Delaware General Assembly

AN ACT TO AMEND TITLE 22 OF THE DELAWARE CODE TO PROVIDE FOR MUNICIPAL TAX INCREMENT FINANCING AND TO PROVIDE FOR MUNICIPAL SPECIAL DEVELOPMENT DISTRICTS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Two-thirds of all members elected to each house thereof concurring therein):

“Chapter 17. Municipal Tax Increment Financing Act.

§ 1701. Title.

This Chapter, consisting of § 1701 through § 1713, shall be known as the Municipal Tax Increment Financing Act.

§ 1702. Definitions.

(a) In this Chapter the following terms have the meanings indicated, unless the context clearly indicates another or different meaning or intent.

(b) ‘Act’ means the Municipal Tax Increment Financing Act.

(c) ‘Adjusted assessed value’ means: (i) for real property that qualifies for an agricultural, horticultural or forest use under 9 Del. C. § 8329, the fair market value of the property without regard to its agricultural, horticultural or forest use assessment as of January 1 of that year preceding the effective date of the resolution creating the TIF District under § 1706 of this Chapter, or (ii) in the event the municipality grants an exemption from taxes, the original assessed value less the amount of taxes subject to such exemption.

(d) ‘Assessed value’ means the total assessed value of all real property in a TIF District subject to taxation as determined by the Assessor, with any adjustment pursuant to § 1702(c) of this Chapter taken into account.

(e) ‘Assessor’ shall mean the town or City Assessor or, if there is no town or City Assessor, the Department of Land Use for New Castle County, the Board of Assessment for Kent County and the Board of Assessment for Sussex County.

(f) ‘Bonds’ or ‘bond’ means any revenue or general obligation bonds or bond, notes or note, or other similar instruments or instrument issued by any municipality pursuant to and in accordance with this Chapter.

(g) ‘Chief executive officer’ means the mayor, or other chief executive officer of a municipality.

(h) ‘County’ or ‘county’ means one of the 3 counties of the State.

(i) ‘Development’ includes new development, redevelopment, revitalization and renovation.

(j) ‘TIF District’ means an area designated by a resolution described in § 1706(1) of this Chapter.

(k) ‘Issuer’ or issuer’ means a municipality that issues Bonds.

(l) ‘Municipality’ or ‘municipality’ means any town or city located in the State with a population in excess of 50,000 people.

(m) ‘Original assessed value’ means the assessed value as of January 1 of that year preceding the effective date of the resolution creating the TIF District under § 1706 of this Chapter.

(n) ‘Tax increment’ means for any tax year the amount by which the assessed value as of January 1 preceding that tax year exceeds the original assessed value.

(o) ‘Tax year’ means the fiscal year for the municipality.

§ 1703. Bonds to finance Development of industrial, commercial or residential area authorized.

In addition to whatever other powers it may have, and notwithstanding any limitation of law, any municipality may borrow money by issuing and selling bonds, at any time and from time to time, for the purpose of financing the Development of an industrial, commercial, or residential area.

§ 1704. Payment of bonds.

Bonds shall be payable from the special fund described in § 1706(3)(ii) of this Chapter, and the governing body of the issuer may also pledge its full faith and credit or establish sinking funds, establish debt service reserve funds, or pledge other assets and revenues towards the payments of the principal, premium, if any, and interest, including special taxes levied and collected pursuant to Chapter 18 of this Title.

§ 1705. Application of bond proceeds.

All proceeds received from any bonds issued and sold pursuant to this Chapter shall be applied solely for:

(1) The cost of purchasing, leasing, condemning, or otherwise acquiring land or other property, or an interest in them, in the designated TIF District or as necessary for a right-of-way or other easement to or from the TIF District;

(2) Demolition and site removal;

(3) Plans, specifications, studies, surveys, forecasts and estimates of cost and revenues;

(4) Relocation of businesses or residents;

(5) Installation of utilities, construction of parks and playgrounds, and other necessary improvements, including streets and roads to, from, or within the TIF District, parking, lighting and other facilities;

(6) Construction or rehabilitation of buildings;

(7) Reserves or capitalized interest;

