The Way I See It!
I am an Ultra-Conservative, Alpha-Male, True Authentic Leader, Type "C" Personality, who is very active in my community; whether it is donating time, clothes or money for Project Concern or going to Common Council meetings and voicing my opinions. As a blogger, I intend to provide a different viewpoint "The way I see it!" on various world, national and local issues with a few helpful tips & tidbits sprinkled in.
TIF - What are PILOTs & EATs?
Day 18 – Still No real response from the Mayor – The city should reach out to Wal-Mart & the Wave to keep them interested - if they are interested at all in making the Wave a reality.
Hawk Eyes Hollenbeck is watching...
The idea behind PILOTs is that property values, and therefore tax collections, will rise after the TIF plan improvements have been completed. TIF allows the increase in property taxes to be used to reimburse the developer for certified project costs.
The difference between the taxes on the property before and after it becomes part of a TIF plan is called the PILOT; PILOT stands for Payment-In-Lieu-Of-Tax.
If there were existing tax on the property, the portion of property tax that existed before the TIF plan is called the “base.” Any tax amount larger than the base is then the PILOT.
PILOT amounts are based on the actual assessed value of a property. The PILOT and any base tax add up to the same amount of tax that would have been charged if the property had not been in a TIF plan. The PILOT is NOT an additional “TIF tax”; it is a portion of the regular tax that can be redirected to the project.
PILOT =Regular Property Tax Base
PILOTs Example:
Before TIF:
Tract 1: Open Pasture, market value $60,000
Residential Commercial
Value: $60,000 $60,000
x Assessment Ratio: .19 .32
Assessed Value: $11,400 $19,200x Tax Levy: 0.0572 0.0572
Tax: $652.08 $1,098.24After TIF:
Tract 1: New development, market value $700,000
Residential Commercial
Value: $700,000 $700,000x Assessment Ratio: .19 .32
Assessed Value: $133,000 $224,000x Tax Levy: 0.0572 0.0572
Tax: $7,607.60 $12,812.80
Market Value Increase: $ 640,000.00 $ 640,000.00
Property Tax Increase: $ 6,955.52 $ 11,714.56
Base tax: $ 652.08 $1,098.24
PILOT*: $ 6,955.52 $ 11,714.56
Total tax: $ 7,607.60 $ 12,812.80
*In this case, the PILOT dollars would be redirected to reimburse the developer for certified project costs, like building sewers, roads, and sidewalks for a new housing subdivision.
What are EATs?
As was stated before, the underlying principle of TIF is that tax collections will rise after TIF plan improvements are completed. Property taxes are not the only tax types to increase with new development. Economic Activity Taxes, or EATs, are the non-property-tax sources of revenue to the City, and these revenues also increase with new development. TIF allows half of the increase in tax collections to be used to reimburse the developer for the certified project costs.
Only new taxes are allowed to be reimbursed. To determine the amount of new tax, the City sets an EATs “base.” This base is the total taxes collected in the area in the year before the project was activated. 50% of any tax amount over that base, or “increment,” can be redirected. A TIF plan can have many projects. Each project will have one base, and the taxes for all the businesses inside that project will be added together and counted against that base.
The City includes the following tax types in its definition of EATs:
Corporate and Individual Earnings Taxes also known as “profits” and “withholding”
Sales Taxes, both on retail sales and on utilities
Use Taxes Convention & Tourism Tax on Food/Beverage Sales also known as “food/beverage” tax
Utility Taxes also known as “gross receipts taxes” or “franchise fees”
EATs Example:
The following is a sample of an EATs calculation:
PROJECT 1 OF TIF PLAN XYZ:
Base Year Taxes:
Profits Earnings Sales Use Utility Food/Bev Total
$200 $2,000 $15,000 $1,000 $800 $1,000 $20,000
Current Year Taxes:
Profits Earnings Sales Use Utility Food/Bev Total$800 $2,500 $24,500 $1,000 $1,200 $10,000 $40,000
Increment:
Profits Earnings Sales Use Utility Food/Bev Total
$600 $500 $9,500 $0 $400 $9,000 $20,000
TIF Reimbursement:
Profits Earnings Sales Use Utility Food/Bev Total
$300 $250 $4,750 $0 $200 $4,500 $10,000
Headhunting firm to help hire DPW director
Cudahy Common Council members will look into headhunter firms that specialize in engineering to assist the city in search for a new director of public works.
In a 4-1 vote April 1, council members approved hiring a headhunting firm. The money will come from the city and the water utility.
Mayor Ryan McCue said hiring a firm would ensure that city officials hire a quality person for the position.
About 10 percent could be charged to the tax-incremental finance district.
Mark Otto, 3rd district alderman, voted against the motion, saying the money should come from the city's general fund.
Is anyone up in arms of using a TIF money for this use?
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