TRAVERSE CITY — The city’s Downtown Development Authority can continue to spend captured tax dollars through the end of its tax increment financing (TIF) plan.
That’s the opinion of DDA attorney Scott Howard presented last week to the city’s DDA Board, as officials continue to grapple with the fallout of two new city charter amendments impacting tax increment financing plans. City voters in November 2024 approved two changes to the city charter requiring new, amended or extended TIF plans to go to a public vote, and the other stating that any extension of the TIF-97 plan— since renamed Moving Downtown Forward — not approved by city voters would be void.
Following the election the board asked Howard for a legal opinion on allowable expenditures of TIF-97 beyond the plan’s expiration in 2027. Howard’s April 22 memorandum outlined the statutory framework that would impact those expenditures, including outstanding legal obligations and continuing the DDA’s business operations. Tax increment financing involves capturing tax dollars collected from other taxing units for projects and expenses identified in approved TIF plans, including the city’s general fund, Grand Traverse County, Northwestern Michigan College and other local taxing entities.
“It is my opinion that the DDA may continue to expend TIF dollars captured prior to the expiration of the current TIF plan (TIF 97) for approved projects and activities outlined in the TIF plan, even after the expiration of the plan itself (expected in 2027),” Howard wrote.
Specifically, Howard said the DDA may allocate TIF funds to any projects or financing obligations — such as a bond payment — so long as the funds are captured prior to the plan’s expiration. Those funds must be spent “on activities explicitly permitted under the approved Development and TIF plans,” he wrote.
Howard also said state law prohibits the city from abolishing the DDA until its outstanding contractual obligations, such as bonds or other legal commitments, have been “fully satisfied or segregated for payment.” He clarified that until the DDA completes its final tax capture in 2027, “it may enter into contracts, continue funding projects and conduct operations consistent with the current TIF plan.”
If the TIF plan or the DDA is abolished by the city, Howard said state law “mandates that all outstanding obligations related to the TIF must be resolved first. Surplus funds remaining after obligations are met would revert proportionately to the respective taxing authorities.” Finally, Howard said the “DDA’s spending authority extends to funds that are ‘contracted’ or ‘otherwise obligated’ prior to the expiration date of the TIF plan. It is crucial to ensure that expenditures align with projects currently approved under the plan.”
Mayor Amy Shamroe, who serves on the DDA Board, asked Howard to work with city attorney Lauren Trible-Laucht to develop a similar legal explanation on allowable TIF spending for the City Commission. Trible-Laucht is currently working on an implementation policy for TIF plans in accordance with the city’s new charter amendments. The commission discussed that proposal last week and will revisit the issue in the near future. It’s possible that a 30-year extension of the TIF-97 plan that’s been endorsed by the DDA will be put before city voters in November under the new charter rules.
“I think it’s good we have an update on what we can do and can’t do,” Shamroe said.
As the clock winds down on the TIF 97 plan, DDA Executive Director Harry Burkholder continues to update the board on the major capital improvement projects that remain in the document. Those include upgrades to Rotary Square on Union Street, early phases of the Boardman/Ottaway riverwalk project that includes a new pedestrian bridge over the river and improvements to the J. Smith Walkway, and construction of a long-planned pavilion at the Sara Hardy Farmers Market.
Burkholder said staff from Progressive Companies have conducted several recent meetings locally to gather feedback and input on uses and designs for Rotary Square. Consultants are working on preliminary design concepts through May and should have schematic designs in place by July, and develop an operational and management framework for the site by late summer and start construction next spring.
In February, the DDA Board hired Inform Studio to work on design and development plans for the Boardman/Ottaway riverwalk project and will meet with the consultants to set up the next steps in the process. Burkholder said he wants the DDA to determine those future financial obligations under the plan before the last budget cycle of the TIF 97 plan.
“I think we need to get our ducks in a row by the end of 2027,” he said.
The TIF 97 district is the larger of two tax increment financing districts operating in the DDA’s service area. The other is the Old Town TIF plan covering projects and expenses in the Old Town area south of the main downtown district. The Old Town TIF plan was extended for 25 years back in 2016 and continues through December 2041.