Redevelopment Agency

Holladay’s Redevelopment Agency (RDA) was created to incent private investment in areas of the community with a demonstrated need for economic development. These are areas that Holladay desires to see redeveloped, but the market has not done so. By creating an economic incentive for redevelopment, the RDA encourages desired development. By State Law, the elected members of the Holladay City Council serve as the Holladay Redevelopment Agency (RDA) Board. The RDA Board approves the RDA budget, programs, policies, and projects.

The purpose of the RDA is to achieve several key objectives, including:

  1. Attracting private investment in economically disadvantaged communities.
  2. Rejuvenating older neighborhoods through a combination of renovation and new development initiatives.
  3. Facilitating the construction of housing that caters to individuals across various income levels.
  4. Eliminating blight and improving the overall condition of designated project areas.

Tax Increment Financing, Projects, and Project Areas

The primary tool granted to community development and revitalization agencies, including the Redevelopment Agency of Holladay City, as per Title 17C, revolves around the utilization of tax increment financing (TIF) to stimulate redevelopment and foster economic growth in specific locations within the city. This process entails the identification of particular project areas and the formulation of project area plans.

Tax increment is the increase in property tax revenue generated within a project area from new growth and development. Taxing entities volunteer a percent of the additional revenue from new growth for a specified number of years or until a specific contribution cap is reached. The volunteered tax increment is used by the RDA to support development that wouldn’t otherwise happen.

The RDA currently manages two project areas in Holladay City:  Holladay Village Center, and Cottonwood Mall (Holladay Hills)


How Tax Increment Financing Works
The financial incentives offered to developers by the RDA are generated by the future proceeds of the development. The incentives do not come from the city’s general fund or from other entities involved, such as the County or Granite School District. The incentives

Priority development activity within targeted areas, known as “project areas,” may be eligible for financial assistance provided by the RDA. Project areas are usually less than 100 acres in size and take between three and six months to establish.

Once a project area is created, the RDA may assist in the acquisition of property or in the development of the site. The agency has the ability, with required approval of a committee comprised of representatives of various taxing entities, to receive a portion of the future property tax revenue (referred to as “tax increment”) paid on new improvements constructed in the project area. This allows the agency to financially assist in the development of projects. Providing financial assistance is limited to those projects that the agency determines are important in building the community and helping to reach its development goals. State law also requires that the agency use 20% of the tax increment generated by a project area to encourage the development of affordable housing throughout the community.

“Affordable housing” is based on the Area Median Income (AMI), which is determined by the federal Department of Housing and Urban Development (HUD), based on US Census Data. The Median Family Income in the Salt Lake County area for 2012 is $71,300.  

Redevelopment projects in which RDA is involved are financed through a combination of public and private investment. A unique mechanism called tax increment financing (TIF) enables the RDA to use the net new tax revenues generated by the redevelopment to help finance the project.

Here’s how TIF works: When a redevelopment project is being planned, the RDA analyzes how much additional taxes would be generated once it is completed. That projection is compared to the existing taxes generated. The difference, or increased tax generations is called the “tax increment.” Some or all of the tax increment then can be dedicated by the RDA either to finance bonds or to reimburse developers for a portion of their project financing. The new tax revenue that is created must be used for improvements that have a demonstrable public benefit and that support the redevelopment effort, such as the site clearance, streets, utilities, parks, the removal of hazardous materials or conditions, or site acquisition and the removal of blighted buildings.

TIF is used only when an area or property can’t be redeveloped without public investment and when it meets a public objective, and then only to fill the gap between the total project cost and the level of private financing the project can support. In the case of developer reimbursement, the amount of money reimbursed depends on the success of the project, with the developer getting the money only if the project creates the extra value for the city.

All the additional taxes created by the redevelopment revert to the normal taxing entities once the RDA has fulfilled its monetary obligations related to a project. Thus, the neighborhood benefits from the creation of revitalized, productive properties and the taxing entities get new, permanent sources of revenue that wouldn’t have existed if the RDA had not enabled the project to be undertaken.
What about eminent domain in RDA?
The US Supreme Court ruled in Kelo v. City of New London, that RDAs can condemn property using eminent domain for economic development. The Holladay RDA Board adopted a resolution that Holladay would not obtain property for development through condemnation.

That said, the Holladay City Council has used eminent domain to obtain rights-of-way for roads. These are small slivers of land needed for roadway. The land owner is paid the fair market appraised value of the land that is taken.
How Tax Increment Funding Affects School Districts
Just like the City of Holladay, school districts do not give money to the developer. They don't write a check, they don't appropriate any money in their budgets. The school district simply agrees to collect less on the additional taxes generated from future development for a period of time. The taxes that are foregone, do not exist today and would not exist “but for” the RDA, and are generated by the development itself. The development literally “pays for itself” by redirecting the taxes it generates back into the project.

The City and the school district continue to receive the “base amount” of taxes collected and allow some or all of the net increase in future taxes (the “tax increment”) to be dedicated to the project for a period of time.

Granite District and other taxing entities simply agree to receive less in property taxes for the improvements during an initial period of time. The “captured” taxes are retained in the project area and used to pay for infrastructures (roads, utilities, sewer, etc), thereby making the project economically viable. Without such incentive, these projects would not be built.

This is the “but for” test: the project would not be built “but for” the public/private partnership of tax-increment funding. Conversely, the tax increment which the schools agree to initially forego would not exist “but for” the project. After the initial period, the full increment is then paid to the city and school district.
Why Not Let the Developer Pay for it
Some propose that cities should offer no assistance to developers, under the theory that “the market will make something happen there anyway.”  The economic reality is “were that true, it would already have happened.” If a project were financially viable, free market forces would have ensured that it would have happened already. When the market fails to redevelop an area, RDA incentives are needed to stimulate development.

The same can be said for the Holladay Village Center. Prior to the RDA investing in downtown Holladay, nothing major has happened there for decades. The redevelopment would not have happened, “but for” redevelopment help.
Do RDAs expire?
Each EDA or RDA is set to expire in a certain number of years or when the financing goals are reached, whichever is soonest. Usually, they last 15-20 years. After they expire, all of the taxes generated from the project area flow to the taxing entities and not retained in the project.