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.
The TIF Redevelopment Cycle
(1)
Private Redevelopment
Projects
(2)
Increased
Tax Base
Public Redevelopment
Expenditures
(4)
(3)
Trust Fund
Revenue
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 “frontend” 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.
The Allocation of Property Taxes Under TIF
Base Year
Assessed Value
Source: Weber (2002) “Tax Incremental Financing in Theory and Practice”
Florida’s TIF Legislation
• The state of Florida’s TIF enabling legislation provides the
following guidelines for using Tax Increment Financing in the state:
General 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 identified
Planning 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
Tallahassee’s 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”.
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 funding
2) Essentially a special district  Users pay, Users benefit
3) Can finance infrastructure improvements/additions in blighted areas
4) Potentially a very useful redevelopment tool
5) There is a infrastructure  development relationship
Disadvantages
1) Often misused or poorly applied financing mechanism
2) Often very optimistic in terms of expected revenues & development
3) “Takes” money from other governments
4) A “risky” approach to redevelopment (borrowing against anticipated
future revenue streams to fund needed capital improvements)
5) Quasi-government, no direct public accountability