Atlantic City Administrator John Lund says the Iowa House Appropriations Sub-Committee has proposed legislation (HSB 681) that would eliminate Tax Increment Financing (TIF), a move that would impact funding for local school districts. Lund said the bill would require an affirmative vote from school boards and the county to allow their TIF levies to be activated for cities. That’s not much of an issue for counties, but because the school districts have traditionally had a “back-fill mechanism” that the State provides when cities begin to TIF, and the districts lose in their basic levy, because the city captures those funds in the form of tax valuation. He says it’s a “Lose, lose, win” situation for schools.

Lund says if the City decides to cooperate with a developer, and the school district contributes to the TIF, the money they would have received directly from the State to support their budget, is taken away from the district and given to the City. He says that gives the district zero-incentive to want to work with the City in TIF situations. But that’s not without risk. John Lund says they run the risk by not cooperating, of not seeing funds come in from valuations, and they may not see growth. But they could also hedge their bets and assume the city will pick up the slack and they’ll see the benefits regardless. He assumes that’s exactly what’s going to happen. If the bill were to pass, Lund says the City would lose about 40-percent of its TIF resources, and “That is way too high to lose, to make this work.” Lund sees some scenarios playing out. The least likely of which is the City stops giving out economic development incentives, and allow the cost of streets and utilities and new developments to be absorbed into the price for the developer.

He said if the City continues to TIF, it won’t be for very much, and it would only cover the General Fund, employee benefits and the same for the County, if they agree to contribute. But then the City would need to make up the difference by raising property taxes on everyone, through General Obligation debt, which would not be popular, but it would not be something that had to be done by referendum, so that would still be an option. He said the City could end up taking 40% longer to retire the TIF debt, which would mean the General Fund and employee benefits levy will be deprived of natural growth, because the frozen tax base will last that much longer.

Lund says there is a fourth option he’s exploring, which he would recommend to the City’s Personnel and Finance Committee, if the bill continues to move forward. He said the future of housing and development in Atlantic is dependent on TIF. Without it, he said it will be very difficult. Mayor Dave Jones recommended the Council and citizens contact their State representatives to voice their displeasure with the bill, before it gets too far. (A copy of the bill can be found at https://www.legis.iowa.gov/legislation/BillBook?ga=87&ba=HSB%20681)