What is a Tax Increment Reinvestment Zone?
What is a TIRZ? Useful Community Development Tool or Scary Public Finance Monster?
Recently, the Rockdale City Council approved the City’s second Tax Increment Reinvestment Zone, or TIRZ. What is this, other than being a funny-sounding name? Some folks see them as scary public finance monsters, but generally, they are helpful community development tools. Section 311 of the Texas Tax Code allows for the creation of these districts by cities or counties.
A TIRZ is only applicable within a defined geographic area designated by the local governing body. To qualify, an area has to suffer from disinvestment and prohibit the future development of the community. This could be because of blighted structures, poor drainage, old and inadequate infrastructure, poor street layouts, etc.
The zone’s current appraised value is calculated – let's call this the base. The entity creating the TIRZ will continue receiving tax revenue from the base. Any new construction or appraisal increases in the zone is called the increment. Property taxes are levied on the increment and directed into a special fund instead of going into the general fund account. The TIRZ money then pays for improvements in the zone, such as addressing the problems mentioned above, and stimulates new private investment.
Think of this as someone who gets a pay raise from work and using that extra money to pay for something that will help them make even more money in the future. This could be buying a new computer or more reliable transportation or taking classes to build skills.
TIRZ’s are often used by local governments to help things happen faster in their communities.
For Rockdale, we are creating this TIRZ not just to help clean things up along the highway or make downtown more attractive, but to reduce the negative impression given of Rockdale being a place which offers a high degree of investment risk.
By making these improvements - tearing down blighted properties, doing some enhanced landscaping, cleaning up downtown and making it attractive – this will help our residents feel better about Rockdale and improve pride in the community. It will also signal to anyone driving through or visiting Rockdale that we are a town worth investing in. We will show that we care so much about Rockdale that we are willing to put some scarce money into it. We will show that Rockdale is a place worth investing in.
We are going to do great things in Rockdale, Texas!
