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Thread: Tax increment financing district?

  1. #1

    Tax increment financing district?

    Anyone have any experience with using a Tax Increment Financing District to borrow against the expected tax increment revenue be used for affordable housing construction/rehab? I am brainstorming about potential affordable housing strategies for a town of 25,000 people and came across this idea.

  2. #2
    Cyburbian estromberg's avatar
    Jul 2007
    Northern Illinois
    This has been done in the I live in a few times. The TIF is set up and then bonds are sold to finance the improvements, with the bonds repaid by the TIF proceeds, hopefully.

  3. #3

    my town

    We use TIF but don't leverage it on a loan. Instead, we use a fund as you go method. After the fiscal year, we have a budget from the taxes collected and use that for mutliple TIF projects. They only way I think it makes sense to leverage it against a loan is if you are going to invest into a very large redevelopment project that has significant potential to raise property values.

  4. #4
    Cyburbian wahday's avatar
    May 2005
    New Town
    TIFs and TIDDs are quite the controversy in Albuquerque right now, mainly because of their application in a greenfield, New Urbanist-style development on the outskirts of town (rather than in blighted areas of established areas as is more commonly the case) called Mesa del Sol (http://www.mesadelsolnm.com/)

    It might help to read some of these opinions on the issue (which are critical of TIF use and their potetial abuse) to make sure you understand the potential downsides of such an approach. This isn't to say it can't be a very useful tool, but its good to know how it could go wrong as well:

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  5. #5
    Cyburbian Cardinal's avatar
    Aug 2001
    The Cheese State
    TIFs are implemented differently depending on the state, which may or may not allow the approach you have identified. I have worked with both "pay-as-you-go" TIFs in Illinois and several TIF bonds in Wisconsin. The second approach transfers the risk to the municipality, whereas the first one places the risk on developers. Either create the increment or you won't get (as much of) a benefit.

    Since TIF is tied to tax levies as well as value increment, changes to the levy can cause the tax increment to go up or down. Right now, for instance, falling residential property values are likely impacting many TIF districts.

    When bonding based on expected TIF increment, it is important to have as much assurance as possible that the increment will be generated. I have usually recommended that any TIF tied to a specified development secure an agreement with the developer to make up any shortfall in revenue. If this is not possible, a good feasibility study should be completed to identify how much increment can be expected, and then I would still recommend being conservative in making decisions on how large the bond can be.
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  6. #6
    Cyburbian Brocktoon's avatar
    Apr 2006
    Promoting synergies...
    Are you thinking about a TIF for just the development or are you going to create a larger district? This will also factor in what mechinism you can se to finance the deal. With the problems in the housing market a bond issue might not float without a sweetener.

    Have you looked at Low Income Tax Credits to entice developers to move forward on your project?
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