Important Terms in Development Contracts

Here are four terms that you are going to hear when a council is discussing a new development agreement. Developers use these four items to offset the costs of installing infrastructure (roads, water sewer, etc...) for a new development. These terms are important for all taxpayers to know where their tax dollars will be going.

TIRZ (Tax Increment Reinvestment Zone). A TIRZ boundary is set for a particular area by Council. The Council approves the percentage of the TIRZ agreement and how long the TIRZ agreement will be in place. A portion of the Ad Valorem tax (property tax) goes to the TIRZ zone and the other to the city’s general fund based off of what the TIRZ percentage is set at. The TIRZ funds are used for infrastructure improvements for the area in the TIRZ boundary.

380 Agreement

A 380 Agreement is designed to encourage economic development by businesses and developers in the form of incentives. When a 380 agreement is coupled with a TIRZ agreement, in a PDA (Property Development Agreement), a percentage of the TIRZ dollars go back to the developer. Because the developer is adding to the economic development of that area (by developing it) the developer keeps

the TIRZ dollars and there is no oversight on how they are spent – essentially that money is profit for the developer.

PID (Public Improvement District)

An area designated by the city within which projects (infrastructure: roads, water, sewer, parks etc…) are undertaken and paid for by special assessments (fees) levied on the properties in that area. The City takes out PID bonds to pay for the infrastructure improvements and levies a set fee on the properties in the district to pay back the bonds.

MUD (Municipal Utility District)

Developers finance Infrastructure improvements through the issuance of Bonds. The MUD is its own taxable district and that tax rate is voted on and can be changed by MUD Board. Homeowners pay back the MUD bonds with a separate MUD Tax. This MUD Tax is indefinite unless the MUD board votes to dissolve it. As home values increase, so will this MUD tax.

These contracts come before the Council because developers want to be annexed into Pilot Point. With these agreements in place Council can then have a better say in development standards of these properties (think green spaces and building standards). I believe if any of these agreements come before the council they should not only benefity the developer. They should also be benefitial for the taxpayers and city at large.