Post No. 2

Posted By: Sarah Szurpicki, 2/8/2008

Ryan Horton, a GLUE team member from the Public Policy Forum in Milwaukee, lobbied hard at GLUE's inaugural conference last week for creative usage of Tax Increment Financing (TIF) in urban redevelopment. TIF generally refers to this process: A municipality issues bonds to pay for aspects of a development. That development should lead to increased property values, which lead to increased taxes. The increase in property taxes is the "increment" in TIF, and can be captured to repay the initial bonds.

Historically, TIF has been used to help finance developments like industrial parks, shopping centers and housing developments, and has been the source of some controversy. TIF often suffers from lack of transparency. And because TIF projects are designed specifically to increase property values, they've also been criticized as direct causes of gentrification.

However, Ryan urged us to reconsider the power of TIF when used boldly and responsibly. He told us about an underutilized, elevated highway spur in Milwaukee – the Park East Freeway – and how it divided neighborhoods and left the dominant land use around it as – no shock to Detroiters – surface parking. Milwaukee used TIF ambitiously: to finance $15 million of the cost of the spur's razing, which began in 2002.

Now, according to the city's website, "The elevated freeway spur was replaced with an at-grade six-lane boulevard that is fully connected with the existing and newly re-created street grid. New block configurations opened up 24 acres of downtown property for redevelopment." The Park East Freeway's removal reconnected downtown Milwaukee with the largely African-American neighborhoods immediately to the north. (Highways dividing neighborhoods – sound familiar?)

According to Ryan, "The challenge is to stop thinking of TIF as a project-based tool, and start thinking of it as a way to achieve regional and community development goals." Detroit needs bold visions and can't wait for the government to catch up with new financing tools. I hope some of our planners and leaders are imagining a new transportation and spatial arrangement for the city – and are exploring existing models for making their visions a reality.

The rest of us need to understand the potential gains and the pitfalls, so that we can hold our leaders accountable for using tools like TIF transparently, and for the good of our city's current residents.

Comments:

Saturday, February 09, 2008 2:44 PM by Andrew Mutch

When used properly, TIF can be a effective tool for guiding redevelopment in urban areas. The challenge in these times is that the old assumption that new development would generate the tax revenues necessary to finance TIF projects is in question. When market values are falling across the board, even new development may not generate enough new tax revenue to offset those declines. In that scenario, there's simply no money to pay for those TIF projects. Also, in Michigan at least, taxing authorities can choose to opt-out of the TIF so that their share of taxes are not captured. At a time when government at all levels is scrambling for every penny, many of them will choose to opt-out of allowing their taxes to be captured. They'll take the short-term guarantee of tax revenues today over the long-term promise of more revenues in the future.

Without some changes in how TIFs are funded, it seems unlikely we'll see new TIFs put in place. But that doesn't mean that the goals that TIFs could accomplish should be abandoned. One of the big problems that seems to affect redevelopment in Detroit is the lack of vision and plans for redevelopment of key areas. Without such a vision, redevelopment often appears to be driven by specific projects (or doesn't occur because of a lack of development proposals). How many of us can articulate what the "regional and community development goals" are for Detroit and the region. Until there's a shared vision that is clearly articulated for all to understand, we'll never be able to fully realize that potential of redevelopment tools like TIF.