(8) Necessary costs of issuing bonds;

(9) Permissive costs of issuing and servicing the bonds, which may include up to 0.5% of the bond issues as origination costs incurred by the municipality, and up to 2.0% of the bond debt service payments as administrative costs if administered by the municipality;

(10) Payment of the principal, premium, if any, and interest on loans, money advanced, or any indebtedness incurred by a municipality for any of the purposes set out in this Section, including the refunding of bonds previously issued under this Chapter; and

(11) Any costs permitted under § 1801(a)(4) of this Title 22, and for any purposes described in §1801(b)(2) of this Title 22; provided, however, that the purposes described in § 1801(b)(2) of this Title 22 shall be with reference to the designated TIF District.

§ 1706. Conditions precedent to issuance of bonds.

Before issuing any Bonds, the governing body of the issuer shall:

(1) Designate by resolution an area within its jurisdiction as a ‘TIF District’.

(2) Receive from the appropriate Assessor a certification as to the amount of the original assessed value.

(3) Pledge that until the bonds have been fully paid, or thereafter, the municipal property taxes on real property within the TIF District shall be divided as follows:

(i) That portion of the taxes which would be produced by the rate at which taxes levied each year by or for a municipality upon the original assessed value shall be allocated to and when collected paid into the funds of the taxing body in the same manner as taxes by or for the taxing body on all other property are paid.

(ii) That portion of the taxes representing the levy on the tax increment that would normally be paid to the issuer shall be paid into a special fund to be applied in accordance with the provisions of § 1708 of this Chapter.

(iii) That portion of the taxes representing the levy on the tax increment that would normally be paid to a taxing body other than the issuer shall be allocated to and, when collected, paid into the funds of such taxing body in the same manner as taxes by or for the taxing body on all property are paid, or any other manner that public agencies so determine (school districts, etc.); provided, however, if such taxing body has agreed pursuant to §1709 of this Chapter that such taxes shall be paid into a special fund created in accordance with § 1707 of this Chapter, then such taxes shall be paid into such special fund.

§ 1707. Resolution creating special fund.

The governing body of any municipality may adopt a resolution creating a special fund with respect to a TIF District, even though no bonds authorized by this Chapter have been issued by such municipality with respect to that TIF District or are then outstanding. The taxes allocated to such special fund by § 1706(3)(ii) or (iii) of this Chapter shall thereafter be paid over to such special fund, as long as such resolution remains in effect.

§ 1708. Uses of special fund; issuance of general obligation bond.

(a) Uses of special fund when no bonds outstanding. When no bonds authorized by this Chapter are outstanding with respect to a TIF District and the governing body of the municipality so determines, moneys in the special fund for that TIF District created pursuant to §1707 of this Chapter may be:

(1) Used for any of the purposes described in § 1705 of this Chapter for which bond proceeds could be used;

(2) Accumulated for payment of debt service on bonds subsequently issued under this Chapter;

(3) Used to pay or to reimburse the municipality for debt service which the municipality is obligated to pay or has paid (whether such obligation is general or limited) on bonds issued by the municipality, or any agency, department, or political subdivision thereof, the proceeds of which have been used for any of the purposes specified in § 1705 of this Chapter; or used to pay or reimburse any developer loan; or

(4) Paid to the municipality to provide funds to be used for any legal purpose as may be determined by the municipality.

(b) Restrictions on use of special funds. When any bonds authorized by this Chapter are outstanding with respect to a TIF District and the governing body of the municipality so determines, moneys in the special fund for that TIF District created pursuant to § 1707 of this Chapter may be used as provided in subsection (a) of this Section in any fiscal year by the municipality, but only to the extent that:

(1) the amount in such special fund exceeds the unpaid debt service payable on such bonds in such fiscal year and is not restricted so as to prohibit the use of such moneys;

(2) such use is not prohibited by the ordinance authorizing the issuance of such bonds; and

(3) to the extent not prohibited by bond or loan covenants.

(c) Compliance with charter requirements. The issuance of general obligation bonds pursuant to this Section shall comply with appropriate municipal charter requirements.

