This past August, the city of Missoula found itself facing a surprise budget shortfall caused by a lower than expected projection of tax revenues. The Missoulian reported that one initial explanation by state officials for this situation was apparently that TIF financing and redevelopment projects were to blame.
I know a thing or two about Tax Increment Financing from my past life as director of redevelopment (and community development and economic development) for many years in a community about the size of Missoula in another state before moving here about two years ago. So I just can’t keep quiet when I hear these tired old claims about how TIF somehow takes money away from other taxing units.
Just the opposite is generally the case – using the new tax revenues that are generated by development in an area of the community that is NOT experiencing growth to fund projects to turn that area around and begin to cause positive expansion will ultimately pay off for everyone. It may take some time for that to happen, but it certainly does not cause any decline from the base values set when the district is created.
To think that any tax revenue currently generated from new construction is being “stolen” from city coffers is to misunderstand the basic math that any percent of zero is still zero – if there is no growth, there would be no additional tax revenues to “steal.” Without the initial use of TIF funds on projects to stimulate growth, development would not have occurred, hence zero additional tax revenues.
I now live in a TIF district which was formerly a vacant piece of industrial property needing environmental remediation and infrastructure before anything could be developed. Construction is taking place all around me – which will eventually generate tax revenues that can be used anywhere in the city. TIF revenues have already been used within the TIF area to make some of the housing more affordable as well as build the necessary streets. None of this could have happened just by using the regular city tax structure.
When the city decides that not all the revenues from a TIF district are needed to pay bond obligations or to fund other needs in the district directly, the additional revenues can be passed along to all the taxing units, including the city itself, schools and others. Even the state benefits by the clever use of funding formulas which decrease the state’s contribution to some of these taxing districts. Missoula has apparently decided to do that this year, but that should not be expected every year, as TIF districts are rarely without some additional projects to keep the ball rolling for the finite life of the district.
Responsible taxpayers should actually demand that their public officials utilize all the tools available to them to build a better community – and TIF is one of the best tools available in this state and many other states to do just that.