The City of Houston Tax Increment Reinvestment Zone (TIRZ) Program – Online Board Training Materials

Robert FiederleinTom MesaFinance & Administration

July 1, 2007

TIRZ Basics

Tax increment financing is a method for financing Tax increment financing is a method for financing public projects. Tax increment reinvestment public projects. Tax increment reinvestment zones are statutorily able to engage in such zones are statutorily able to engage in such financings.financings.

Definition: In tax increment financing, when a Definition: In tax increment financing, when a zone is created the ad valorem tax values are zone is created the ad valorem tax values are “frozen” (the base year) and the taxes generated “frozen” (the base year) and the taxes generated from any incremental growth in the tax base in from any incremental growth in the tax base in future years (the increment) are used to finance future years (the increment) are used to finance public projects and the administration of the zone.public projects and the administration of the zone.

TIRZ Basics (cont.)

Two TIRZ Types:Two TIRZ Types: City-initiatedCity-initiated

Less than 10% residentialLess than 10% residential Petition ZonePetition Zone

Created by petition of land ownersCreated by petition of land ownersMaybe more than 10% residentialMaybe more than 10% residentialRequires that one-third of revenues be set-Requires that one-third of revenues be set-

aside for affordable housingaside for affordable housing

TIRZ Basics (cont.)

22 Zones in the City22 Zones in the City Link to mapLink to map

http://www.houstontx.gov/planning/http://www.houstontx.gov/planning/economic_dev/TIRZ11x17.pdfeconomic_dev/TIRZ11x17.pdf

TIRZ Operations

Three PlayersThree Players The CityThe City The ZoneThe Zone The Redevelopment AuthorityThe Redevelopment Authority

TIRZ Operations (cont.)

The City’s RoleThe City’s Role Manage the overall TIRZ ProgramManage the overall TIRZ Program Approve Annual Budget and AmendmentsApprove Annual Budget and Amendments Approve multi-year Capital Improvement Approve multi-year Capital Improvement

Plan (CIP) and coordinate with the CityPlan (CIP) and coordinate with the City Deposit tax increment revenue into fundDeposit tax increment revenue into fund Appropriate revenuesAppropriate revenues

TIRZ Operations (cont.)

The City’s Role – In DetailThe City’s Role – In Detail The City Council and/or the Program The City Council and/or the Program

Administrators approve:Administrators approve:Development AgreementsDevelopment AgreementsConsultant ContractsConsultant ContractsAuthority ObligationsAuthority Obligations

• BondsBonds• NotesNotes

TIRZ Operations (cont.)

The Zone’s RoleThe Zone’s Role If a Redevelopment Authority has been If a Redevelopment Authority has been

created the Zone’s role is limited:created the Zone’s role is limited:Approve Annual BudgetApprove Annual BudgetApprove Plan AmendmentsApprove Plan AmendmentsOther administrative actionsOther administrative actions

TIRZ Operations (cont.)

The Redevelopment Authority’s RoleThe Redevelopment Authority’s Role Defined by the Tri-Party AgreementDefined by the Tri-Party Agreement

Delegation by the City and the Zone of Delegation by the City and the Zone of day-to-day operations to the day-to-day operations to the Redevelopment AuthorityRedevelopment Authority

• Generally responsible for the Generally responsible for the implementation of the Project and implementation of the Project and Financing PlanFinancing Plan

TIRZ Operations (cont.)

The Redevelopment Authority’s RoleThe Redevelopment Authority’s Role Day-to-Day Administration:Day-to-Day Administration:

Budget preparationBudget preparationProject managementProject managementHiring of consultantsHiring of consultantsFinancial affairsFinancial affairs

TIRZ Operations (cont.)

The Redevelopment Authority’s RoleThe Redevelopment Authority’s Role With regards to the financial affairs of With regards to the financial affairs of

the Zone/Authority, the members of the the Zone/Authority, the members of the Redevelopment Authority board have a Redevelopment Authority board have a fiduciary dutyfiduciary duty to properly manage and to properly manage and account for the publics’ moneys at all account for the publics’ moneys at all times.times.

TIRZ Operations (cont.)

It is It is highly recommendedhighly recommended that upon that upon appointment new board members request of appointment new board members request of their Zone’s administrator the following their Zone’s administrator the following materials and that they become familiar materials and that they become familiar with them:with them: Zone Project and Financing PlanZone Project and Financing Plan The most current City-approved budgetThe most current City-approved budget The most current annual financial auditThe most current annual financial audit

Legal Issues

Sources of AuthoritySources of Authority There are several sources of authority that There are several sources of authority that

define and/or constrain the actions of define and/or constrain the actions of Redevelopment Authorities:Redevelopment Authorities:

Ch. 311 Tax Code (“TIRZ Act”)Ch. 311 Tax Code (“TIRZ Act”)Ch. 431 Transportation CodeCh. 431 Transportation CodeCh. 394 Local Gov’t CodeCh. 394 Local Gov’t CodeArticles and By-LawsArticles and By-LawsContractsContracts

Legal Issues (cont.)

TIRZ Zone and Redevelopment Authority Boards TIRZ Zone and Redevelopment Authority Boards are subject to both the Texas Open Meetings Act are subject to both the Texas Open Meetings Act and the Texas Public Information Actand the Texas Public Information Act New board members must receive training New board members must receive training

within 90-days of their appointment in eachwithin 90-days of their appointment in each Training available thru Texas Attorney Training available thru Texas Attorney

General’s website:General’s website:http://www.oag.state.tx.us/opinopen/http://www.oag.state.tx.us/opinopen/

og_training.shtmlog_training.shtml

Legal Issues (cont.)

In addition to open government training, board In addition to open government training, board members are required to abide by state and local members are required to abide by state and local laws and rules governing:laws and rules governing: Conflicts of interestConflicts of interest Receipt of giftsReceipt of gifts NepotismNepotism

With regards to these matters, board members With regards to these matters, board members should always consult with their board's legal should always consult with their board's legal counselcounsel

TIRZ #19 Upper Kirby Created in 1999 – 15 yearsCreated in 1999 – 15 years Major Project and Financing Plan Major Project and Financing Plan

amendment approved by City Council in amendment approved by City Council in early 2007early 2007

Multi-year CIP in placeMulti-year CIP in place Significant mobility and drainage projects: Significant mobility and drainage projects:

Kirby DriveKirby Drive Pay-as-you-go CIPPay-as-you-go CIP