List of Figures
Assessed value—The dollar value assigned to a property for purposes of measuring applicable taxes. There are three primary methods for determining assessed value:
Assessed value multiplied by a tax rate determines the tax liability for a property. Determination of the assessed value of a property is an administrative function. Setting tax rates is a political function.
Authorizing or enabling legislation—State-level legislation that authorizes / enables a subordinate jurisdiction (county, parish, township, city, etc.) to levy a special assessment, create a TIF or require exactions. This legislation will provide substantive and procedural requirements for establishing these value capture techniques.
Benefit (general)—The typical level of benefit that accrues to properties throughout a jurisdiction from a particular public facility or service. For example, a new highway might reduce traffic congestion, speed up freight deliveries and reduce the price of goods throughout a jurisdiction.
Benefit (special)—A specific and direct benefit that accrues to some properties as a result of their proximity (in distance or time) to a particular public facility or service. For example, while a new highway might benefit all properties generally, those properties closest to highway interchanges obtain even more value from the highway (due to easier access) and this would be reflected in higher property values as a result.
Blight—A condition of individual properties or neighborhoods. For an individual property, a significant lack of maintenance that results in deterioration of a building or an unkempt vacant lot that is overgrown or strewn with rubble. For a neighborhood, the prevalence of deteriorated or boarded-up buildings, vacant lots and/or deteriorated infrastructure are characteristics. Statutes that limit TIFs to blighted areas will define blight more specifically.
Bond—A certificate that acknowledges the indebtedness of the bond issuer to the holder. The holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor).
But for—In the context of a TIF, this characterizes the necessary relationship between infrastructure improvement and future private sector development. In other words, the diversion of the tax increment away from a jurisdiction's general fund and into a dedicated fund for an infrastructure improvement project is permissible only if the private sector development would not occur without (but-for) the infrastructure improvement project.
CAMA—Computer-assisted mass appraisal. This is software that automates the real property assessment process.
Condemnation—The process whereby a governmental entity exercises its power of eminent domain to take private property for a public purpose. This typically entails a judicial proceeding where "just compensation" is ascertained.
Eminent domain—The power exercised by a governmental entity or agent to take private property for a public purpose pursuant to the Fifth Amendment to the U.S. Constitution. If property is taken for a public purpose, just compensation must be provided to the private owner.
Essential nexus—This refers to the relationship between a legitimate state interest, the impact of development activity upon that interest, and the ability of an exaction to compensate, remediate or mitigate that impact. (See also, "Rough Proportionality.") Although "essential nexus" is language applied by courts regarding the validity of exactions, a similar concept is employed for special assessments whereby the assessing jurisdiction establishes a nexus between an infrastructure project and a special benefit conferred upon a particular property or properties. In the context of TIFs, the relationship between infrastructure improvements and future private sector development is referred to as the but-for test.
Exaction—An in-kind provision of infrastructure, dedication of land for infrastructure, or cash payment for off-site infrastructure required of developers to mitigate the impact of new development on infrastructure capacity. This mitigation is required as a condition for obtaining development permits.
Excise tax—This is a tax levied against the quantity of a good purchased or sold. A per gallon tax on motor fuel, for example, depends solely on the amount of fuel sold. Fluctuations in the price of motor fuel do not lead to changes in revenue as long as the amount sold remains constant. (This is in contrast to a sales tax which is levied against the price of the good sold.)
Fee—This is a charge for a good or service. It is similar to a "price," in that the consumer is either paying for a direct benefit received from the government or compensating the government for an expense incurred because of or on behalf of the person or entity paying the fee. Fees are distinguished from "taxes." Regarding taxes, there is no direct relationship between the payment of a tax and the receipt of benefits (or compensation for costs incurred). Regarding fees, most people pay for water with a per-gallon fee for the operation of a municipal water purification plant and distribution system. The more water you use, the more you pay. Many people also pay property taxes, some of which might be used to fund capital expenses for the water authority. This is a tax and not a fee because payment is unrelated to the utilization of municipal water. However, the land value portion of the property tax is more like a fee because access to municipal water (and other infrastructure amenities) enhances the value of land. So, the part of the property tax applied to land values is more like a fee and the part applied to building values is more like a tax.
Fee rate—The means for determining the amount of a special assessment. A "fee rate" could be expressed as a "cost per front foot" or as a "rate (percentage) applied to property value."
Fee schedule—An adopted and published fixed-fee for defined public services such as water main and sewer main hookups, curb cut installation, or zoning changes requested by the property owner.
Front foot—A measure of distance along the side of a property that faces a street. Distance is one of the primary cost variables in many types of infrastructure projects (sidewalks, streets, utility lines, etc.) The length of an infrastructure facility segment constructed along one or more sides of a property is expressed in "front feet."
Implementing ordinance—Legislation that establishes a special assessment, development impact fee or TIF to fund particular infrastructure projects. This legislation satisfies the substantive and procedural requirements provided in the applicable State's authorizing legislation.
