Redevelopment is a set of tools provided under state law, Title 17C of the Utah Code, that empowers local governments in economic development, job creation, eliminating blight, and achieving the goals of development, reconstruction and rehabilitation of residential, commercial, industrial, and retail districts. Municipalities and counties are authorized to create redevelopment agencies, also known as urban renewal agencies, to use these tools.
Redevelopment is a term that has a long history in Utah, but in 2006, the Utah Legislature broke “redevelopment” down into three different tracks, including Urban Renewal, Economic Development, and Community Development. Each of those three tracks serves a somewhat different purpose. The same legislation also changed the legal name of agencies from “Redevelopment Agencies” to “Community Development and Renewal Agencies,” but many Agencies across the state still go by the historical nomination of Redevelopment Agency, or RDA.
Urban Renewal is the new term for what was historically redevelopment. The goal of Urban Renewal is to eliminate blight from specific areas within the community.
Economic Development is a tool that redevelopment agencies can use to help promote job growth in the community. The redevelopment agency can use tax increment to help encourage business relocation, expansion, and development through incentives targeted toward the creation of high-quality jobs.
Community Development is a flexible tool that allows redevelopment agencies the opportunity to encourage all kinds of new development that the community believes will be beneficial, including mixed-use and retail. Community Development provides a flexible alternative to the more rigid Urban Renewal and Economic Development tracks.
Examples of redevelopment tools:
- Ability to assemble land for development
- Ability to utilize tax increment and issue bonds
- Ability to invest in infrastructure to assist private enterprise
- Ability to increase affordable housing stock
Redevelopment Agencies use redevelopment powers and tools as a catalyst in revitalizing their communities. Redevelopment encourages new development, creates jobs and generates tax revenues in declining urbanized areas by developing partnerships between local governments and private entities. As of 2010 in Utah, 70 cities and 5 counties have redevelopment agencies.
Redevelopment can help a community implement a revitalization effort for downtowns, retail areas, neighborhoods or industrial areas. Redevelopment plans are locally created and adopted so they can respond to a community’s unique needs and vision.
Redevelopment plans can help communities to:
- Attract new jobs and businesses
- Create more affordable housing
- Stimulate private reinvestment in local neighborhoods and businesses
- Reduce crime
- Stimulate development of improvement programs
- Stimulate private investment and help rehabilitate homes and businesses
- Build or improve roads, utilities and public facilities
- Preserve open space
- Transform hazardous waste sites (called brownfields) into productive uses
- Create, adopt and/or implement specific plans
- Initiate and fund comprehensive planning efforts
The Redevelopment Agency, also known as a Community Development and Renewal Agency, is a separate, distinct legal entity from the City. However, the City Council serves as the governing board of the Agency. And, the Redevelopment Agency can utilize city staff or hire its own staff and advisors to carry out its day-to-day operations as well as to help formulate and implement redevelopment plans.
The benefit of this system is that the Redevelopment Agency is ultimately responsible to the voting public through the elected governing body that oversees the Agency.
Redevelopment activities may include the rehabilitation/reconstruction of existing structures, the redesign/re-planning of areas with inefficient site layout, the demolition and clearance of existing structures, the construction/rehabilitation of affordable housing and the construction of public facilities including, but not limited to, public buildings, streets, sidewalks, sewers, storm drains, water systems and street lights. All of this contributes to general economic revitalization of an area, making it more attractive for additional investors.
Through redevelopment, a project area receives focused attention and financial investment to reverse deteriorating trends, create jobs, revitalize the business climate, rehabilitate and add to the housing stock, as well as gain active participation and investment by residents and local business which would not otherwise occur. These revitalization efforts have positive effects that spill over the project area boundaries and improve the entire community.
Examples of activities/benefits generated through redevelopment:
- Commercial mixed-use projects
- New/rehabilitated affordable and market-rate housing
- New and revitalized schools
- Increased investment in the area
- Living wage job creation
- Transportation facilities
- Sales, hotel and utility tax revenue
- Youth recreation and service centers
- Community beautification
- Renewed civic pride
The project area is an officially adopted boundary in which actual redevelopment will take place. The project area must first go to public hearing (giving citizens who will be included in the project area a chance to express their views) after which the Redevelopment Agency acts on the adoption of the project area and becomes primarily responsible for future projects.
For Urban Renewal, before a project area is established, a survey area is designated to determine whether or not a redevelopment project is feasible. Preliminary studies, such as feasibility studies, are conducted to make a determination of the blighting conditions within the area.
Based upon this evaluation, the Redevelopment Agency selects a project area and indicates how the purpose of the Community Development and Renewal Law can be attained by redevelopment of this area. A project area can be reduced in size prior to adoption of the redevelopment plan, but cannot be enlarged without amending the survey area. A project area can also include non-adjacent properties.
