Tax Increment Financing

1. Tax Increment Financing A Quick Overview Prepared by Weld County Treasurer John Lefebvre

2. Tax Increment Financing • TIF is a tool of local general governments to finance (re)development of blighted property for the purpose of economic revitalization Prepared by Weld County Treasurer John Lefebvre

3. Background • Problem • Urban flight left blighted areas in the inner city unable to compete with the urban edge communities • Slums are economically depressed (blighted) areas in inner cities that need revitalization Prepared by Weld County Treasurer John Lefebvre

4. Slums = Market Failure • Cheap and available supply of fuel and the auto lead to urban flight in the 1940s and 1950s • Owners allow their properties to fall into disrepair • Values spiral downward • Tax base erodes • Businesses flee Prepared by Weld County Treasurer John Lefebvre

5. Results • Government revenues fall • Social costs climb without offsetting revenue • High unemployment • Increased crime • Increased substance abuse Prepared by Weld County Treasurer John Lefebvre

6. Competing With The Urban Edge • Solution • State governments established Urban Renewal Authorities (URA) in the 1950s • Power given: • Declare blighted areas • Eminent domain • TIFs Prepared by Weld County Treasurer John Lefebvre

7. History • Began in CA in 1952 • CO established parallel legislation in 1958 • Heavily used since the 1970s nationwide Prepared by Weld County Treasurer John Lefebvre

8. How They Work • Declare blighted • Freeze the tax base • Split the revenue stream • Original underlying authority revenue remains frozen at the time of blight declaration for up to 25 years • Increment accrues to the URA Prepared by Weld County Treasurer John Lefebvre

9. Prepared by Weld County Treasurer John Lefebvre

10. URA / Blight / TIF Solution • Urban Renewal Authorities • Eminent domain • Holdouts • Small parcels • TIFs • Finance redevelopment • Stop sprawl • Retain tax base • Level economic playing field with urban edge developments • Finance infrastructure improvements without a general tax increase • Development pays its own way Prepared by Weld County Treasurer John Lefebvre

11. TIFs = Financing Options • Finance infrastructure • Estimate future value • Bond for difference • Dollars today for dollars tomorrow • Improved community Prepared by Weld County Treasurer John Lefebvre

12. General TIF Problems • Result in market distortion • Traditional tax base shifts from underlying authorities to the city • Job quality • No accountability Prepared by Weld County Treasurer John Lefebvre

13. New URA / TIF Problems • Eminent domain is abused • Taking land from one private party to benefit another private party • High jacks the tax base • TIFs misapplied • Used on the urban edge rather than competing with it Prepared by Weld County Treasurer John Lefebvre

14. What is Blight? • Lack of infrastructure • Incorrectly configured infrastructure • Site or other improvement deterioration • Faulty lot layout • Unsanitary or unsafe conditions • Unusual topography • Defective or unusual conditions impairing economic growth Prepared by Weld County Treasurer John Lefebvre

15. Colorado Community Revitalization Association • TIF: • Prevents leakage of sales tax dollars to outside communities • Retains revenue for government services • Contains costs for providing government services by reusing in-fill locations; • In-fill development carries a significantly lower public cost compared to edge, or sprawl, development Prepared by Weld County Treasurer John Lefebvre

16. Colorado Community Revitalization Association • Revitalizing in-fill locations: • Reduces pressure on urban edges • Preserves open space & agricultural land • Retains Colorado’s character and quality of life Prepared by Weld County Treasurer John Lefebvre

17. Subjectivity = Blight Anything Prepared by Weld County Treasurer John Lefebvre

18. TIFs on the Urban Edge • Meant for development to pay its own way without a general tax increase • Yet overuse leads to a general tax increase • Meant to limit sprawl • Subsidizes sprawl • Leads to newly blighted areas from overbuilding Prepared by Weld County Treasurer John Lefebvre

19. Developers get subsidized City gets new infrastructure Citizens have: higher property values New jobs No new general taxes Local shopping All other county residents County government Competing communities Truly blighted areas in cities All state residents State legislature has to find the money to backfill schools Winners Losers Prepared by Weld County Treasurer John Lefebvre

20. Irony • Meant for development to pay its own way without a general tax increase • Yet overuse leads to a general tax increase • Meant to limit sprawl • Subsidizes sprawl • Leads to newly blighted areas from overbuilding Prepared by Weld County Treasurer John Lefebvre

21. Questions Prepared by Weld County Treasurer John Lefebvre