. In Illinois, for example, school districts cannot unilaterally veto a TIF proposal by voting against it. They can only force the corporate authorities of a municipality to adopt a TIF plan by a super-majority vote rather than by a simple majority.