Inverse condemnation—As mentioned above, under "condemnation," a governmental entity initiates a judicial proceeding to acquire private property through eminent domain. However, in the event that a government law or regulation imposes an excessive burden on private property, a property owner may initiate a judicial proceeding claiming that the government has effectively taken property without providing just compensation. Because the property owner is initiating this proceeding, it is referred to as "inverse condemnation."
Land value return—Providing public goods and services (infrastructure) typically enhances the value of well-served sites. Returning some of this publicly created land value to the community that created it is referred to as "land value return." Land value return encompasses several value capture techniques including (but not limited to):
Land value uplift—The increase in land value caused by the creation or improvement in nearby infrastructure. As mentioned in the report, even the expectation of infrastructure improvement can lead to land value uplift prior to the commencement of improvement activities.
Police powers—The Tenth Amendment to the US Constitution confers powers to the States (and potentially delegated by them to local governments) enabling them to adopt laws and regulations to prevent crime and to secure the safety, health and prosperity of their citizens by preserving the public order and preventing the conflict of rights. Zoning, building codes, and other development regulations are examples of police powers exercised by State and local governments.
Rough proportionality—This refers to the relationship between the impact of private development upon a legitimate state interest and the burden placed upon that development by an exaction to remediate or mitigate that impact. In other words, the burden must be roughly proportional to the impact being mitigated. Although "rough proportionality" is language applied by courts regarding the validity of exactions, a similar concept is employed for special assessments whereby the assessing jurisdiction establishes that a special assessment is proportional to the benefit conferred to or the costs imposed by a private property. In this context, a special assessment may not exceed either the benefit conferred, or the cost imposed, whichever is less. In the context of TIFs, there is no parallel concept except that TIF revenues cannot exceed the cost of the infrastructure project and any financing costs that might also be entailed. Once TIF project costs or debt service are retired, a TIF is dissolved and all revenues from the benchmarked revenue sources are allocated to the general fund.
Single occupancy vehicles—Cars carrying only one person, the driver. Compared to walking, biking, carpooling (high occupant vehicles or HOV) and well-utilized transit, single-occupancy vehicles consume more energy and space per person per trip.
Site value—Land value. This term emphasizes that land value is related to the location of the site and not merely to the value of dirt.
Special assessment—A fee imposed on properties that receive a special (specific and direct) benefit from a particular public facility or service.
Tax—This is a charge owed to a government. However, payment of a tax bears no direct relationship to any particular benefit received or costs incurred. Instead, taxes represent a payment for general and possibly indirect benefits. Most people pay for water with a per-gallon fee for the operation of a municipal water purification plant. The more water you use, the more you pay. Many people also pay property taxes, some of which might be used to fund capital expenses for the water authority. This is a tax and not a fee because payment is unrelated to the utilization of municipal water. However, the land value portion of the property tax is more like a fee, because access to municipal water (and other infrastructure amenities) enhances the value of land. So, the part of the property tax applied to land values is more like a fee and the part applied to building values is more like a tax.
Tax increment—The difference in revenue generated by a benchmarked revenue source after an infrastructure project has been undertaken compared to the revenue generated prior to the project. Based upon the language in a TIF ordinance, the tax increment is that portion of the difference which is diverted away from a jurisdiction's general fund and into a dedicated fund used solely for the infrastructure improvement project.
Tax increment finance (TIF)—A technique for funding an infrastructure project without allocating existing revenues or raising new taxes. Thus, TIF is as much a budgeting tool as it is a funding technique. TIF relies on an assumption that but-for an infrastructure project, tax revenues in a defined location would remain constant. Tax revenues are measured and benchmarked at this "pre-project" level. If a TIF ordinance is enacted, any future increase in tax revenues (as identified by the ordinance) above the benchmarked level in the defined location is deposited into a special account dedicated to the funding of the infrastructure project. An important feature of most TIFs is that the public pays the same taxes regardless of whether a TIF exists or not. For this reason, TIF might be characterized as "revenue segregation" rather than as "value capture."
Tax levy—The amount of revenue collected by a particular tax or jurisdiction.
Tax liability—The amount of taxes owed by a taxpayer, either for a particular tax or a combination of taxes.
Tax rate—Percentage or fixed dollar amount which is used to determine how much tax is owed. For ad valorem property taxes, a tax rate is expressed in terms of dollars per $100 or $1,000 of assessed value. Thus, a tax rate of 1 percent ($1/$100) is the same as a tax rate of 10 mills ($10/$1000). For a property with an assessed value of $100,000 at a tax rate of 2.5% or 25 mills, the following equation would be used: $100,000/$1,000 x 25 = $2,500 tax liability. For sales taxes, the tax rate is expressed as a percentage of the price of the good or service being purchased. For excise taxes, the tax rate is expressed as an amount of money per quantity of the good purchased. Thus, the price per gallon of gas might fluctuate, but the excise tax, per gallon, remains constant.
Uniformity—The legal requirement that all taxpayers or taxable property in the same circumstances and conditions should be treated the same.
Value capture—In its simplest form, this is "value given" for "value received." In other words, value capture represents a payment to a jurisdiction for the receipt of a benefit or to compensate for the imposition of a cost. "Value capture" describes several techniques that return a share of infrastructure-created value to the public sector that created it or that compensate the public sector for adverse development impacts upon it.
