TIF district 5 could be a possibility for Colfax

By LeAnn R. Ralph

COLFAX —  Creating a Tax Increment Financing District No. 5 could be a possibility for Colfax to help move economic development forward.

Sean Lentz, of Ehlers, Inc., the village’s financial consultant, spoke to the Colfax Village Board’s audit and finance committee December 6 about the village’s finances.

The audit and finance committee is made up of the entire village board.

TIF No. 4 is nearing the end of its life cycle, with a final expenditure year of 2021 and a final revenue year of 2026, Lentz said.

TIF No. 4 also is sharing revenue with TIF No. 3, he noted.

In a TIF district, after the district is created, the property tax money paid on new valuation in the district is set aside in a special fund for the village to use to pay expenses for the TIF district rather than being paid to other taxing authorities that normally would receive the property taxes.

The other taxing authorities include the county, the school district and the technical college district. When the TIF is closed out, any money left over is paid to the other taxing authorities.

School districts neither gain nor lose from a TIF district, because when the district is closed out, the state reduces the amount of state aid to the school district by the amount of money received from the TIF district.

If the village wanted to borrow $450,000 for a project, such as purchasing more land, the best way to go about it would be to create a TIF No.5, Lentz said.

With a fifth TIF District, new valuation would have to amount to $1.325 million to make it work, he said.

If the village were to borrow $450,000 under TIF 4, the new valuation would have to amount to $3 million to make it work, Lentz said.

Getting to $1.325 million in new valuation would be easier than getting to $3 million, he said.

For example, if new homes built were valued at $150,000, all together, eight or nine new homes would be needed to generate $1.325 million in new valuation, while 20 new homes would be needed to generate $3 million in new valuation.

Creating a fifth TIF district would “reduce the risk” by $1.675 million and would give the village between 20 and 27 years to repay the costs, Lentz said.

TIF districts are created for either a 20 or a 27 year period.

Borrowing capacity

Lentz also reviewed the village’s borrowing capacity.

State law allows municipalities to borrow up to 5 percent of the equalized value.

Colfax has an equalized value of $50.5 million, so the village’s borrowing capacity is $2.53 million, Lentz said.

The $50.5 million in equalized value includes the valuation in the village’s TIF districts.

At the beginning of 2017, the village had outstanding general obligation debt and promissory notes of $1.55 million and a remaining borrowing capacity of just under $1 million — or $976,734, Lentz said.

The total principal payment in 2017 is $168,422. At the beginning of the year, Colfax had 39 percent remaining on the borrowing capacity, and the end of the year, will have 45 percent remaining of the borrowing capacity, he said.

According to information Lentz provided to village board members, a 2016 promissory note for $410,000 will be paid off in 2023.

A 2015 promissory note for $350,000 will be paid off in 2025.

General obligation bonds of $1.31 million from 2013 will be paid off in 2028.

If the village’s equalized value remains at $50.5 million and the village does not borrow any money, by 2028, the borrowing capacity would be back up to $2.53 million.

The total debt levy of $77,430 is the amount of the tax levy in the village’s general fund budget not covered by any other sources.

In 2018, for example, the debt mill rate is $1.67 per $1,000 of property value, meaning that a property owner in Colfax with a home valued at $100,000 would be paying $167 per year toward the village’s debt.

From 2018 to 2028, the debt levy mill rate fluctuates up and down, with a high of $1.74 per $1,000 of property value in 2020.

By 2028, the debt levy mill rate is expected to be $1.33. At that point, a property owner in Colfax with a home valued at $100,000 would be paying $133 per year toward the village’s debit.

$450,000

Lentz also provided information about the borrowing capacity and debt mill rate if the village were to borrow $450,000 in 2018 to buy land in TIF 4.

Borrowing $450,000 would reduce the village’s borrowing capacity to $526,734, and the total principal payment would be $168,422.

The total principal payment would climb to $246,868 in 2022 and would gradually decline until the final $60,000 payment in 2028.

If the village borrowed $450,000 that the TIF could not support or if the money was not related to the TIF, the debt mill rate would increase to $3.15 per $1,000 of property value, or $315 on a $100,000 home, in 2020.

The debt mill rate would remain over $3 per $1,000 of property value until 2023 and would decrease to $2.76 in 2024, and would eventually end up at $1.33 in 2028, or $133 on a $100,000 home.