Our client is a beautiful semi-rural Township of 8,000 residents, just a short drive from a large metropolitan area. Like many other Michigan municipalities, the Township established a Downtown Development Authority (DDA) in the early 2000’s. And, like many other Michigan municipalities, the Great Recession had a profoundly negative and lasting impact on the Taxable Values in the community, and hence, the Captured Taxable Values available to the DDA.
In 2011, the decline in Taxable Values had eroded the Captured Taxable Values within the DDA to a negative position. This situation was exacerbated over the ensuing years to a point where the DDA capture was negative $6 million in 2017. In 2022, after a decade of no Tax Increment Finance (TIF) revenue, existing staff had no experience with administering TIF for DDAs and lacked the knowledge of tax increment financing to evaluate the feasibility of the DDA. Local leaders questioned the viability of the DDA and openly debated whether it made sense to dissolve the authority. Local leaders called upon WHG to step in to evaluate the DDA and assess its future viability.
The WoodHill Group Solution
WHG researched the history of the DDA from its inception, and created a detailed, yet succinct, record of the DDA’s TIF activity. This included separating the DDA’s two distinct capture methods for different property types, and memorializing the Taxable Values, Base Values, and Captured Values by year and capture methodology.
WHG then created a forecast of future Taxable and Captured Values. Our methodology included using the current year values as a base and applying economic forecast data for inflation and real estate growth from the Federal Reserve Bank of Philadelphia Survey of Professional Forecasters, the Urban Land Institute, CoreLogic HPI, and others. Results were tempered for the expected influence of the Headlee Rollback factor. Due to the uncertainty of future economic forecasts, WHG created three scenarios: Baseline, Optimistic, and Pessimistic.
Our model showed that there would be positive capture for the current year for the first time in twelve years. Additionally, the model forecasted significant growth into the future. Our client is expecting to distribute $60k to the DDA this year and can expect to distribute more than $2 million to the DDA over the next decade.