Earlier this month, a package of bills was signed into law that would phase out the capture of tax increment revenues generated by library millages by downtown development authorities, tax increment finance authorities, local development finance authorities, and corridor improvement authorities. These bills took immediate effect on January 9, 2017, and must be considered in evaluating tax increment capture for these entities going forward. The law excludes all new millages for public library purposes approved by the voters after December 31, 2016, from the definition of tax increment revenues, thus automatically excluding them from capture. Millages (voted and nonvoted) levied before January 1, 2017, may also be exempted if the authority no longer has outstanding obligations that need to be paid or if the authority amends the boundaries of its district or amends its tax increment finance plan to extend the plan's duration. The legislation, however, contains problematic language with respect to the amendment of plans to extend their duration that may make this provision ineffective.
Are all new voter-approved library millages exempt from capture?
Yes, all millages approved by the voters after December 31, 2016, are removed from the definition of tax increment revenues and cannot be captured as long as the millage is a separate millage for public library purposes. This provision applies to all libraries, not just district libraries, but would not apply to a library if its funding comes from a general millage levy of a municipality.
Are existing millages automatically exempt from capture?
Existing millages (voted and nonvoted) are only automatically exempt from capture as of the effective date of the legislation if all outstanding obligations of the tax increment authority are satisfied. "Obligations" under the statutes is a broadly defined term. An obligation is any written promise to pay or a requirement to pay imposed by law. Written promises include bonds, notes, contracts, agreements, and leases. Obligations may include chargebacks owed to counties for delinquent property taxes and gain sharing agreements. Each authority will need to analyze its financial obligations carefully in determining whether it has obligations in place that will prevent a library millage from becoming exempt.
Can an authority incur new obligations to prevent a library millage from becoming exempt?
While there is no definitive guidance on this question, we believe a court would...