prepared by weld county treasurer john lefebvre tax increment financing a quick overview
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Prepared by Weld County Treasurer John Lefebvre
Tax Increment Financing
A Quick Overview
Prepared by Weld County Treasurer John Lefebvre
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
BackgroundProblem
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
Slums = Market FailureCheap 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 downwardTax base erodesBusinesses flee
Prepared by Weld County Treasurer John Lefebvre
ResultsGovernment revenues fallSocial costs climb without offsetting
revenue High unemployment Increased crime Increased substance abuse
Prepared by Weld County Treasurer John Lefebvre
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
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
How They WorkDeclare blightedFreeze the tax baseSplit 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
Typical TIF
1 1 1 1 1 1
0.1 0.2 0.3 0.4 0.5 0.6
0
0.5
1
1.5
2
1 2 3 4 5 6
Years
Tax Amount
Prepared by Weld County Treasurer John Lefebvre
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
TIFs = Financing OptionsFinance infrastructure Estimate future valueBond for differenceDollars today for dollars tomorrow Improved community
Prepared by Weld County Treasurer John Lefebvre
General TIF ProblemsResult in market distortionTraditional tax base shifts from
underlying authorities to the cityJob qualityNo accountability
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New URA / TIF ProblemsEminent domain is abused
Taking land from one private party to benefit another private party
High jacks the tax baseTIFs misapplied
Used on the urban edge rather than competing with it
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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
Colorado Community Revitalization AssociationTIF:
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
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
Subjectivity = Blight Anything
Prepared by Weld County Treasurer John Lefebvre
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
Winners Losers 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
Prepared by Weld County Treasurer John Lefebvre
IronyMeant 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
Questions
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