Our client is a charming and growing Village of 4,000 residents, just a short drive from a large metropolitan area. The Village created a Brownfield Redevelopment Authority (BRA) in 1998. Over the next six years, the BRA facilitated five projects on four separate sites.
After completing each of these five projects, the Village began capturing Tax Increment Finance revenue (TIF). The Village issued bonds to finance one of the projects. TIF capture continued through 2021, and the Village realized that that its Brownfield Fund had accumulated approximately $900k. Village officials were uncertain of how these funds could be used, and enlisted WHG to review Brownfield Fund reserves and prepare a written recommendation on the potential uses of available funds.
The WoodHill Group Solution
To determine a recommendation for use of accumulated funds, WHG sought to gain a
complete understanding of BRA revenues and expenses from 1998‐2021. To do so, WHG:
· Summarized each Brownfield project by site according to the provided Act 381 Work Plans
· Identified included parcels, and detailed their respective captured taxable values by site and by year
· Calculated TIF revenue by year, parcel, taxing authority, tax season, and site
· Validated deposits into the Brownfield Fund by source and year
· Identified discrepancies in expected and actual tax revenues
· Summarized authority expenses by type and date
· Constructed TIF allocation tables based upon the actual TIF revenues and spending records of the authority
· Summarized the total sources and distributions of funds by type, and
· Determined the recommended disposition of remaining and future funds.
WHG determined that all Developer Reimbursements and Other Eligible Expenditures were complete. So, the question became: where did the extra $900k come from and what could the Village do with it?
Our research provided the answer to the problem. The Village had been making the debt service payments on the aforementioned bond issue from the Village General Fund since the date of issue, despite the original intention that the payments be split amongst the Village, the BRA, and the DDA. Of the $900k balance in the Brownfield Fund, $600k could be transferred immediately to the General Fund to reimburse it for prior year expenditures. The remaining $300k was sufficient to cover the BRA’s portion of future year debt service payments.
Additionally, it was determined that the DDA had not contributed its portion of prior year debt service payments. The DDA portion had also been paid from the Village General Fund. Therefore, WHG recommended that the Village and the DDA come to an agreement on how the DDA could make the Village whole for the prior year expenditures it had made on behalf of the DDA.
Between the BRA and DDA portions of the debt service, the resulting benefit to the Village General Fund was $1.15 million.