June 13, 2024

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SMSD Super Sings a New Tune about TIFs

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The Shawnee Mission School District will not use its statutory veto power to stop the creation of a Tax Increment Financing district in Overland Park. SMSD Superintendent Jim Hinson told board members during a special meeting in January that the district cannot prove using TIF financing for a controversial project to redevelop the Brookridge Country Club will have an adverse impact on the school district’s finances.

Hinson said he can’t prove it due to the current school funding mechanism.

“Whether there is the TIF in place or not in place, we do not draw operational dollars from this project,” Hinson told the Shawnee Mission Post. “Therefore, how do you determine adverse effect for operational purposes?”

Currently, Kansas is using block grants to fund public schools. The block grant funding was designed as a two-year stop-gap measure to fund schools until legislators adopt a new funding formula. Under the old formula, TIF projects cost districts potential capital outlay funding used to maintain school buildings and other district infrastructure. Block grants will be going away soon, but the same challenges created by TIF districts are likely to exist when legislators get around to adopting a new school finance formula.

Tax Increment Financing districts are established by cities, but Kansas statutes allows other affected taxing entities, like school districts, a 30-day window in which to veto the creation of a TIF district. TIF financing allows developers to use some of the property taxes and sales taxes generated by a property to finance infrastructure related to the development.

This year, Hinson and the board won’t formally oppose a TIF in the school district, but in 2015, Hinson testified before a Kansas Senate Special Committee on Taxation  that TIFs create challenging “financial implications for school districts.”

Using TIF financing, developers use increased property valuations and sales taxes generated from a property to finance the development. The property tax increment value is the increased property valuation value above that of the base year, or the year the TIF was granted. The taxation difference may be used to subsidize land acquisition or site improvements.  School districts continue to receive the base tax amount until the TIF is dissolved.

Multiple projects within the same district are common, and proceeds from one project can be used to support other projects within the TIF district. By statute, TIF financing is limited to 20 years. However since multiple projects within the same district are common, the TIF district boundary continues until it is formally resolved by the city council. This means additional projects can be approved for TIF financing within the boundary indefinitely, and school districts and other taxing entities never receive the full taxation value for the properties.

The largest effect on a school district may be that many TIF proposals, like the one for the Brookridge Country Club area, contain housing elements including multi-family housing, increasing student headcounts in those local school districts.Hinson told the special committee that increased enrollment is good for the district, but that schools need revenue to support the additional student population.

“The loss of capital outlay funds through TIF poses a concern regarding the ability to maintain infrastructure needs over time…Economic development is beneficial to our community; however, it is important for school district leaders to carefully review and work with the municipalities to ensure that not only the goals of the development are met, but that the school district can remain viable and has the resources necessary to meet its education mission serving students.” Hinson once told a special Kansas Senate committee.

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