PRECM 04-06-1983 - Laserfiche WebLink

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~ .~ '~r~ • ' --t ~,.; ~~~~~~ Eii ~ A publication for subscribers to the APA Planning Advisory Service January 1983 83-I Tax Increment Financing By Sam Casella There is a striking similarity betvt•een the questions cities are asking about tax increment financing (TIF) and the questions that s}~ndicated advice columnist Ann Landers regularly receives about adolescent sex. To v`~it; Should I do it? t~'here do I do it? How do I do it? And, what are the consequences if I do it? Before ans«•ering these questions, as they pertain to TIF, let's first revietir with athree-part definition of TIF. It is: • A method of capturing the tax revenue that results from private redevelopment projects; • A trust fund that collects those increased revenues and allocates them to such public purposes as land ac- quisition and parking facilities; and • A spur to private investment to start the cycle and keep it going. . Diagrammatically, asimplified flow of TIF cash can be found in Figure 1. In effect, TIF is a bootstrap method of using private Sam Casella, AICP, is the executive director of the Clearwater Downtown Development Board, Clearwater, Florida. A similar version of this article appeared in the January 1983 issue of Center City Report, v.~hich is pub- lished monthly by the International Downtown Executives Association. s ` ~ S YJ~ jjjjj .,a ,,- ~i ~ . . ~ ~, ~~ ~ ~ '3 .~ I r L _~ ~~_ Private a Redevelopment \ / - Projects \~j Pubiic Redevelopment Increased Tax Expenditures Base Trust Fund Revenue Figure 1. The. TIF Cycle redevelopment to support public redevelopment, thereby making more-private investment possible. The beauty, to the taxpayer, is that there are no increased property taxes. This particularly appeals to homeowners and suburbanites who often don't care to have their taxes flowing into do~~~ntown redevelopment projects. Should I Do It? A chicken and a pig were strolling by a diner one mor- ning. The chicken smiled and said, "Doesn't that'make you feel proud that we are responsible for enabling those humans to enjoy their breakfast?" The pig replied, 'That's easy for you to say. For you it's merely a contribution, for me it's a total commitment." Cities that expect to use tax increment financing suc- cessfully wil]have to be like the pig and make a total com- mitment. Itwould be amistake to think that TIF is a new panacea that relieves everyone of responsibility while it produces cash windfalls. Underscoring the need fora local commitment is the fact that, typically, TIF yields very meager returns in the ear- ly years. A public redevelopment agency will need to in- ;~~' f ~~ _ C I ~~~25 s?s;€3 .~`~ ~ ~'! ~~:. American Planning Association, 1313 E. 60th St., Chicago, IL 60637; 312='955-9100