By Charlie McCabe
(Daffodils on the Esplanade in April 2021, Boston)
You might be enjoying February School Vacation Week or had Presidents Day off; here in Boston, the snow we had a week ago is gone and the weather is warmer, but rain and snow will soon return. (One month until the official first day of spring!)
In this post, we're going to cover less typical parks funding methods. If you haven't read Part one, you should do that first. These funding mechanisms are less common, but can be very effective. I've noted how the funding can be used for each.
A park district is a governmental entity created through state legislation and specifically enacted as a geographic designation in cities, towns, and counties, or a combination of the three. Park districts are most common in Minnesota, Michigan, Ohio, Illinois, Washington State, and Georgia. Park districts are governed by an appointed or elected board of directors. The specific make-up varies according to the enabling state legislation and municipal government make-up. Boards can be appointed by a mayor (Chicago), publicly elected by voters (Minneapolis), or can be made up of the mayor and city council (Seattle). These entities can collect sales tax or property taxes to fund capital construction, programming, and operations and maintenance.
Dedicated Property Tax (Mill)
A variation of dedicated revenue is a dedicated property tax, often referred to as a “mill.” The definition of a mill is $1 per $1,000 of property valuation, so one-half of a mill is 50 cents per $1,000 of property valuation. Generally, these dedicated property taxes are approved by a majority of voters and use of funds is specified by local ordinance. They are often associated with a parks district or a parks authority, but not always. Funds are generally used for capital projects, but there are exceptions.
Dedicated Sales Tax
A dedicated sales tax is a percentage of sales tax collected by the local city/county that is earmarked for usage by a public parks and recreation agency. Sales tax propositions are usually placed on the ballot by mayor/city council and must be approved by a majority of voters. They can be used for capital, operations and maintenance, and programming. Denver passed such a tax in November 2018, but generally, these dedicated sales taxes for parks are very rare.
Hotel Occupancy Tax (HOT)
A small but growing number of cities are enacting “hotel-motel” taxes, allocating a portion of hotel room taxes for public capital projects that benefit tourism, including some projects in parks. Most often this is historic preservation work. Hotel occupancy tax usage regulations are approved by state legislatures and are subject to conditions and regulations placed on them. HOT funds can be used for capital projects.
TIF, TAD and TIRZ
Often called a TIF (Tax Increment Financing) district, a TAD (Tax Allocation District), or a TIRZ (Tax Increment Revenue Zone), this is an agreement between one or more government entities to allocate a portion of present and future property taxes to be dedicated to pay for public realm improvements. The assumption behind such a special taxing district is that property values (and hence revenues) will rise on private properties in the TIF, TAD or TIRZ district over time, resulting in increased tax revenue by the time the TIF district expires. Improvements can range from small incremental services to major projects such as flood control, streets and streetscapes, parks, and public transportation. Usually these improvements are funded through general revenue (G.R.) bonds issued by the municipality, which are paid back through TIF, TAD and TIRZ allocations over a period of 10, 25, 50 or more years. These funds can be used for capital projects. Each of these types of entities can be complex and there's a lot to unpack when considering such a district.
BIDs and PIDs
Business improvement districts (BIDs) and public improvement districts (PIDs) are defined geographical areas, typically in an urban downtown, established to provide specific improvements, security measures, programming, and operations and maintenance for the shared green space, plaza, or park in that district. These efforts are financed by assessments against the property owners within the area. The District is created by a vote of city council, following the agreement of a majority of the property owners in the proposed district to opt in. Depending on the state laws governing the creation and operations of BIDs, they may require a re-authorization by property owners or city council every number of years, as mandate by state and municipal laws. Generally, BID/PID funds can be spent on capital, operations and maintenance, and programming expenses, including parks and recreation facilities and programs within their boundaries. BIDs are usually managed by a variant of a community nonprofit, a 501c6 (versus the typical 501c3 nonprofit) as they largely are funded through that BID assessment/allocation. Generally, they do not solicit donations.
A variation of dedicated revenue is a dedicated property tax, often referred to as a “mill.” The definition of a mill is $1 per $1,000 of property valuation, so one-half of a mill is 50 cents per $1,000 of property valuation. Generally, these dedicated property taxes are approved by a majority of voters and use of funds is specified by local ordinance. They are often associated with a parks district or parks authority, but not always. Funds are generally used for capital projects only.
Copyright 2022, Charlie McCabe Consulting LLC