Redevelopment is primarily financed by tax increment revenue. Other revenue sources include loans, grants and issuance of tax allocation bonds.
Typically, agencies use tax increment funds to leverage financial assistance from various agencies of the state and federal governments, and private sources.
The most common bond instrument used by redevelopment agencies to finance projects is called a tax allocation bond or revenue secured bond. These bonds, which are a loan of money to an Agency, are not a debt of the community or the general taxpayer. Rather, they are repaid solely from tax increment revenue generated within the project area. In other words, increased tax revenues generated through redevelopment activities are funneled back into the project area to stimulate more development as well as to pay the costs involved.
Tax increment is the primary source of revenue that redevelopment agencies have to undertake redevelopment projects. It is based on the assumption that a revitalized project area will generate more property taxes than were being produced before redevelopment. When a redevelopment project area is adopted, the current assessed values of the property within the project area are designated as the base year value. Tax increment comes from the increased assessed value of property, not from an increase in tax rate. Any increases in property value, as assessed because of change of ownership or new construction, will increase tax revenue generated by the property. This increase in tax revenue is the tax increment that goes to the Agency.
For example, a property owner pays $1,000 on land assessed at $100,000 this year. If, as a result of new construction on the property, the property increases in assessed valuation to $500,000, the property owner would pay $5,000 at the same standard tax rate. The $4,000 increase is called “tax increment.” Redevelopment agencies are entitled to collect this increase in property tax revenues, or tax increment, on the acreage they redeveloped to repay the debt involved in the project, and to reinvest these dollars in redevelopment activities within the project area. As well, 20 percent of that tax increment money goes into a housing fund set aside specifically to finance low- to moderate- income housing.
The Redevelopment Agency has no power to set tax rates or levy property taxes. Property tax on properties within a redevelopment project area is governed by the same laws as on properties outside redevelopment project areas.
When redevelopment activities are successful, the property values within and around the redevelopment project area increase over time due to the sale of property, or the rehabilitation and new construction of buildings. Thus, property tax increment revenues are the result of the rise in property values, not an increase in tax rates. The changed image and improved economic base increase the marketability of property in the area. Redevelopment activities enhance the marketability of properties.
Taxing entities such as the county, school districts, and special districts that serve the project area continue to receive all the tax revenues they were receiving the year the redevelopment project was formed (the base year). Also, taxing entities may receive a portion of the incremental increase in property tax revenues from a redevelopment project area, if adopted as part of the project area budget.
No redevelopment projects occur without taxing entity approval. For Urban Renewal and Economic Development projects, the taxing entities are represented by a taxing entity committee that reviews and, in its discretion, approves project area budgets. The taxing entity committee’s approval is required before the Redevelopment Agency can collect any tax increment.
For Community Development projects, the Redevelopment Agency does not convene a taxing entity committee. Instead, the Redevelopment Agency works independently with each taxing entity located within the project area. The Redevelopment Agency and each taxing entity may agree to an interlocal cooperation agreement giving the Redevelopment Agency a portion of tax increment generated in the Community Development project area.
Economic development is used to increase the number and quality of jobs in the state of Utah. Economic Development Project Areas have assisted in the creation of many employment opportunities throughout the State of Utah. Fundamentally and operationally, Economic Development Projects differ from Redevelopment Project Areas in that Economic Development Project Areas are not required to have or prove blight. As such, without Blight as a constraint, economic development project areas must produce new high paying “quality jobs” as defined by Utah Law. In addition, economic development project areas may not have retail uses as the primary component of the project area. Any retail components must be ancillary to the primary uses which create the new job opportunities.
A five step process must be followed to adopt an economic development plan and budget.
First, an area is targeted for economic development. This is called a “survey area.”
Second, the Agency prepares an economic development plan and project area budget describing the economic development project to be accomplished as a result of the Agency’s participation.
Third, the Agency board holds one or more public hearings to obtain comments and suggestions on the proposed plan and budget. The Agency board and the city council then adopt, adopt with modifications, or reject the plan. Adopting the plan establishes an economic development project area.
Fourth, if the plan includes the use of tax increment, a committee of representatives from the affected taxing agencies approves, approves with changes, or rejects the project area budget.
After plan and budget adoption, the Agency negotiates an agreement with an employer who will provide the additional employment opportunities. If the plan is prepared without a specific economic development partner, the Agency follows the plan to encourage economic development.
A Community Development Plan can be used to achieve the goals of either an Urban Renewal or Economic Development Plan. It does not have a taxing entity committee but instead individual Interlocal Agreements are negotiated with each taxing entity which will participate in a portion or all of the tax increment created in the project area.