Pub. 5 2014 Issue 3

www.wvbankers.org 12 West Virginia Banker West Virginia currently has legislation permitting the establishment of TIF districts utilizing increases in property tax revenues or sales tax revenues to finance public improvement projects. TIF districts in West Virginia are typically utilized to assist with the financing of costs related to public infrastructure, land acquisition, demolition, utilities and other public improvements. Because projects utilizing TIF funds are “public improvements,” they must comply with West Virginia laws pertaining to (1) payment of prevailing wage, (2) use of local labor and (3) either competitive bidding or design-build meth- ods of construction. West Virginia Tax Increment Financing Act In 2002, the West Virginia Legislature enacted the West Virginia Tax Increment Financing Act (W.Va. Code §7-11B-1 et. seq.) (the “TIF Act”), permitting the cap- ture of increases in property tax revenue gained by developing a discrete geograph- ic area and the use of such increase to finance development or redevelopment projects. A county commission or a gov- erning body of an eligible municipality, upon its own initiative or upon application of an agency or a project developer, may propose the creation of a TIF district and designate its boundaries, which must be contiguous. Under the TIF Act only counties and municipalities with a popu- lation in excess of 10,000 are permitted to establish TIF districts. After the creation of a TIF district has been proposed, a public hearing must be held. If following the public hearing the political subdivision decides to move for- ward with the creation of the TIF district, it must submit a district and project plan application (eligible projects include the acquisition of land and improvements; the development or redevelopment of the project area to provide land for need- ed public facilities, public housing, or industrial or commercial development or revitalization; assistance in the relocation of persons and organizations displaced as a result of carrying out the project; or the construction of capital improvements within the district designed to increase or enhance the development of commerce, industry or housing) to the West Virgin- ia Development Office (“WVDO”) for approval. After receiving approval from the WVDO, the governing body of the political subdivision must enact an order Tax Increment Financing (“TIF”) is becoming a very common tool to accomplish economic development projects in West Virginia. Banking executives should not overlook financing opportunities presented by TIF projects, as the creation of TIF districts provide financing opportunities for lenders. In this article, we present the basics of TIF in West Virginia to assist bankers in identifying such opportunities. TIF is a method of public financing that has been used as an economic development tool throughout the United States. De- signed to generate funding for projects in distressed or underdeveloped areas where development might not otherwise occur, it is based upon using future increases in tax revenue to finance current improvements. The construction of such improvements is intended to create the conditions that result in the future tax revenue increases. Discrete geographic districts are created, and a base level of tax revenue within that area is determined based on tax revenues generated in that district prior to develop- ment. Then, during each year after the base level is established, tax revenues collected in excess of the base are available to finance economic development and redevelopment projects or pay debt service on TIF bonds used to fund economic development and redevelopment projects. Tax Increment Financing Provides Unique Opportunities for West Virginia Lenders By Carrie J. Cecil, Spilman Thomas & Battle, PLLC