Tax Increment Financing (TIF) Districts

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twincitizen
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Tax Increment Financing (TIF) Districts

Postby twincitizen » January 16th, 2015, 8:49 am

The use of TIF districts has fallen sharply in Minneapolis, and all over MN. TIF remains a very valuable tool in a city's redevelopment toolbox, when it comes to spurring redevelopment that has a financing gap, in blighted/distressed areas, or needs public improvements to go along with the development. It's good to see cities not so dependent on it though, tying up large portions of their tax base in TIF distrits.
TIF debuted as a tool in the 1970s and has been used to pay for development in blighted areas where it wouldn’t happen “but for” the public assistance. Critics worry about the method’s true benefits, because it diverts increased tax revenues, or “increments,” for up to 25 years.
The total number of TIF districts across the state fell 5 percent in 2013, the latest year for data, to 1,732. That number is down from 1,981 districts in 2009, according to a previous Finance & Commerce report.
In each year since 2009, the number of expiring old districts outpaced the creation of new ones. The number of existing TIF districts has dropped every year since 2004, when it topped out just over 2,200.
The districts captured about $201.8 million in revenue in 2013, down from $312.8 million in 2009. About 35 percent of the state’s TIF districts are in metro-area counties.
In Minneapolis, the percentage of the city’s tax base tied up in TIF arrangements has dropped from 15.7 percent in 2003 to 8.6 percent in 2014.
“Minneapolis is following similar trends to what we’re seeing throughout the state,” Sandy Christensen, deputy chief financial officer for the city, said Thursday. “We’re reducing our use of TIF.”
The city now has 79 active TIF districts, down from its peak of 101 in 2008. The vast majority of those districts — 77 of them — are for either housing or redevelopment projects.
Read more: http://finance-commerce.com/2015/01/use ... statewide/

mattaudio
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Re: Tax Increment Financing (TIF) Districts

Postby mattaudio » January 16th, 2015, 10:09 am

I'm skeptical of TIF in nearly 99% of cases. Because it's always sold as a lie, that it's only coming from future tax increments so it doesn't affect others. But

1. The tax base growth (the payback on the TIF) seems to always fall short of the plan.

2. TIF literally constitutes a subsidy, picking winners and losers, usually subsidizing sprawly growth at the expense of existing and/or urbanized places.

3. Much of the growth that happens with TIF would happen in some fashion without TIF. It's basically businesses playing local governments against each other.

4. Most importantly, it *does* impact everyone else's property tax. Why? Two reasons. TIF growth usually increases ongoing maintenance liabilities without a commensurate increase in tax capacity, so this necessarily constrains budgets and/or raises others' property taxes to cover increased costs. Second, though most people don't seem to understand how property tax is calculated, we're not charged a mill rate of property values, we're charged proportional to the overall tax base (which creates an *effective* mill rate). It's the same reason why Mpls could raise the levy this year, though less than the growth in tax base, thus the *aggregate effective* mill rate actually decreased. So, keeping new growth off the tax rolls necessarily raises the tax incidence for other land owners.

mattaudio
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Re: Tax Increment Financing (TIF) Districts

Postby mattaudio » January 16th, 2015, 10:13 am

To clarify, I know that there's the "but for" test for TIF to get approved. The growth in tax base would not happen "but for" the TIF financing.

But, IRL, it's BS. Simplest example? The famed Brainerd Taco John's.
It received TIF money http://www.brainerddispatch.com/stories ... 4006.shtml
to buy out an "old and blighted" land use and replace it with a "shiny and new" Taco John's.
Yet the new Taco John's generates less property tax revenue than the old land use it replaced! Not to mention the block now provides less jobs and keeps much less money in the local community.

David Greene
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Re: Tax Increment Financing (TIF) Districts

Postby David Greene » January 16th, 2015, 11:00 am

What mattaudio said.

twincitizen
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Re: Tax Increment Financing (TIF) Districts

Postby twincitizen » January 16th, 2015, 1:17 pm

What about using TIF for sites that are currently generating 0 property taxes, like say a polluted, government-owned, former industrial site? Or even privately-owned, but generating minimal property taxes?

What about for affordable housing projects that would otherwise not get built at all, leaving vacant or vastly underutilized sites? I agree that the "but for" criteria should be strengthened if it's letting dubious projects through, but TIF is still very important tool for local governments to redevelop "blighted" or vacant property.

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Re: Tax Increment Financing (TIF) Districts

Postby RailBaronYarr » January 16th, 2015, 1:32 pm

What about using TIF for sites that are currently generating 0 property taxes, like say a polluted, government-owned, former industrial site? Or even privately-owned, but generating minimal property taxes?

What about for affordable housing projects that would otherwise not get built at all, leaving vacant or vastly underutilized sites? I agree that the "but for" criteria should be strengthened if it's letting dubious projects through, but TIF is still very important tool for local governments to redevelop "blighted" or vacant property.
In some of those cases, I'd rather there be a pot of money from the state/federal level (ideally state) to give out grants fro cleanup/prep. This fund should come from business taxes within the state since they're nearly always the ones that leave behind these type of blighted/vacant sites (though not always, and it's certainly tough to charge some industries like a hair salon the same amount as chemical plants and auto repair shops who really do the damage). This is especially the case when the site is an industrial user who left for another municipality without being good stewards of the place they left. I dunno, seems like a bad workaround to use TIF to bring a property back to viable status and then not receive any of the property tax benefits for so long...

twincitizen
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Re: Tax Increment Financing (TIF) Districts

Postby twincitizen » August 15th, 2015, 8:51 pm


twincitizen
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Re: Tax Increment Financing (TIF) Districts

Postby twincitizen » December 6th, 2015, 6:36 pm

Good article here on use of TIF in St. Paul: http://www.twincities.com/news/ramsey%2 ... ot-so-much

twincitizen
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Re: Tax Increment Financing (TIF) Districts

Postby twincitizen » April 19th, 2016, 3:29 pm

Senator Ann Rest (DFL - New Hope) wants to make some changes to TIF law and literally no cities want this to happen: http://www.lmc.org/page/1/TIFPooling.jsp

David Greene
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Re: Tax Increment Financing (TIF) Districts

Postby David Greene » April 20th, 2016, 8:09 am

What problem is this proposal trying to solve?

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Re: Tax Increment Financing (TIF) Districts

Postby Anondson » May 13th, 2018, 12:42 pm

Fred Melo on a couple ways to make TIF better.

https://www.twincities.com/2018/05/12/h ... d-chicago/

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Re: Tax Increment Financing (TIF) Districts

Postby Tiller » May 13th, 2018, 5:43 pm

Instead of TIF, could cities define a district and levy a separate/additional property tax therein?

For the Nicollet ave streetcar, Minneapolis needed special permission from the legislature because it's a value-capture district. If the key part is "value capture", and not "district", cities could use special property tax levy districts to pay for transit/transportation improvements. It would also give reason for neighbors/businesses to support increasing density along those improvements, as density would reduce their contribution (and by more than if an ordinary city-wide property tax levy was used to pay for said improvements). There would just be more opposition upfront.

If instead Minneapolis (just an example) levied something like $5m/year for the Nicollet ave streetcar across the same geographic area, would that be constitutional?

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Re: Tax Increment Financing (TIF) Districts

Postby FISHMANPET » May 13th, 2018, 7:31 pm

Municipalities in Minnesota have no way to levy additional property taxes on certain areas. The total tax capacity of the city is calculated by state formulas, all the city or anyone can do is set their tax capacity rate which applies to the whole city.


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