Authorizes tax increment bonds payable from real property taxes levied by a school district within a blighted project area

Summary of specific provisions

§ 1- Includes findings and determinations that sound development and redevelopment of blighted areas increases public school enrollment by providing affordable housing and employment opportunities and the need for expanded public education facilities and services.

§ 2- Amends subdivisions (b) and (f) of § 970-c of the General Municipal Law to expand the definition of a "Legislative body" and a "Planning Agency" to include the board of education of a school district which consents to participate in TIF and adds a new subdivision (i)to define the term "school district."

§ 3- Amends subdivision (1) and (n) of § 970-f of the General Municipal Law in regard to the amount of bonds which may be issued and the plan for the relocation of families and person who may be temporarily or permanently displaced from housing facilities in a project area and adds a new subdivision (a) to provide that each redevelopment plan may provide for the consent to and approval of the project area and the redevelopment plan by the board of education of the school district.

§ 4- Amends subdivision (b) and (c) of § 970-h of the General Municipal Law to provide that public notice of the establishment of a project area must include a disclosure of whether a one or more school districts have consented to participate in TIF.

§ 5- Amends § 970-m of the General Municipal Law in regard to the amend- ment of a redevelopment plan.

§ 6- Amends paragraphs (iii), (iv) and (v) of subdivision (a) of § 970-n of the General Municipal Law in regard to joint undertakings.

§ 7- Amends paragraphs (ii) and (iii) and subparagraph 1 of paragraph (v) of subdivision (b) of § 970-n of the General Municipal Law to include school districts as entities that may be a member of a municipal redevelopment authority and to stipulate that such school districts would, by resolution of the board of education, have a say in the selection of a chairman to such authority.

§ 8- Amends subdivision (a), (b), and (g) and (i) of § 970-o of the General Municipal to provide that TIF bonds are not the debt of a muni- cipality or the State of New York and that no entity pledges its faith and credit to the payment of such debt. This section also clarifies that a school district is not issuing debt by consenting to an allocation of taxes and that a school district's participation in TIF is not dependent on the authorizing of § 6 of Article XVI of the New York State Constitu- tion. In addition, this section expands the purposes for which TIF bonds may be issued and determines that such purposes shall be for a public use and a public purpose including environmental remediation and brown- field redevelopment.

This section also adds a new subdivision (j) to provide for additional sources of security for TIF bonds, including a pledge of a portion of the sales tax received from businesses operating in the project area and benefiting from the redevelopment plan, and the establishment of an assessment area co-terminus with the project area to provide revenues for debt service if incremental real property taxes are deficient..

§ 9- Amends paragraph (i) of subdivision (d) of § 970-o of the General Municipal Law.

§ 10- Amends § 970-p of the General Municipal Law to provide that refer- ence to both a municipality and a school district are applicable in approving an allocation of real property taxes and issuance of TIF bonds. In addition, this section provides that the allocation of taxes be estimated by the assessor for each year the TIF bonds are outstanding before the TIF bonds are issued and places a standard of good faith effort on the assessor to make such allocation in such years. Upon request by a municipality or school district, the Office of Real Proper- ty Services shall provide guidance on methodologies for assessment and/or review such estimates.

This section also repeal subdivision (b) of § 970-p of the General Municipal Law. Also, this section provides that a redevelopment object or purpose is a school building purpose for a school district consenting to an allocation of taxes under the MRL.

Finally, this section provides that the amount of taxes allocated to debt service on TIF bonds is not available for treatment under a PILOT agreement otherwise the allocated taxes would be insufficient to pay debt service on TIF bonds.

§ 11- Effective date.

Justification

New York's TIF statute, the MRL, has been in effect since 1973. It was considered such a significant financing mechanism for economic development when enacted that the state constitution was amended to allow municipalities to issue TIF bonds payable from allo- cated real property taxes as an express exception to the constitutional rule that all real property taxes be available under the full faith and credit pledge for general obligations authorized by municipalities.

However, the MRL has been used very little even though TIF has become a popular and successful economic development/infrastructure financing regime in many states.

The principal deficiencies with the MRL which these amendments address are as follows: (i) unavailability of real property taxes from the school district levy (usually, the largest single line on the tax bill) which has prevented issuance of larger TIF bonds in significant redevel- opments; (ii) narrow purposes for which TIF bonds may be issued, (iii) unavailability of alternative revenue sources to pay debt services on TIP bonds, and (iv) uncertainty of future years assessments while TIF bonds are outstanding to raise adequate amounts of incremental tax for debt service on TIP bonds.

These amendments address foregoing issues. School districts are not required to participate in the tax increment financing process. Howev- er, they may elect to do so by resolution of their boards of education. To participate, a school district must receive all notices and approve all proceedings (including establishment of the redevelopment plan, setting the boundaries of the project area, and electing members to an authority, if used, and allocating taxes and certifying to the assessor's estimate of future year allocations).

The purposes for which TIF bonds may be issued are expanded to include environment remediation and brownfields redevelopment purposes under the Environmental Conservation Law. These purposes further both economic development projects and governmental infrastructure requirements so that TIF bonds may be an important financing regime for modern techno- logical projects that benefit both private sector and public sector entities.

The amendments provide several alternative revenue sources to support debt service on TIF bonds. All of these sources are currently authorized and available in various forms to support state and local government debt. Trapping sales tax receipts is currently employed by certain state public benefit corporations. Municipal assistance agreements when limit- ed to annual appropriations are used to support projects that benefit the public sector when project revenues are insufficient. Special bene- fit assessments in support of debt service have long been available to villages and improvement districts in towns and counties. These amend- ments apply the procedures in the Village Law to the MRL. Assessments are sometimes referred to as "service payments" and are available to raise additional revenue each year if the allocation of taxes is insuf- ficient to meet TIF bonds debt service.

The MRL is silent on the responsibility of assessors to allocate real property taxes during the years TIP bonds are outstanding. These amend- ments require that an estimate of allocations for such years be made before TIF bonds are issued to provide investors with material informa- tion about the creditworthiness of TIP bonds. The assessor is also charged with a good faith effort standard to assess properties in the project area to realize the tax allocation estimated. In addition, upon

request by a municipality or school district, the Office of Real Proper- ty Services shall provide guidance on methodologies for assessment and/or review such estimates.

Prior legislative history

2007-2008: A.2358/S.371; 2005-2006: A.10365/S.8192.

Fiscal implications

These amendments would stimulate economic develop- ment infrastructure financing, enhance tax bases, and lead to increased governmental revenues.

Effective date

This act shall take effect immediately and shall apply to any indebtedness incurred by a municipality pursuant to section