Tax Increment Financing Bill Sent to Governor
Wolfe, Lou Anne, THE JOURNAL RECORD
By Lou Anne Wolfe
Journal Record Staff Reporter
A bill to allow local governments to designate tax increment financing projects and grant other tax incentives for development passed the Oklahoma Legislature Friday and was sent to the governor's desk.
House Bill 1525, cothored by Rep. Russ Roach and Sen. Penny Williams, both D-Tulsa, would provide the mechanism to activate State Question 641, approved by voters in November 1990.
The bill was approved 53-42 in the House of Representatives, but the emergency clause failed to get the required 51 votes for passage, so it would not go into effect until 90 days after the end of the legislative session on Friday.
The Senate approved the bill 31-14.
In tax increment financing on a development project, the amount of ad valorem tax income from the property prior to improvement continues to go to the usual recipients, such as schools. The excess tax revenue generated by developing the land is captured to pay for needed improvements to the property, such as water and sewer systems and utilities.
The excess captured amount is the "tax increment."
When the financing instruments for the structural improvements on the land are paid off, the increment reverts back to the usual recipients, for a revenue increase from an improved tax base.
House Bill 1525 also would authorize local governments to grant tax incentives or exemptions in "reinvestment" areas, historic preservation areas or economic growth areas. Allowable tax breaks would be limited to the extent of the new investment made.
Roach said some 40 states, including every state surrounding Oklahoma, have tax increment financing legislation. He said the authors of House Bill 1525 worked closely with the Oklahoma State School Boards Association to come up with wording that would be acceptable to schools. School boards have been concerned that they might lose property tax revenue under the new financing tools.
However, proponents of the bill point out that the schools would continue to receive property tax revenues equal to what they currently get from the unimproved property. Moreover, they said as the project property value improved, value of surrounding properties would follow, resulting in increased property tax revenue from those sources.
"Education is not going to lose one red cent on this bill," said Rep. Gary Bastin, D-Del City. "As a matter of fact, they stand to gain."
Bastin noted that the state's Rural Economic Development Summit made establishment of tax increment financing a top priority.
"I guarantee you, it would generate a lot of economic development in this state," he said.
Rep. Don McCorkell, D-Tulsa, said House Bill 1525 has been sought by developers of a potential major project in "rural" Oklahoma, which would create about 1,500 jobs. The community under consideration for the site lacks infrastructure to support the project, he said.
Rep. Larry Adair, D-Stilwell, opposed the bill, saying that it's "going to begin eroding the base of two things very important to the people of the state of Oklahoma _ schools and county government."
Rep. M.C. Leist, D-Morris, also speaking against the bill, said he's opposed to involving the ad valorem tax base in the incentives. He recommended restricting the tax options to sales tax and other local taxes. …