On February 1, however, TIF came to an end in California, 60 years after its introduction there, as legislation abolishing the redevelopment agencies that used TIF came into effect. By 2010, there were approximately 425 redevelopment agencies statewide overseeing about $8 billion of tax increment per year. As far as I know, this exceeds TIF in the rest of the country put together. read article
What Does the Research Say About Redevelopment?
For nearly seven decades, California law has authorized cities and counties to establish redevelopment agencies (RDAs) in order to reduce blight. Once established, RDAs receive most of the growth in property tax revenues attributable to increases in property values (“tax increment”) in the redevelopment project areas.1 Absent redevelopment, schools and other local agencies would receive these revenues. Currently, RDAs receive approximately 12 percent of statewide property tax revenues, up from 4 percent in 1983-84.2 As part of his 2011-12 Proposed Budget, Governor Jerry Brown proposed to dissolve RDAs by July 1, 2011.
Independent research on redevelopment in California – more broadly referred to as “tax-increment financing” (TIF) in other states – is limited. Studies find mixed results as to whether TIF boosts property values and results in increased property tax revenues. However, the most comprehensive independent study of California RDAs, conducted by the Public Policy Institute of California, found that redevelopment activities in most RDAs studied failed to generate enough growth in property values to account for the tax increment revenues they received. A small body of academic literature also examines the extent to which TIF projects boost economic activity, and some of this research finds evidence that TIF projects simply shift economic activity within municipalities rather than creating additional economic activity. For example, one study suggests that when employment increases in TIF project areas, it decreases in other parts of the city, which could mean that TIF projects draw jobs from elsewhere in the city, rather than generating net new jobs. read article
The video below relates to Tax Increment financing and how it benefits multi billion dollar corporations.
Your tax dollars being spent to increase the wealth of the already wealthy.
You Can’t Understand TIF without Eminent Domain
Matt Yglesias suggests that Tax-Increment Financing (TIF) is a good mechanism for encouraging the development of abandoned property. I disagree. TIF is mostly a mechanism for transferring taxpayer dollars to politically-connected private developers, and it is intimately connected to the problems of eminent domain abuse.
TIF is one of those ideas that looks reasonable when you first encounter it (and, indeed, seemed reasonable when California invented it in the 1950s) but gets worse and worse the more you learn about it. The theory behind TIF is that local governments take out bonds that are paid back out of the increased tax revenue generated by a new development financed by those bonds. So, for example, if Wal-Mart wants to build a new store on land that was previously a low-revenue residential neighborhood, the city government might issue bonds worth several million dollars, give them to Wal-Mart to help build its store, and then repay the bonds out of the increased revenue generated by the Wal-Mart.
There are two problems with this approach. One is that the concept of “new tax revenue” isn’t as simple as it seems. It’s true in a trivial sense that the city government is now getting tax revenue from that particular site that it wasn’t getting before. But the reality is that Wal-Mart almost certainly would have built its store somewhere, and so some tax jurisdiction in the general area is losing revenue it would received but for the TIF.
Second, the way the TIF process is set up in Missouri (and Missouri is far from unique) creates a kind of revenue death spiral, where municipalities compete to give large companies ever-larger TIF packages (and eminent domain) to lure them to the state. The result is that large, politically connected developers wind up paying much less in taxes than they would in a world without the ability for such favoritism. Indeed, a lot of large retailers have become expert at playing this kind of game, staying only as long as required by their TIF agreement before picking up stakes and moving to another municipality, where they can get another round of taxpayer handouts. (read article)
You can make a difference. Learn from citizens nationwide who staged effective grassroots battles to save their homes and small businesses from the government’s wrecking ball. These determined activists fought against eminent domain abuse brought on by tax-hungry city officials and greedy developers—and they won.
Ordinary citizens have triumphed against seemingly insurmountable odds by forming grassroots coalitions, pursuing aggressive media campaigns, remaining politically active and bringing their struggles to the court of public opinion—all strategies outlined in the Castle Coalition’s Survival Guide.
As these success stories indicate, momentum against eminent domain abuse has spread like fire across America—and it’s only getting bigger.
Valley Township, Pennsylvania
It cost Nancy and Dick Saha $300,000 of their retirement savings and six hard years, but they prevailed in their bout with the City of Coatesville. The couple bought their Pennsylvania farmhouse in 1971, making lifelong dreams of owning a small horse farm a reality. With their five children, the Sahas moved to Chester County and restored their charming 250-year-old residence. Truly a family farm, two of their daughters married and built their family homes on the land, giving Nancy and Dick the chance to see their five grandchildren grow up next door.
When Coatesville threatened to take their property by eminent domain to build a golf course—plans for which didn’t even include their farm in the first place—the Sahas remained fully committed to a grassroots battle. They submitted three petitions, protested at local meetings and took their fight to court. Ultimately, the city council backed off when the Sahas pushed to elect new representatives, agreeing to purchase five acres that the Sahas had offered to give the government for free at the beginning of the dispute.
Property Tax Abatements, Tax Increment Financing and Funding for Schools
If a piece of property has enough profit potential to be developed without TIF, then there seems little reason that a local government should give up many years of future property tax revenues to pay for a portion of the development.
Eminent Domain Law, Urban Renewal and Tax Increment Financing....
Note: The Kelo case represented the first time in 20 years that the Supreme Court had agreed to hear a case involving the question of whether a “public use” exists when private property is condemned and transferred to private developers and long-term tenants in an area struggling to emerge from an economic recession. read article
The Need for Increased Transparency and Accountability in Local Economic Development Subsidies. if you only read one article on TIF and the need for reform,
"The Department of Commerce, in cooperation with other State agencies and local governments, shall make a comprehensive report to the Governor and the General Assembly every two years commencing January 1, 1992, as to the social, economic, and financial effects and impact of tax increment financing projects." -53 PS 6930.10, Tax Increment Financing Act
Tax increment financing is a method of redirecting tax revenues to enable the redevelopment of property that is (1) blighted, (2) a conservation area, or (3) an economic development area. The TIF Act authorizes the capture of 100% of the incremental increase in property taxes above the property taxes generated by the property prior to redevelopment, called “payments in lieu of taxes” (“PILOTs”) and 50% of the new economic activity taxes (“EATs”) generated from the redevelopment project through sales taxes, earnings taxes, and utility taxes. read article part 1, part 2, part 3