One potential answer to the lack of funding for Route 1 is tax increment financing, or TIF. Tom Himler, a consultant from Municipal Group LLC attended last week's city council work session and explained the feasibility of TIF as a possible means of solving Route 1's funding problem. Below is a summary of Himler's presentation.
What is a TIF?
The basic assumption behind TIF is that property tax revenues in a specified district will increase incrementally when that district is improved or developed. For example, improvement to vacant land within a TIF district will generate additional real estate value (an "increment"), which can then be used to retroactively finance the cost of the project. So once an area is legally determined to be a TIF district, its value is "frozen," meaning that any improvements that generate additional real estate value are captured via property taxes solely within the TIF district.
TIF can be applied to a variety of projects, such as single-family residences, professional sports stadiums, hotels, and lots of things in between. National Harbor, for instance, was a TIF project.
- Encourage economic development in areas that are underserved by the private sector
- Don't require the use of existing tax resources
- Enables partnerships between the public and private sector
- Diverts a portion of new tax revenue from the jurisdiction's general use to a special fund with a restricted purpose
- Potentially excludes property owners and developers outside the TIF development district
- Possible conflict of interest in using public incentives for private development
However, Himler also noted that lack of money is still a problem, even in the context of using TIF.
"National Harbor probably wouldn't have happened today," he said.