tax increment financing: constraints and opportunities · tif in d.c. is governed by the 1998 tax...
TRANSCRIPT
![Page 1: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/1.jpg)
Tax Increment Financing: Constraints and Opportunities
Abdi Aidid and Joseph Nawrocki Community & Economic Development Clinic
Yale Law School
![Page 2: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/2.jpg)
Areas We Studied
We were asked to look at: Washington, D.C. Wisconsin Maine Iowa (not discussed in this
presentation)
![Page 3: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/3.jpg)
Characteristics of the TIF Statute Most Suitable for Downtowns
We found that TIF statues are most effective for downtown redevelopment when: Municipality run, with minimal state involvement Centralized decision-making procedure Few or no limitations on the types of projects it can be used
for Allows creation of broad TIF Districts Uses multiple sources of revenue, including sales taxes
![Page 4: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/4.jpg)
District of Columbia
TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004
Via 1998 Act, DC Council can issue bonds to finance development costs up to $500 million (and $300 million in designated “Central Business Districts” or CBDs)
2004 Retail Incentive Act provides for smaller TIF bonds to defray cost of tenant improvements
![Page 5: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/5.jpg)
Advantages of Retail Incentive Act of 2004
Broad districts: larger, neighborhood-sized areas are designated TIF districts
Access to significant funds: District can get up to $25 million in funding from TIF Up to $5 million per project
Diverse Revenue Streams: Utilizes both Sales and Real Property Taxes
![Page 6: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/6.jpg)
Designation of Retail Priority Area for Retail Incentive Act of 2004
Municipality Run, Centralized Decision Making
![Page 7: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/7.jpg)
H Street
![Page 8: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/8.jpg)
Columbia Heights
![Page 9: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/9.jpg)
D.C. TIF Act of 1998
Used for large-scale projects
Ordinarily developer-initiated
Effectively subsidizes development that might not otherwise have occurred
![Page 10: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/10.jpg)
Advantages of D.C. TIF Act of 1998
Diverse funding streams: Funding is drawn from both property and sales taxes in designated areas
Relatively high funding cap: The $500 million cap allows for large and relative sophisticated development projects
![Page 11: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/11.jpg)
D.C. TIF Selection Processes: 1998 TIF Act
![Page 12: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/12.jpg)
Mandarin Oriental Hotel
![Page 13: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/13.jpg)
Gallery Place
![Page 14: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/14.jpg)
International Spy Museum
![Page 15: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/15.jpg)
City Market at O Street
![Page 16: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/16.jpg)
Wisconsin
TIFs in Wisconsin are governed by the Wisconsin TIF Law of 1975 and five subsequent amendments/expansions
Legislation authorizes municipalities to create Tax Increment Districts (TIDs)
![Page 17: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/17.jpg)
Versatility of Wisconsin TIF
Cities can create TIF District if 50% of the property is: Blighted In need of rehabilitation/conservation Zoned for industrial use; OR Suitable for mixed-use development
TIF Districts can be large TIF District can cover area beyond the actual development
![Page 18: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/18.jpg)
Wisconsin TIF Selection Process: Centralized and Municipality Run
![Page 19: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/19.jpg)
What WI TIF may cover
Capital costs
Financing costs
Real property assembly costs
Professional service costs
Imputed administrative costs
Relocation costs
Organizational costs
Construction or alteration of sewage treatment plants costs
![Page 20: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/20.jpg)
Wisconsin TIF: Types of Taxes
Note that Wisconsin TIF typically only allows the use of revenues from property taxes
![Page 21: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/21.jpg)
Courtyard Marriott Milwaukee
![Page 22: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/22.jpg)
Currie-Pierce Office Building
![Page 23: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/23.jpg)
Maine
Maine’s TIF statute was introduced in 1977, and empowers cities and plantations to establish TIF districts
TIF districts can be established anywhere that there is at least 25% of the proposed area in need of rehabilitation, redevelopment, conservation or is suitable for industrial and commercial use
Developers can also propose TIF districts
![Page 24: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/24.jpg)
Advantages of Maine TIF statute
Few project limitations: TIF funds can be used to cover capital costs, financial costs, real property assembly costs, professional services, reasonable administrative expenses, relocation costs and organizational costs related to establishing the TIF district.