§ 1709. Agreements to pay revenue from taxes on tax increment into special fund.

A County, which is not the issuing body, may pledge, by written agreement, that some or all of its property taxes levied on the tax increment shall also be paid into a special fund created pursuant to §1707 of this Chapter. Such agreements shall be between the governing bodies of a municipality and the County. They shall run to the benefit of and be enforceable on behalf of any bondholder.

§ 1710. Ordinance authorizing bonds.

(a) Required; mandatory provisions. In order to implement the authority conferred upon it by this Chapter to issue bonds, the governing body of any municipality shall adopt an ordinance which:

(1) Specifies and describes the proposed undertaking and states that it has complied with § 1706 of this Chapter;

(2) Specifies the maximum rate or rates of interest the bonds are to bear.

(b) Additional provisions. The resolution described in § 1707 of this Chapter may itself specify and prescribe, or may authorize its finance board or department, by resolution or ordinance, or its chief executive officer, by executive order, to specify and prescribe any of the following as it deems appropriate to effect the financing of the proposed undertaking:

(1) The actual principal amount of the bonds to be issued;

(2) The actual rate or rates of interest the bonds are to bear;

(3) The manner in which and the terms upon which the bonds are to be sold;

(4) The manner in which and the times and places that the interest on the bonds is to be paid;

(5) The time or times that the bonds may be executed, issued and delivered;

(6) The form and tenor of the bonds and the denominations in which the bonds may be issued;

(7) The manner in which and the times and places that the principal of the bonds is to be paid, within the limitations set forth in this Chapter;

(8) Provisions pursuant to which any or all of the bonds may be called for redemption prior to their stated maturity dates; or

(9) Such other provisions not inconsistent with this Chapter as shall be determined by such legislative body to be necessary or desirable to effect the financing of the proposed undertaking.

(c) Referendum. Neither the ordinance authorizing the bonds referred to herein, nor any ordinance, resolution or executive order passed or adopted in furtherance thereof, nor the bonds themselves, shall be subject to any referendum by reason of any other State or local law, except that an ordinance authorizing the pledge of the full faith and credit of a municipality to the payment of principal and interest on bonds issued pursuant to this Chapter shall be subject to any applicable provisions for referendum.

§ 1711. Exemption of bonds from taxation.

The principal amount of the bonds, the interest payable thereon, their transfer, and any income derived therefrom, including any profit made in the sale or transfer thereof, shall be exempt from taxation by the State and by the several counties and municipalities of this State.

§ 1712. Nature and incidents of bonds.

(a) Form of bond; deemed ‘securities’. All bonds shall be in fully registered form. Each of the bonds shall be deemed to be a ‘security’ within the meaning of § 8-102 of the Title 6 of the Delaware Code, whether or not it is either one or a class or series or by its terms is divisible into a class or series of instruments.

(b) Signing and sealing. All bonds shall be signed manually or in facsimile by the chief executive officer of the issuer, and the seal of the issuer shall be affixed thereto and attested by the clerk or other similar administrative officer of the issuer. If any officer whose signature or countersignature appears on the Bonds ceases to be such officer before delivery of the Bonds, his or her signature or countersignature shall nevertheless be valid and sufficient for all purposes the same as if he or she had remained in office until delivery.

(c) Maturity. All bonds shall mature not later than 30 years from their date of issuance.

(d) Sale. All bonds shall be sold in such manner, either at public or private sale and upon such terms as the governing body of the issuer deems best. Any contract for the acquisition of property may provide that payment shall be made in bonds.

(e) Bonds issued are securities. Bonds issued under this Section are securities in which all public officers and public bodies of the State and its political subdivisions, all insurance companies, State banks and trust companies, national banking associations, savings banks, savings and loan associations, investment companies, executors, administrators, trustees and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them.

(f) Construction of Section. This Section, being necessary for the welfare of the State and its residents, shall be liberally construed to effect the purpose of this Section.

§ 1713. TIF District Consistency with Certified Comprehensive Plan.

The use of lands in a TIF District shall be consistent with the Comprehensive Plan for the area as certified pursuant to 29 Del. C. § 9103(f).

