I remain uneasy with the proliferation of tax increment financing, especially for projects like Madison’s new commercial/residential TIF district across from the new hospital that look like they could succeed without public subsidy.
But Governing columnist Scott Beyer looks at the bright side of TIF districts:
There are several advantages to using TIF, rather than money from the general fund, for these public goods. First, it forces neighborhoods to fund their own amenities. People who benefit from proximity to a project via higher property values, added commerce, or use of that amenity, will actually pay for it. This matters in an age when struggling inner-city neighborhoods and outer suburbs alike resent funding downtown projects that have little to do with them, especially if that means their own services are cut. Second, TIF incentivizes governments to use the land within TIF boundaries for high revenue-generating purposes.
Of course, TIF doesn’t guarantee against boondoggles. But a third asset is that TIF, if structured properly, encourages accountability. If officials know that a project must pay for itself through added tax receipts in a specific location, they’ll be more cautious about what and where they build. And because TIF demands a before-and-after look at an area’s revenue levels, it clarifies whether an amenity has worked [Scott Beyer, “The Perils and Promises of a Popular Yet Controversial Financing Method,” Governing, May 2016].
I’m dubious on that first point: an important part of funding certain neighborhood projects should be to unite a city, to make everyone within the jurisdiction realize that we all benefit from public goods, even if we don’t live right next door to them or use them on a daily basis. I can also see some circularity in the caution point: if cautious officials only engage TIFs for projects that are sure to produce a return, then aren’t they leaning right back toward projects that should be able to take off on their own under free-market rules, paying the full freight of their tax bill from year one?
As for the accountability point, I’m all for government keeping a close watch on the books, but don’t city finance officers and county equalization offices record accurate property values and tax revenue figures every year, within and without TIF districts?