Tax Increment Financing

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Tax Increment Financing

• TIF A method for funding public investments in
  an area slated for redevelopment by capturing
  for a time all or a portion of the increased
  property tax revenues that may result if the
  redevelopment stimulates private investment.
• State enabling legislation is required. (49
  states, incl. FL)
• Key principles behind the use of TIF
• 1) Private redevelopment would not occur without
  (but for) public intervention. (the but for
  question)
• 2) The tax base in the redevelopment district is
  declining/stagnant and any increases would only
  occur through public intervention.
• 3) The tax authorities that give over their
  incremental tax increase will eventually receive
  a larger tax base.
• TIF is the Dot.Com model of infrastructure
  financing.

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The TIF Redevelopment Cycle
Public RedevelopmentExpenditures
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The Typical TIF Procedure
Step 1 A Finding of Necessity is prepared and
boundaries for the redevelopment district are
identified and mapped. Step 2 The Redevelopment
Agency is created by resolution or
ordinance. Step 3 A Redevelopment Plan is
prepared and approved by the overseeing body,
usually the agency and often the city. Step 4
The Base Year is declared following plan
adoption. This locks in the current tax
base. Step 5 The Redevelopment Agency solicits
developers and enters into agreements for
redevelopment projects. Step 6 Revenue Bonds are
sold so that funds are available for front-end
expenses, typically on infrastructure
improvements. Step 7 Bonds are retired with the
revenues deposited into the special fund in the
form of incremental increases in property tax
revenues.
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The Allocation of Property Taxes Under TIF
Base Year Assessed Value
Source Weber (2002) Tax Incremental Financing
in Theory and Practice
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Floridas TIF Legislation

• The state of Floridas TIF enabling legislation
  provides thefollowing guidelines for using Tax
  Increment Financing in the stateGeneral
  Limitations --Must prepare a Finding of
  Blight/Slum Conditions --No But For Finding
  requirement in the statute --Must delineate a
  Redevelopment Area --A Public Purpose for TIF
  funds must be identifiedPlanning
  Requirements --A CRA Redevelopment Plan is
  required --Linkages to Comprehensive Plan must
  be identified --Relocation Feasibility Study
  required --No CRA-specific CIP is required
  Procedures --No Public Vote required (Elected
  officials can establish) --A Redevelopment
  Agency required --No state participation
  required --No direct state oversight --A
  Special Deposit Fund must be established

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Tallahassees CRA

• The city has a redevelopment agency that oversees
  a community redevelopment area (CRA), generally
  made up of areas north of FSU and areas to the
  east and west of FAMU. (see map)
• A Community Redevelopment Plan (prepared as part
  of a DURP Studio) estimated that over thirty
  years --Approximately 2,900 housing units will
  be constructed --1.1 Mil. Sq Ft of
  commercial/office space will be constructed
  --316 million will be added to the tax base
  over this period --TIF revenues will total
  approximately 106 million
• These revenues are borrowed against and
  infrastructure and urban design improvements can
  be made with this money. The common practice is
  to invest in capital improvements early in the
  process and repay these funds using the TIF
  revenue stream.
• The city and county are currently fighting (like
  very angry cats and dogs!) over a proposed
  Downtown CRA.

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Assessing TIF

• TIF is a growing source of infrastructure
  funding. Most states have in place enabling
  legislation and TIF is a financing mechanism that
  is here to stay. But how good an infrastructure
  financing mechanism is it?
• Advantages
• 1) A new, innovative source source of
  infrastructure funding2) Essentially a special
  district ? Users pay, Users benefit3) Can
  finance infrastructure improvements/additions in
  blighted areas 4) Potentially a very useful
  redevelopment tool5) There is a infrastructure ?
  development relationship
• Disadvantages
• 1) Often misused or poorly applied financing
  mechanism2) Often very optimistic in terms of
  expected revenues development3) Takes money
  from other governments4) A risky approach to
  redevelopment (borrowing against anticipated
  future revenue streams to fund needed capital
  improvements)5) Quasi-government, no direct
  public accountability