§ 1714. Construction of Chapter.

This Chapter, being necessary for the welfare of the State and its residents, shall be liberally construed to effect the purpose of this Chapter.

§ 1715. Taxation of leased property in TIF District.

Whenever the municipality, as lessor, leases its property within the TIF District, the property shall be assessed and taxed in the same manner as privately owned property, and the lease or contract shall provided that the lessee shall pay taxes or payments in lieu of taxes upon the assessed value of the entire property and not merely the assessed value of the leasehold interest.”.

“Chapter 18. Special Development Districts.

§ 1801. Special Districts.

Definitions.

(1) In this Section, the following terms have the meanings indicated.

(2) ‘Bonds’ or 'bond' means a special obligation bond, revenue bond, note, or other similar instrument issued by any municipality in accordance with this Section.

(3) ‘County’ or ‘county’ means New Castle County, Kent County or Sussex County.

(4) ‘Cost’ includes the cost of:

(i) Construction, reconstruction, and renovation, and acquisition of all lands, structures, real or personal property, rights, rights-of-way, franchises, easements, and interests acquired or to be acquired by a municipality for a public purpose;

(ii) All machinery and equipment including machinery and equipment needed to expand or enhance municipal services to the special development districts created pursuant to subsection (b) of this Section;

(iii) Financing charges and interest prior to and during construction, and, if deemed advisable by the municipality, for a limited period after completion of the construction, interest and reserves for principal and interest, including costs of municipal bond insurance and any other type of financial guaranty, liquidity support, and costs of issuance;

(iv) Extensions, enlargements, additions and improvements;

(v) Architectural, engineering, financial and legal services;

(vi) Plans, specifications, studies, surveys and estimates of cost and of revenues;

(vii) Administrative expenses necessary or incident to determining to proceed with the infrastructure improvements; and

(viii) Other expenses as may be necessary or incident to the construction, acquisition, financing and operation of the infrastructure improvements including administrative expenses charged to collect and/or administer the tax revenues.

(5) ‘Municipality’ or ‘municipality’ means any town or city located within the State with a population in excess of 50,000 people.

§ 1802. Special taxes authorized; purpose; requirements and restrictions.

(1) Subject to the provisions of this Section, and for the purpose stated in paragraph (2) of this subsection, any municipality may:

(i) create a special development district;

(ii) levy ad valorem or special taxes; and

(iii) issue bonds and other obligations.

(2) The purpose of the authority granted under paragraph (1) of this subsection is to provide financing, refinancing, or reimbursement for (i) the cost of the design, construction, establishment, extension, alteration, or acquisition of adequate storm drainage systems, sewers, water systems, roads, bridges, culverts, tunnels, streets, sidewalks, lighting, parking, parks and recreation facilities, libraries, schools, transit facilities, solid waste facilities, and other infrastructure improvements as necessary, whether situated within the special development district or outside the special development district if the infrastructure improvement provides service or benefit to the property within the special development district, for the development and utilization of the land, each with respect to any defined geographic region within the municipality; and (ii) to pay costs associated with tax increment financing undertaken with respect to TIF Districts pursuant to Chapter 17 of this Title.

§ 1803. Issuance and sale of bonds; section self-executing.

(1) In addition to other powers any municipality may have, and notwithstanding the provisions of any other public local law, or public general law, or the charter of any municipality, a municipality may borrow money by issuing and selling bonds for the purpose stated in subsection (b)(2) of this Section, if a request to the municipality is made by both:

(i) The owners of at least two-thirds of the assessed valuation of the real property located within the special development district; and

(ii) At least two-thirds of the owners of the acreage located within the special development district, provided that:

1. multiple owners of a single parcel are treated as a single owner; and

2. a single owner of multiple parcels is treated as one owner.

(2) This Section is self-executing and does not require the municipality to enact legislation or, if applicable, to amend its charter to exercise the powers granted under this Section.

§ 1804. Bond payable from special fund; complementary powers of governing body; proceeds.

(1) Bonds shall be payable from the special fund required under subsection (e) of this Section.

