They can stretch for miles and often hang around population centers like Charleston, Huntington and Morgantown, but remain unseen — and often unknown — throughout their lifespans, which can last for decades.
What they have helped produce in West Virginia, however, can often be seen as clear as day: renovations to the Charleston Civic Center, new baseball and soccer fields at Putnam County’s Valley Park and, eventually, a site for a new South Charleston shopping center.
Tax-increment financing districts are set up and used by local governments to direct a portion of taxes within the district toward a project also inside its borders, the acceleration of economic development in mind.
John Stump, a Steptoe & Johnson lawyer who has guided several municipalities through establishing TIF districts, called them “a very precise economic development tool” because the lines of the district can also be drawn precisely to benefit the project.
“TIF is utilized to take a project that is either marginal and make it workable, or take a project that would be done on a smaller scale and optimize it, so essentially you’re getting more development as a result of TIF,” he said.
Local government in West Virginia hasn’t been slow to embrace TIF, once the state cleared the path for it. The Department of Commerce had 35 TIF districts on their books in 2017, per its annual report on West Virginia TIF districts.
“For the most part, I think they have [succeeded],” said Todd Hooker, the state’s deputy director of business and industrial development, of TIF districts. “There are one or two out there that struggle, but most have paid off pretty well.”
Reviewing TIF districts sent in by local governments is part of Hooker’s job, as the state has to approve them before they can go into effect. In West Virginia, the districts proposed often aim to finance the construction of infrastructure within them, Hooker said. That helps attract businesses looking for land that won’t be a hassle to develop for their needs.
“We like to see the TIF projects go toward anything that can be considered public infrastructure: water, roads, we’ll look at fiber, gas service, power service into sites and projects,” he said.
But developing infrastructure or other projects through TIF isn’t as easy as drawing up a district and celebrating instant success: officials describe it as a careful process where the reward won’t be clear until years down the road.
How TIF works
County commissions need to be able to finance projects “designed to encourage economic growth and development in geographic areas characterized by high levels of unemployment, stagnant employment, slow income growth, contaminated property or inadequate infrastructure,” West Virginia state code says.
Those characteristics aren’t impossible to find in the economically lagging Mountain State, and TIF districts are to be created as a partial remedy. Per state code, one of their purposes is to aid localities with “a competitive disadvantage” when it comes to drawing in private investment and development, along with eliminating blighted areas.
So how does a TIF district get created to do just that? Early on, the district area and the projects that tax dollars will go toward must be defined. Then the base value of its projects must be assessed. The district also needs to garner support in its city or county.
“They have to go through all their local public hearings, typically the developers will meet with either the city or county — that’s typically a 90 to 100 day process,” Hooker said.
Sometimes people are wary the TIF district will directly install a property tax hike — a common misconception, Hooker said.
But usually, Stump said, any public opposition would occur due to the projects themselves rather than TIF as their financing vehicle.
“There is concern about, in some instances, if the TIF is really needed, but I think overall it’s been a very effective tool,” Stump said. “We rarely have people come and show up to complain about TIF itself.”
County commissions and some municipalities can apply directly to the Development Office for TIF approval. Other municipalities have to be approved by their county commissions prior to asking the Development Office for approval.
“Once they send it here, we typically have a committee of people here that take a look at it,” Hooker said, himself being in the committee.
If the TIF district passes through the remaining regulatory hoops and makes the state’s grade, it will finally settle in and begin directing tax dollars toward improvements within it.
Most of West Virginia’s TIF districts generate their funds via property taxes. The project financing comes from the difference between the assessed value of the property pre-development and the value of the property post-development — that difference is the “tax increment.” The increase in revenue can only be used within the district.
The county or municipality the TIF district is in will continue to collect the amount in funds they did pre-development while, as the assessed value of the property rises, those newfound tax dollars go directly toward the district’s desired project or bonds/notes issued for their funding. The new development itself is an easy way to get property value to rise.
Districts cannot be in existence for more than 30 years, and financing obligations can’t mature later than an area’s termination date, per state code. After the project, the assessed value then belongs to the project area’s taxing districts.
Another option outside of property tax TIF districts are sales tax TIF districts, a much rarer entity in West Virginia. These use new sales taxes in the district to finance projects. It’s been used at the Cabela’s near Wheeling and will soon have a presence in South Charleston.
Stump expects sales tax TIF districts to remain uncommon, as local officials focus on building infrastructure through property tax TIFs to attract businesses that could just as easily locate in Ohio or North Carolina.
“For us to compete, we have to have shovel-ready sites,” Stump said. “That’s a term that’s thrown around a lot, but we have to have sites that are ready to go that have water and sewer and road access.”
Present, future districts
West Virginia was relatively late to the TIF game, Stump said. But once the state set the stage, Putnam County was one of the first in line to take advantage.
In 2004, the Greater Teays Valley TIF district made its debut, stretching along Interstate 64 between the Teays Valley and Hurricane exits. Building out water infrastructure was part of the district’s purpose, but it also directed dollars toward Valley Park improvements, including new baseball and soccer fields, wave pool repairs and the construction of a community conference center.
“It’s really been a regional and local boom to the economy for getting people into that area, and I think everyone benefits from that, from restaurants to retail places and so forth,” said Jeremy Young, county manager of Putnam.
Putnam County has another TIF district, too, this one more recently established at its business park. Infrastructure buildout is the primary goal of that district. The revenue coming in from it isn’t as much as what’s been seen in the Greater Teays Valley district, but there’s a lot more room for growth, Young said.
“There have been several businesses that have moved into the park, and we hope that continues to grow,” he said.
Charleston, meanwhile, established a TIF district in downtown to finance its Civic Center renovation project, which is slated to wrap up this year.
These districts in the Kanawha Valley, though, have a way to go before catching up to Monongalia County up north. Within that county, nine TIF districts exist, be they under the county commission’s or the city of Morgantown’s purview. The districts have helped finance projects like the West Virginia University baseball field and additional University Town Centre development.
“It’s a pretty explosive growth area,” Hooker said of why Monongalia County and Morgantown house several TIF districts.
But perhaps none of West Virginia’s TIF districts are as ambitious — and complex — as South Charleston’s district that would encompass much of the city.
Approved by the Legislature and the Development Office in 2017, South Charleston’s TIF district has two distinct parts: a sales tax TIF to draw revenue from new businesses and a property tax TIF for a future shopping complex on the site of the fly ash pond once owned by FMC.
South Charleston Mayor Frank Mullens — who has often called the TIF a “game-changer” for the city — said the idea came from a conversation he and city manager Rick Atkinson had with Paul Mattox, when Mattox was Transportation Secretary.
“We’re talking about the Jefferson Road [expansion] project and the fly ash pond development, and he said, ‘You should check into a TIF,’” Mullens said, noting that the Jefferson Road project will provide a window of opportunity to use excess fill for other projects. “We’re riding back and I said, ‘Rick, we got to do this, so let’s start investigating.”
The TIF district’s two parts are expected to finance roughly $155 million in various public projects, including an educational complex at the West Virginia Regional Technology Park, the Thomas Memorial Hospital Wellness Center and an access road to The Shops at Trace Fork shopping center.
South Charleston City Manager Rick Atkinson, though, said he’s perhaps most excited for a project to build a sewer line on Corridor G.
“Infrastructure is hopefully the foundation for new buildings and new opportunities,” he said.