Programs - Tax Increment Reinvestment Zones (TIRZ)
What Are Tax Increment Reinvestment Zones (TIRZs)?
Tax Increment Reinvestment Zones (TIRZs) are special zones created by City Council to attract new investment in an area. TIRZs help finance costs of redevelopment and encourage development in areas that would otherwise not attract sufficient market development in a timely manner. Taxes attributable to new improvements (tax increments) are set-aside in a fund to finance public improvements within the boundaries of the zone.
Criteria for Reinvestment
To be designated as a reinvestment zone, an area must:
- substantially arrest or impair the sound growth of the municipality or county creating the zone, retard the provision of housing accommodations, or constitute an economic or social liability and be a menace to the public health, safety, morals, or welfare in its present condition and use because of the presence of:
- a substantial number of substandard, slum, deteriorated, or deteriorating structures;
- the predominance of defective or inadequate sidewalk or street layout;
- faulty lot layout in relation to size, adequacy, accessibility, or usefulness;
- unsanitary or unsafe conditions;
- the deterioration of site or other improvements;
- tax or special assessment delinquency exceeding the fair value of the land;
- defective or unusual conditions of title;
- conditions that endanger life or property by fire or other cause; or
- structures, other than single-family residential structures, less than 10 percent of the square footage of which has been used for commercial, industrial, or residential purposes during the preceding 12 years, if the municipality has a population of 100,000 or more;
Powers of Municipality
A municipality or county may exercise any power necessary and convenient to carry out Chapter 311 of the Texas Tax Code, including the power to:
- cause project plans to be prepared, approve and implement the plans, and otherwise achieve the purposes of the plan;
- acquire real property by purchase, condemnation, or other means to implement project plans and sell that property on the terms and conditions and in the manner it considers advisable;
- enter into agreements, including agreements with bondholders, determined by the governing body of the municipality or county to be necessary or convenient to implement project plans and achieve their purposes, which agreements may include conditions, restrictions, or covenants that run with the land or that by other means regulate or restrict the use of land; and
- consistent with the project plan for the zone:
- acquire blighted, deteriorated, deteriorating, undeveloped, or inappropriately developed real property or other property in a blighted area or in a federally assisted new community in the zone for the preservation or restoration of historic sites, beautification or conservation, the provision of public works or public facilities, or other public purposes;
- acquire, construct, reconstruct, or install public works, facilities, or sites or other public improvements, including utilities, streets, street lights, water and sewer facilities, pedestrian malls and walkways, parks, flood and drainage facilities, or parking facilities, but not including educational facilities; or
- in a reinvestment zone created on or before September 1, 1999, acquire, construct, or reconstruct educational facilities in the municipality.
Composition of Board of Directors
The board of directors of a reinvestment zone generally consists of at least five and not more than 15 members. Each taxing unit other than the municipality or county that created the zone that levies taxes on real property in the zone may appoint one member of the board.
If the zone was designated by petition, the board of directors of the zone consists of nine members. Each school district, county, or municipality, other than the municipality or county that created the zone, that levies taxes on real property in the zone may appoint one member of the board if the school district, county, or municipality has approved the payment of all or part of the tax increment produced by the unit. The member of the state senate in whose district the zone is located is a member of the board, and the member of the state house of representatives in whose district the zone is located is a member of the board, except that either may designate another individual to serve in the member's place at the pleasure of the member. The remaining members of the board are appointed by the governing body of the municipality or county that created the zone.
Members of the board are appointed for terms of two years unless longer terms are provided under Article XI, Section 11, of the Texas Constitution. Terms of members may be staggered.
A vacancy on the board is filled for the unexpired term by appointment of the governing body of the taxing unit that appointed the director who served in the vacant position.
To be eligible for appointment to the board by the governing body of the municipality or county that created the zone, an individual must generally:
- be a qualified voter of the municipality or county, as applicable; or
- be at least 18 years of age and own real property in the zone, whether or not the individual resides in the municipality or county.
Powers and Duties of Board of Directors
The City of Houston by ordinance or resolution may authorize the board to exercise any of the municipality's powers with respect to the administration, management, or operation of the zone or the implementation of the project plan for the zone, except the power to:
- issue bonds;
- impose taxes or fees;
- exercise the power of eminent domain; or
- give final approval to the project plan.
Project and Financing Plans
The board of directors of a reinvestment zone shall prepare and adopt a project plan and a reinvestment zone financing plan for the zone and submit the plans to the governing body of the municipality that created the zone. The plans must be as consistent as possible with the preliminary plans developed for the zone before the creation of the board.
The project plan must include:
- a map showing existing uses and conditions of real property in the zone and a map showing proposed improvements to and proposed uses of that property;
- proposed changes of zoning ordinances, the master plan of the municipality, building codes, other municipal ordinances, and subdivision rules and regulations, if any, of the county, if applicable;
- a list of estimated nonproject costs; and
- a statement of a method of relocating persons to be displaced as a result of implementing the plan.