(2) If the governing body of the municipality issues bonds under this Section, the governing body may also:

(i) establish sinking funds;

(ii) establish debt service reserve funds;

(iii) pledge other assets and revenues towards the payments of the principal, premium, if any, and interest; or

(iv) provide for municipal bond insurance or any other type of credit enhancement or liquidity support of the bonds.

(3) All proceeds received from any bonds issued and sold shall be applied solely to pay costs, including:

(i) costs of design, construction, establishment, extension, alteration, or acquisition of infrastructure improvements;

(ii) costs of issuing bonds;

(iii) payment of the principal and interest on loans, including developer loans, money advances, or any indebtedness for any of the purposes stated in subsection (b)(2) of this Section, including the refunding of bonds previously issued under this Section;

(iv) funding of a debt service reserve fund or payment of interest prior to, during, or for a limited period of time after construction; and

(v) purposes described in § 1705 of this Title 22.

§ 1805. Actions necessary before issuing bonds.

(1) Before issuing bonds pursuant to this Section, the governing body of the municipality shall:

(i) Designate by resolution an area or areas as a special development district;

(ii) Subject to paragraph (2) of this subsection, adopt a resolution creating a special fund with respect to the special development district; and

(iii) Provide for the levy of an ad valorem or special tax on all real property within the special development district at a rate or amount designed to provide adequate revenues to pay the principal of, interest on, and redemption premium, if any, on the bonds, to replenish any debt service reserve fund, and for any other purpose related to the ongoing expenses of or security, including debt service coverage requirements, for the bonds. Ad valorem taxes shall be levied in the same manner, upon the same assessments, for the same period or periods, and as of the same date or dates of finality as are now or may hereafter be prescribed for general ad valorem real property tax purposes within the district, and shall be discontinued when all of the bonds have been paid in full. Special taxes shall be levied pursuant to subsection (m) of this Section.

(2) The resolution creating a special fund under paragraph (1)(ii) of this subsection shall:

(i) Pledge to the special fund the proceeds of the ad valorem or special tax to be levied as provided under paragraph (1)(iii) of this subsection; and

(ii) Require that the proceeds from the tax be paid into the special fund.

§ 1806. When no bonds outstanding. When no bonds are outstanding with respect to a special development district:

(1) The special development district shall be terminated; and

(2) Any moneys remaining in the special fund on the date of termination of the special development district shall be paid to the general fund of the municipality, as the case may be.

§ 1807. Adoption of ordinance to implement authority.

(1) In order to implement the authority conferred upon it by this Section to issue bonds, the governing body of the municipality shall adopt an ordinance that:

(i) Specifies and describes the proposed undertaking and states that it has complied with subsection (e) of this Section;

(ii) Specifies the maximum principal amount of bonds to be issued;

(iii) Specifies the maximum rate or rates of interest for the bonds; and

(iv) Agrees to a covenant to levy upon all real property within the special development district, ad valorem taxes or special taxes in rate and amount at least sufficient in each year in which any of the bonds are outstanding to provide for the payment of the principal of, premium, if any, and the interest on the bonds.

(2) The ordinance may specify or may authorize its finance board or department or other appropriate financial officer, by resolution or ordinance, or its chief executive officer, by executive order, to specify any of the following as it deems appropriate to effect the financing of the proposed undertaking;

(i) The actual principal amount of the bonds to be issued;

(ii) The actual rate or rates of interest for the bonds;

(iii) The manner in which and the terms upon which the bonds are to be sold;

(iv) The manner in which and the times and places that the interest on the bonds is to be paid;

(v) The time or times that the bonds may be executed, issued and delivered;

(vi) The form and tenor of the bonds and the denominations in which the bonds may be issued;

(vii) The manner in which and the times and places that the principal of the bonds is to be paid, within the limitations set forth in this Section;

(viii) Provisions pursuant to which any or all of the bonds may be called for redemption prior to their stated maturity dates; or

(ix) Any other provisions not inconsistent with this Section as shall be determined by the governing body of the municipality to be necessary or desirable to effect the financing of the proposed undertaking.

