TIF & Property Taxes

A strategy to provide property tax reliefin East St. Louis

200 N. Broadway Suite 1000 St. Louis, MO 63102 (314) 231-7318

By Mike Weber, Director

PGAVURBANCONSULTING

TIF is designed to induce private sector investment in redevelopment projects.

How TIF WorksTIF district is established by City Ordinance (the

City has 7 TIF districts covering almost the entire City)

Property taxes are then distributed in two ways:

Tax on base assessed value goes to taxing districts

Tax on gains on assessed value goes to special TIF fund

How TIF Works (graphic illustration)

Revenue Flow During TIF

$-

$20

$40

$60

$80

$100

$120

1 5 9 13 17 21 25

TIF Year

Do

llars

($

00

0)

Revenue To TIF Special Allocation Fund

Revenue To Taxing Districts

Streets, Sewers and Other Public Improvements

TIF & Public WorksTIF funding for new streets & other public

works should be in support new private development.

TIF & Public WorksWhen possible TIF can fund street

improvements in existing neighborhoods.

TIF & Public WorksTIF is NOT intended or designed to serve as

funding source for normal maintenance and reconstruction of streets and utilities.

While the need for new streets and sewers is enormous, TIF can only cover a small portion of the costs (see next chart).

TIF dollars must be spent within the TIF district generating the TIF dollars.

Why are property tax rates so high in East St. Louis?

Property TaxesProperty tax rates are determined by dividing

the tax levy request by the rate setting “equalized assessed value” (EAV) within the taxing district.

The higher the rate setting EAV, the lower the tax rate.

If there is no growth in EAV over time, tax rates will tend to go up.

Tax Rate Computations1986 Tax base (assessed valuation):$50,000,000

1986 levy request: $1,000,000 Tax rate to generate levy request:$2.00/$100 AV

2006 Tax base: $50,000,000 2006 levy request: $1,800,000* Tax rate to generate levy request:$3.60/$100 AV

* The 2006 levy request reflects inflation between 1986 and 2006.

Property Taxes (a comparison) A $75,000 home in East St. Louis would pay

in the range of $3,100 to $3,500 in property taxes.

In Fairview Heights, the same home value would result in $1,700 in taxes. 1

1 based on tax rate for tax code 08040

Contributing Factors to High Taxes

Population loss of 9,400 between 1990 & 2000.

Loss of 1,880 occupied housing units between 1990 & 2000.

ALL INCREASES IN PROPERTY VALUE BENEFITS PRIMARILY THE TIF FUNDS.

More than ½ of the City contains tax exempt or vacant lots.

Contributing Factors to High TaxesExemptions & TIF Constrains Tax Base:

Total Assessed Value $170 million Less exemptions 33 million Less TIF Increment Value 89 million

Net Taxable Value $48 million

Only 28% of the City’s assessed value is available for normal taxation.

Between 2003 and 2006, the City’s net taxable value has dropped by nearly $900,000

Dissolve & Reduce TIF DistrictsOver 50% of the City’s tax base is dedicated to

the various TIF funds.

By dissolving and reducing the size of the TIF districts more of the tax base will be available to generate revenue for all affected taxing districts.

With a larger rate setting EAV, tax rates should go down.

Expected property tax savings: 19% to 26%

Effect on $75,000 HomeCurrent:

2006 tax rate for tax code 01099 12.9186 Total property tax bill $3,230

Move $31 million EAV from TIF Districts: Tax rate with added tax base 10.4677* Total property tax bill $2,617

Savings of $613

*Assumes all taxing districts keep levy requests in line with recent trends. Also assumes loss of School District GSA is made up by increased levy.

Effect on $75,000 HomeCurrent:

2006 tax rate for tax code 01099 12.9186 Total property tax bill $3,230

Move $50 million EAV from TIF Districts: Tax rate with added tax base 9.673* Total property tax bill $2,418

Savings of $812

*Assumes all taxing districts keep levy requests in line with recent trends. Also assumes loss of School District GSA is made up by increased levy.

Actions Required & When Effective

City Council needs to pass ordinances dissolving and reducing size of TIF districts.

If accomplished in 2007, it will affect tax rates in 2008.

Other ConsiderationsThe City will continue to use TIF to induce

private development and redevelopment projects.

If needed, new project-based TIF districts will be created.

The effectiveness of property tax relief is predicated on all affected taxing districts cooperating with the City in this effort!