Tax Increment Financing: Ever heard of it? “TIF,” as it has come to be called, may be headed soon to your community, unless citizen groups organize to block it during the next session of the Washington State Legislature.
What’s the problem? TIF threatens to drain millions from already shortchanged municipal budgets and, like many of the worst urban planning schemes we’ve seen of late, it’s being promoted under the banner of “Transit Oriented Development.”
So what the heck is TIF? If allowed by state law, a city can draw boundaries to create a special district of almost any size. The city then sells bonds to pay for “public works” projects in that area in the hope that it will stimulate economic growth that otherwise would not occur. Thereafter, sometimes for 20 to 30 years, all additional property tax revenues (the increment) accompanying new growth in that district are used to pay off the bonds. This is why boosters claim that TIF projects “pay for themselves.”
That’s the theory, but the reality is different. In states that allow it, TIF has been used to divert hundreds of millions of the future tax dollars for sports arenas, strip malls, downtown development and other big-ticket special interest projects.
This happens because TIF laws generally do not contain adequate limitations restricting use of TIF to “brown,” or deteriorated areas, nor are they tailored to ensure that low-income people and small businesses are the beneficiaries.
More often TIF gets used in areas where high levels of growth are already anticipated, where there’s confidence that enough tax revenues will be generated in future years to pay off the bonds for the TIF improvements in the first place. And these are the areas with powerful interests able to push projects that serve them.
By funding projects where growth is expected to occur, instead of creating new economic activity and new jobs where they didn’t exist before, TIF projects become corporate welfare.
Tax revenues that would have gone into the general fund for police, roads, bridges and human services to the benefit of the whole city, including poorer neighborhoods, are instead captured for big-ticket projects to fuel more redevelopment in TIF districts. The rich areas get richer, and the poor areas of the city get poorer.
On the occasions where TIF is used in poorer communities, funded projects more often promote big box retailers and strip malls, which suck the life out of existing small businesses or displace longtime residents.
To get buy-in from the larger community, cities sometimes promise to earmark a portion of the TIF revenues for low-income and “affordable” housing and social services. But invariably that amounts to 10 to 20 percent of the tax dollars that are taken, not nearly enough to build replacement units for all those who are displaced by redevelopment schemes. And the so-called affordable units built with these funds often are priced closer to market rate than what low-income people from these areas can afford.
In states with few restrictions, TIF districts proliferate and drain away as much as 15 to 20 percent of municipal budgets. Then cities are forced to raise additional taxes to cover budget deficits or cut back on basic services so less money is available for housing and job development in truly needy areas.
Nearly every year, development interests lobby Olympia to pass some form of TIF. Every time they do, citizen activists like us have followed them down there and, with help from several legislators, managed to reject the worst of these bills.
A new coalition of interests is gearing up for the next legislative session. Led by the Puget Sound Regional Council (psrc), the group includes several mainstream environmental groups such as Futurewise, Forterra and Transportation Choices, coupled with the more usual commercial land and development interests. The coalition even includes a smattering of labor-related interests and nonprofit housing developers hoping to piggyback onto the new TIF legislation. Their goal is to have new TIF legislation drafted by the end of summer and fully ready for the next legislative session.
The legislation is being touted to promote affordable housing in Transit Oriented Development areas. But it looks more like cover for the same old developer agenda. Few TIF dollars will go anywhere but into developer pockets. And a lot of the projects likely to receive funding from TIF will simply spur more displacement, housing loss and homelessness.
We hope Seattle residents will let legislators know what they think of this. We will be organized and ready to go to Olympia to stave off passage of a full-blown TIF mechanism hatched by the Puget Sound Regional Council’s coalition.