(3) (i) An ordinance authorizing the bonds required under this subsection, an ordinance, resolution, or executive order passed or adopted in furtherance of the required ordinance, the bonds, the designation of a special development district, or the levy of a special ad valorem tax or special tax may not be subject to any referendum by reason of any other State or local law.

(ii) The ordinance authorizing the bonds required under this subsection, any ordinance, resolution, or executive order passed or adopted in furtherance of the required ordinance, the bonds, the designation of a special development district, or the levy of a special ad valorem tax or special tax shall be subject to the request of the landowners as specified under subsection (c)(1) of this Section.

The principal amount of the bonds, the interest payable on the bonds, their transfer and any income derived from the transfer, including any profit made in the sale or transfer of the bonds, shall be exempt from taxation by the State and by the counties and municipalities of the State.

§ 1809. Bond form; signatures; maturity; manner of sale.

(1) All bonds shall be in fully registered form. Each of the bonds shall be deemed to be a security as defined in § 8-102 of Title 6 of the Delaware Code, whether or not it is either one of a class or series or by its terms is divisible into a class or series of instruments.

(2) All bonds shall be signed manually or in facsimile by the chief executive officer of the municipality, and the seal of the municipality shall be affixed to the bonds and attested by the clerk or other similar administrative officer of the municipality. If any officer whose signature or countersignature appears on the bonds ceases to be such officer before delivery of the bonds, the officer’s signature or countersignature shall nevertheless be valid and sufficient for all purposes the same as if the officer had remained in office until delivery.

(3) All bonds shall mature not later than 30 years from their date of issuance.

(4) All bonds shall be sold in the manner, either at public or private sale, and upon the terms, as the governing body of the municipality deems best. Any contract for the acquisition of property may provide that payment shall be made in bonds.

§ 1810. Bonds issued are securities.

Bonds issued under this Section are securities in which all public officers and public bodies of the State and its political subdivisions, all insurance companies, State banks and trust companies, national banking associations, savings banks, savings and loan associations, investment companies, executors, administrators, trustees and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them.

§ 1811. Powers granted are supplemental to other laws.

The powers granted under this Section shall be regarded as supplemental and additional to powers conferred by other laws, and may not be regarded as in derogation of any powers now existing.

This Section, being necessary for the welfare of the State and its residents, shall be liberally construed to effect the purpose stated in subsection (b)(2) of this Section.

§ 1813. Special taxes on real property as alternative to ad valorem taxes.

(1) As an alternative to levying ad valorem taxes under this Section, the governing body of the municipality may levy special taxes on real property in a special development district to cover the cost of infrastructure improvements.

(2) In determining the basis for and amount of the tax, the cost of an improvement may be calculated and levied:

(i) Equally per front foot, lot, parcel, dwelling unit, or square foot;

(ii) According to the value of the property as determined by the governing body, with or without regard to improvements on the property; or

(iii) In any other reasonable manner that results in fairly allocating the cost of the infrastructure improvements.

(3) The governing body of the municipality may provide by ordinance or resolution for:

(i) A maximum amount to be assessed with respect to any parcel of real property located within a special development district;

(ii) A tax year or other date after which no further special taxes under this Section shall be levied or collected on a parcel; and

(iii) The circumstances under which the special tax levied against any parcel may be increased, if at all, as a consequence of delinquency or default by the owner of that parcel or any other parcel within the special development district.

(4) The governing body by ordinance or resolution may establish procedures allowing for the prepayment of special taxes under this Section.

(5) Special taxes levied under this subsection shall be collected and secured in the same manner as general ad valorem real property taxes unless otherwise provided in the ordinance or resolution and shall be subject to the same penalties and the same procedure, sale, and lien priority in case of delinquency as is provided for general ad valorem real property taxes.

§ 1814. Bonds not to constitute general obligation debt.

Bonds issued under this Section are a special obligation of the municipality and may not constitute a general obligation debt of the municipality, or a pledge of the municipality’s full faith and credit or taxing power.”.

§ 1815. Special Development District Consistency with Certified Comprehensive Plan.

The use of lands in a Special Development District shall be consistent with the Comprehensive Plan for the area as certified pursuant to 29 Del. C. § 9103(f).

Approved July 11, 2003