Municipality run
Broad Districts
![Page 25: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/25.jpg)
Maine TIF Selection Process: Centralized
![Page 26: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/26.jpg)
Maine TIF: Types of Taxes
Maine TIF only allows the use of revenues from property taxes
![Page 27: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/27.jpg)
Machias Savings Bank
![Page 28: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/28.jpg)
Bath Iron Works
![Page 29: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/29.jpg)
TIF in Connecticut
![Page 30: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/30.jpg)
Characteristics of the TIF Statute Most Suitable for Downtowns
We found that TIF statues are most effective for downtown redevelopment when: Municipality run, with minimal state involvement Centralized decision-making procedure Few or no limitations on the types of projects it can be used
for Allows creation of broad TIF Districts Uses multiple sources of revenue, including sales taxes
![Page 31: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/31.jpg)
Statutory Sources
TIF-funded projects are enabled by four different statutes:
1. Section 32-23zz: I.T. and Remediation of Polluted Sites
2. Section 32-285: Significant Economic Projects 3. Section 8-125 to 8-145: Redevelopment and
Urban Renewal of Blighted Areas 4. Section 8-192: Municipal Development
![Page 32: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/32.jpg)
32-22zz: I.T. and Remediation
32-22zz authorizes funding for information technology projects that provide “information technology intensive office or laboratory space” and will “materially contribute to the economic base of the state.”
Remediation projects eligible for funding must improve properties that can be treated as polluted real property or contaminated real property.
![Page 33: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/33.jpg)
Why 32-22zz is not suited to downtown revitalization
Project limitations Can only be used for Technology and
polluted site Rehabilitation project
Not municipality run Bonds are issued by Connecticut Innovations
Limited to property taxes
![Page 34: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/34.jpg)
North Haven Commons
![Page 35: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/35.jpg)
Killingly Commons
![Page 36: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/36.jpg)
32-285: Significant Economic Projects
32-285 authorizes funding for self-sustaining significant economic projects
Tax increments are to be generated from increases in hotel taxes, sales, cabaret, admissions and dues taxes.
The purpose of the statute is to attract such developments to Connecticut
![Page 37: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/37.jpg)
Why 32-285 not suitable for downtown revitalization
![Page 38: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/38.jpg)
Dodd Stadium (Norwich)
![Page 39: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/39.jpg)
Oakdale Theatre (Wallingford)
![Page 40: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/40.jpg)
8-124 to 8-145: Urban Redevelopment
An urban renewal project includes “undertakings and activities for the elimination and/or prevention of the development or spread of slums or substandard, blighted, deteriorated or deteriorating areas.”
Examples of urban renewal projects authorized by the statute include
1. Demolitions or removals 2. Rehabilitation of buildings 3. Reconstruction of public utilities, parks or playgrounds 4. Any approved disposition of property
![Page 41: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/41.jpg)
Advantages of 8-124 to 8-145
Municipality run Municipality can issue TIFs without State
Centralized Municipality establishes Redevelopment Agency Redevelopment Agency reviews applications Then municipality legislative body votes
Covers larger areas
![Page 42: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/42.jpg)
Why 8-124 to 8-145 not suited to CT downtown revitalization
Project limitations “at least twenty per cent of the buildings contain one or
more building deficiencies or environmental deficiencies” E.g. Inadequate original construction Obsolete building types Overcrowding
Limited to taxes on property
![Page 43: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/43.jpg)
8-186 to 8-192: Municipal Development Projects
Authorizes CT municipalities to initiate use of TIF for “a project conducted by a municipality for the assembly, improvement, and disposition of land or buildings or both to be used principally for industrial or business purposes and includes vacated commercial plants.” § 8-187(4) (2014).
![Page 44: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/44.jpg)
Advantages of 8-186 to 8-192
Municipality-initiated
More centralized decision-making Though requires final approval from DECD
Can be used to create larger TIF districts
![Page 45: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/45.jpg)
8-191 Process
![Page 46: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/46.jpg)
8-191 Process (Continued)
![Page 47: Tax Increment Financing: Constraints and Opportunities · TIF in D.C. is governed by the 1998 Tax Increment Financing Act and the Retail Incentive Act of 2004 Via 1998 Act, DC Council](https://reader034.vdocuments.site/reader034/viewer/2022042103/5e80e1da900f8b591e27e9b2/html5/thumbnails/47.jpg)
Why 8-186 to 8-192 not suited to CT downtown revitalization
Project limitations “[T]he land and buildings within the project
area will be used principally for industrial and business purposes.” § 8-189(13)(A)
Limitations on revenue streams Can only utilize property taxes