A new Urban Renewal Area encompassing the Lundgren Wind Project may be in the works, which could help pay for roads and bridges in the county.
The Webster County Board of Supervisors heard a presentation on some details of Tax Increment Financing at a meeting Thursday with attorneys from Ahlers & Cooney P.C., the firm used by the county for its recent development agreements.
The meeting was for general information on a wide range of TIF issues, and no specific plans were discussed. More discussion is needed on the possible new region, said Supervisor Clark Fletcher.
The wind farm could be added to the county's existing Urban Renewal Area, or put into its own area, said Pat Martin, of Ahlers & Cooney. The current area includes the large ag industrial park known as Iowa's Crossroads of Global Innovation, as well as NEW Cooperatives in Barnum, Roelyn and Lanyon, and POET Biorefinery north of Gowrie.
TI F is the primary development tool available to the cities and counties, Fletcher said. It can be used to give tax rebates as incentives for new companies, or to fund new infrastructure for them.
But it has other uses, too, such as raising money for economic development investments.
Martin said TIF can only be used within what is declared an Urban Renewal Area. Within that, a TIF region can be created including all or part of the area.
Value of the land in a TIF region is assessed before improvements are made, to give the base tax rate. After a company makes improvements, the land is assessed again. The difference between the base rate and the new higher tax is called the increment. That increment can then be reinvested in various ways within the Urban Renewal Area.
TIF can be collected for a maximum of 20 years after assessment of that base rate, Martin said.
Companies commonly negotiate to receive tax rebates paid out of TIF, usually over a shorter period of time. But agreements can also include the use of TIF to build infrastructure - water, sewer and roads - to support a new business, Martin said.
Wind turbines are taxed as property, not equipment, due to a state law that benefits the turbine companies, said Mark Cory. an attorney with Ahlers & Cooney. This makes it possible to use Urban Renewal Areas and TIF with wind farms, and several counties have done this.
Since heavy equipment can tear up the roads during wind turbine construction, some counties use TIF from the turbines to fix those roads, Martin said.
Other roads in the renewal area can also be fixed with that money, as long as it serves an economic development purpose.
"Just saying 'this is a road that needs to be done' is not good enough," Martin said. Instead, counties say, "'We need roads to market; the No. 1 industry in this county is ag, and we need good roads. We're going to put those roads in.' That's a perfect economic development reason."
Webster County Engineer Randy Will said adding the wind farm to the existing renewal area would be beneficial because of the large number of projects there that need the money.
But making a new Urban Renewal Area, or even several areas, may make it easier to reach agreement. Any city within two miles of a proposed Urban Renewal Area has to approve before it can be created.
Parts of the wind farm come that close to Gowrie, Harcourt, Lehigh, Dayton, Callender and Otho.
"You have to be prepared to go to six city councils and ask them for permission," Cory said.
School districts sometimes object to the increment that would have gone to them being used instead for development of roads not in their district, he said. Cities have turned down renewal areas for that reason.
The county has many options to explore, he added.
TIF takes some time to start coming in, since the work has to be completed, then an assessment has to be done, and taxes based on that assessment are not paid until the next fiscal year.
Also, tax increment funds are not guaranteed, because the Legislature could change how tax is levied on wind turbines.
Cory cautioned the board against spending large sums all at once with the assumption it would all be paid back.
TIF is not funding for the budget, he said; it's a way the county can reimburse itself for money that has already been spent.