Tax Increment Finance Programs

Written By Helen Grant
 
 

I have been asked if I’d support a Tax Increment Finance program over $5 million and spread out over 25 years. Honestly, that would depend on the project, the transparency, accountability, social and economic impacts. I think if designed well, a TIF could provide the funds necessary to redevelop areas that are sliding into blight. And instead of being the cause of gentrification, there are actually TIF programs that can spur the development of Affordable Housing. It really just depends on the legality, aims, and impact.


“...TIFs are sometimes used like slush funds by politicians to achieve conflicted or questionable legacy projects in violation of the TIF agreement. (Egregious examples abound in the City of Chicago that is revising how it implements TIFs. Other examples include expensive sports stadiums and entertainment complexes.)” - source: ERIS, Environmental Risk Information Services

I also think if looking at a TIF option to revitalize the area around a dying strip mall, for example, it is important to plan for the future effects of successful efforts, and the taxpayers who financed it must always be factored into the part of the equation that determines overall success. The benefits should be clearly stated, transparently achieved, and improve more lives than degrade them.


“...Depending on how strict states are in defining the areas where TIFs are permitted, using TIF to preserve affordable housing opportunities in areas likely to experience economic growth may or may not require new legislation. In some states, communities have relatively wide discretion to define an area as “distressed” so that a TIF can be implemented.  But in other states, this term is more narrowly construed and new legislation may be needed. 

Communities might also be able to utilize the “but-for” test by arguing that but for the imposition of the TIF, the intended use of the TIF—affordable housing–would not be feasible. Where jurisdictions cannot meet existing criteria for designating TIFs, it may be worth considering new legislation to expand the authority to use TIFs as an affordable housing preservation tool. The legislation to create Austin’s Homestead Preservation Districts is one example.

While TIFs are traditionally set up to fund investments that will revitalize distressed communities, there is also justification for establishing TIFs or TIF-like districts to help preserve affordable housing opportunities in neighborhoods that have already begun to experience development pressure. By establishing a TIF district in a neighborhood already experiencing or likely to experience economic growth, communities can capture tax-increment funds that they can use to build or preserve affordable homes or to help existing renters buy into their neighborhoods.

Using TIFs in neighborhoods experiencing economic growth is a somewhat non-traditional use of this tool. Critics argue that if not implemented properly, this approach enables government to divert the tax increment toward specific projects (not always in the public interest) instead of supporting public services such as school districts, police and fire departments or utilities.” - source: NHC, National Housing Conference


I do not support using taxpayer money to build an arena in the University North Park area for OU, or any other major developer or sports team owner with millions of dollars at their disposal to invest in their own infrastructure. Many studies have been done on this subject and research by economists across the political spectrum have consistently found stadiums impact how leisure dollars are spent, which means a shift from a leisure activity, like going to Norman Film Fest, Norman Music Fest, Jazz in June, or to another venue for food and entertainment, to another leisure activity, going to a basketball game and those nearby businesses, and overall they do little to generate a lot of new spending.


“...“Pretty much any study done by anyone anywhere that is credible and independent looking at sports stadiums finds that they have next to no impact on the local economy,” said Garofalo, who has done extensive research on subsidies for sports stadiums…” - Investigative Post


Taxpayers should pay for programs and infrastructure that actually benefit the public. That is truly the best bang for our buck. I know a homeless shelter is not as an attractive or exciting development, but you save as a taxpayer, in resources that would cost us and burden our healthcare system even more to leave people on the street, in the long run vs paying for an arena, which arguably could put people on the street by not paying a high enough wage, or in only offering “seasonal” types of work. Also, I found this observation very enlightening when I was trying to find out if taxpayers ever win, too.


“...In fact, local and state governments get new tax revenue from stadium-related events in only two ways: steering purchases toward activities with higher tax rates and taxing out-of-town visitors.

Hotels and rental cars are examples of spending that generally is taxed at a higher rate than other types of spending. Hotel stays are usually taxed in the 10-12 percent range, much higher than ordinary sales taxes, so there is some gain there. But my pre-game meal before a game generates no more tax than a meal I might have eaten in my neighborhood if I had skipped the game.

Thus, the second hope for capturing new revenue is out-of-town visitors. I live an hour from Atlanta, in a different tax jurisdiction. So when I go to a Hawks game and eat a pre-game dinner in Atlanta (usually at Ted’s Montana Grill), Atlanta gets some tax revenue and my hometown loses an equal amount. If the Hawks attract fans from far enough away to stay in hotels, Atlanta wins some more.

Once you look at things this way, you see that stadiums can only justify public financing if they will draw most attendees from a long distance on a regular basis. The Super Bowl does that, but the average city’s football, baseball, hockey, or basketball team does not. Since most events held at a stadium will rely heavily on the local fan base, they will never generate enough tax revenue to pay back taxpayers for the cost of the stadium.

So support your local sports team, enjoy the Super Bowl, but never support public financing of a sports stadium. You as a taxpayer are virtually guaranteed to lose that game.” - Forbes, 2015


I want to end on a creative note and say TIFs are just one of many kinds of financing tools used to reimagine the landscape. If you know all across the country strip malls are dying, that malls are adapting and being reimagined, that people are re-greening empty shopping strips for greenbelts and better stormwater mitigation, or tearing down old shopping districts to build affordable housing or provide an affordable entry point for small business and community resource hubs, then designing a responsible and equitable Tax Increment Finance program is a means to achieve that.

 
 

The Easter Egg for this post is by a local band currently located in OKC, but with roots in Norman.

”A song and video about the things we take with us and persist in our lives. We always win the gold when we trust our friends and rely on their brilliance.” - Laine and the Laters

Helen Grant https://thehelengrant.com
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