Utah state legislation grants certain powers to local government to create redevelopment agencies to facilitate new development and redevelopment of targeted areas. This tool is currently called a “Community Reinvestment Area (CRA)”. It involves using a portion of the property tax revenues (known as “tax increment”) generated by the renewal of the area to finance eligible redevelopment activities. Tax increment financing is a useful tool available in project areas to support redevelopment and can be used to offset certain costs incurred to implement a redevelopment plan. These include property acquisition, infrastructure improvements, demolition, support of specific uses, etc.
A redevelopment agency will administer the CRA and is commonly comprised of, but not limited to, the City Council. Some cities also elect to have a separate board, which helps determine appropriate investments for tax increments. CRAs are helpful tools, including offering the following abilities:
- Facilitate redevelopment of underutilized property through acquisition, clearance, re-planning, and/or sale
- Investing in core infrastructure, such as utilities, streets, lighting, curbs, sidewalks, landscaping, etc.
- Providing “gap” financing in the form of loans, reimbursements, and property discounts to encourage private investment
An effective CRA requires the participation of the taxing entities with taxing authority within the defined area. These entities continue to receive base taxes (taxes that existed before creating a CRA) and a negotiated portion of the generated increment. At the end of the CRA life (typically 20 – 30 years), taxes are fully returned to the entities. All generated tax increments must be spent within the defined project area.
Takeaways
- No new taxes for area residents
- Generated increment from increased property values is spent within the project area
- Key financing tool to support the vision of an area and support development that may otherwise not occur
FAQs
What is it going to cost me?
Nothing. A CRA is not a tax. The CRA pulls funding from the increase (or increment from the base) of a property’s value within the CRA zone after investment. In many scenarios, a CRA targets areas that have become blighted or stagnant, and the private sector is reluctant to invest. The investment made by a county or municipality from a CRA uses funds generated from a designated area to economically invigorate that same area so that it, over time, becomes more attractive to private-sector investment.
What’s in it for me?
Through the public outreach efforts of Envision Heber 2050 and Envision Central Heber, we have learned that citizens of the Heber Valley want a vibrant downtown. They want places to gather, to have local date nights, to shop locally, and to have entertainment options for an evening out on the town. Heber City had these options before the intensification of traffic on US Highway 40 and the ‘bedroom community’ movement of the 1970s. For over 50 years, downtown Heber City has survived as a place of history that must be endured – but not necessarily enjoyed or celebrated. Most citizens shop online or out of town. Local businesses struggle to offer extended hours of operation. The city has aged and atrophied. The proposed CRA will facilitate overdue reinvestment in downtown Heber City, helping to show private sector investors that Heber City cares about itself and is worth private investment dollars. As Heber City becomes more attractive to private investment, the economy will improve, businesses will be able to attract staff, extend their hours into the evening, and, through private investment, implement the vision the citizens have called for in the Envision Heber outreach projects.
Will it take money away from the schools?
No. Wasatch County School District receives most of its funding through property taxes. The base tax rate is set at the beginning of the CRA term, so the District will receive the same base as it has been receiving. The CRA map mainly focuses on areas of aged commercial zones that do not carry a high property value—hence the need for incentivized reinvestment. In Heber City, the overwhelming majority of the development in the CRA zone happened 50 to 125 years ago. Since then, property owners have not invested significantly in the structures or infrastructure, and the property values have stagnated. Property values will increase once CRA funding begins to act as a catalyst for reinvestment. WCSD will capture 25% of the annual increase in property values as the CRA matures. In reality, the District will gain revenue steadily from commercial buildings and reap all the reinvested property values when the CRA expires. The CRA will add revenue to the schools from areas that history has shown would not without an incentivized reinvestment. These same areas and properties, being commercial, will not create the need for additional schools or school-funded resources.
What are the risks?
The entities in the Interlocal Agreement outside of Heber City Municipal Corporation (Central Utah Water Conservancy District, Wasatch County, Wasatch County School District) are not at risk. Once the CRA is created, Heber City will call for an advance on the projected increase and inject that money into the CRA zone, adding insurance to the likelihood that private sector investment will quickly follow. Heber City will own that loan and be solely responsible for paying it back. While the partners in the Interlocal Agreement will have the opportunity to participate in the committee, provide input on how funds are allocated, and benefit from the reinvestment through additional property taxes and a stronger local economy, the supporting entities are not liable for any lending Heber City seeks out for the Downtown reinvestment efforts. The loan will be paid back through the collected increment so the citizens of Heber City will not experience new expenses. Additionally, 100% of the incremental funds captured will be contractually reallocated into the CRA Zone, even if the original bond is fully repaid before the term expires.
Do other cities or counties in Utah use a CRA?
28 Cities and 6 Counties in Utah currently use the CRA program to help reignite their aging zones and districts. Some have created additional CRA zones after seeing the success of their first. This is a well-tested program that many similar communities have employed with notable results without burdening taxpaying citizens.
American Fork | Bluffdale | Bountiful | Cedar City | Clearfield | Draper | Eagle Mountain | Emery County | Grand County (Moab) | Herriman | Iron County | Juab County | Lehi | Lindon | Logan | Marriott-Slaterville | Millcreek | Nibley | Ogden | Pleasant Grove | Provo | Roy | San Juan County | Sandy | Santaquin | Salt Lake City | Saratoga Springs | Sevier County | South Ogden | South Salt Lake City | Syracuse | Tooele County | Vernal | Woods Cross
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Can you spot the difference?
Can you spot the difference?All generated tax increments must be spent within the defined project area.
The difference between a downtown area that has not implemented a CRA (Kaysville (top)) and one that has (Ogden (bottom)) is contrasted in these two photographs.