The reinvestment zone financing plan must include:
- a detailed list describing the estimated project costs of the zone, including administrative expenses;
- a statement listing the kind, number, and location of all proposed public works or public improvements in the zone;
- an economic feasibility study;
- the estimated amount of bonded indebtedness to be incurred;
- the time when related costs or monetary obligations are to be incurred;
- a description of the methods of financing all estimated project costs and the expected sources of revenue to finance or pay project costs, including the percentage of tax increment to be derived from the property taxes of each taxing unit that levies taxes on real property in the zone;
- the current total appraised value of taxable real property in the zone;
- the estimated captured appraised value of the zone during each year of its existence; and
- the duration of the zone.
The governing body of the municipality that created the zone must approve a project plan or reinvestment zone financing plan after its adoption by the board. The approval must be by ordinance, in the case of a municipality, that finds that the plan is feasible and conforms to the master plan, if any, of the municipality or to subdivision rules and regulations, if any, of the county.
The board of directors of the zone at any time may adopt an amendment to the project plan consistent with the requirements and limitations of this chapter. The amendment takes effect on approval by the governing body of the municipality that created the zone. That approval must be by ordinance, in the case of a municipality. If an amendment reduces or increases the geographic area of the zone, increases the amount of bonded indebtedness to be incurred, increases or decreases the percentage of a tax increment to be contributed by a taxing unit, increases the total estimated project costs, or designates additional property in the zone to be acquired by the municipality, the approval must be by ordinance, as applicable, adopted after a public hearing.
Collection and Deposit of Tax Increment
Each taxing unit that taxes real property located in a reinvestment zone shall provide for the collection of its taxes in the zone as for any other property taxed by the unit. Each taxing unit shall pay into the tax increment fund for the zone an amount equal to the tax increment produced by the unit, less the sum of:
- property taxes produced from the tax increments that are, by contract executed before the designation of the area as a reinvestment zone, required to be paid by the unit to another political subdivision; and
- for a taxing unit other than the municipality that created the zone, a portion, not to exceed 15 percent, of the tax increment produced by the unit as provided by the reinvestment zone financing plan or a larger portion as provided by Chapter 311 of the Texas Tax Code.
Tax Increment Fund
In addition to the tax increment, all revenues from the sale of tax increment bonds or notes, revenues from the sale of any property acquired as part of the tax increment financing plan, and other revenues to be used in the reinvestment zone shall be deposited in the tax increment fund for the zone.
"Project costs" means the expenditures made or estimated to be made and monetary obligations incurred or estimated to be incurred by the municipality or county establishing a reinvestment zone that are listed in the project plan as costs of public works or public improvements in the zone, plus other costs incidental to those expenditures and obligations. "Project costs" include:
- capital costs, including the actual costs of the acquisition and construction of public works, public improvements, new buildings, structures, and fixtures; the actual costs of the acquisition, demolition, alteration, remodeling, repair, or reconstruction of existing buildings, structures, and fixtures; and the actual costs of the acquisition of land and equipment and the clearing and grading of land;
- financing costs, including all interest paid to holders of evidences of indebtedness or other obligations issued to pay for project costs and any premium paid over the principal amount of the obligations because of the redemption of the obligations before maturity;
- real property assembly costs;
- professional service costs, including those incurred for architectural, planning, engineering, and legal advice and services;
- imputed administrative costs, including reasonable charges for the time spent by employees of the municipality or county in connection with the implementation of a project plan;
- relocation costs;
- organizational costs, including the costs of conducting environmental impact studies or other studies, the cost of publicizing the creation of the zone, and the cost of implementing the project plan for the zone;
- interest before and during construction and for one year after completion of construction, whether or not capitalized;
- the cost of operating the reinvestment zone and project facilities;
- the amount of any contributions made by the municipality or county from general revenue for the implementation of the project plan; and
- payments made at the discretion of the governing body of the municipality or county that the governing body finds necessary or convenient to the creation of the zone or to the implementation of the project plans for the zone.
"Project plan" means the project plan for the development or redevelopment of a reinvestment zone approved under this chapter, including all amendments of the plan approved as provided by this chapter.
"Reinvestment zone financing plan" means the financing plan for a reinvestment zone described by this chapter.
"Taxing unit" means a county, an incorporated city or town (including a home-rule city), a school district, a special district or authority (including a junior college district, a hospital district, a district created by or pursuant to the Water Code, a mosquito control district, a fire prevention district, or a noxious weed control district), or any other political unit of this state, whether created by or pursuant to the constitution or a local, special, or general law, that is authorized to impose and is imposing ad valorem taxes on property even if the governing body of another political unit determines the tax rate for the unit or otherwise governs its affairs.
For more information please contact us.