In getting my thoughts together about my upcoming tax increment financing reform legislation, I put together a memo about how TIF works, how our 2016 reform impacted TIF, and how some of my proposed 2018 reform would work.
Here’s the memo.
The abbreviated version is…tax increment financing diverts property tax revenue from some property mostly in the downtown area. Absent diverting the funds, that money would ordinarily be divvied up among Metro’s several operating “Funds” (e.g., the “General Fund,” the “Schools Fund,” etc…). Instead, the property tax revenue from these TIF properties is used to pay for development loans. I don’t think this is inherently good or bad. It is a tool that can be used well or poorly.
In 2016, the Council passed a law that, for new TIF loans, required Metro to retain about 15% of these tax funds instead of diverting all of the funds to pay development loans. Metro will now have to keep that 15% and use it to pay long term bond debt.
The current legislation would expand this concept and require Metro to also retain the “Schools Fund” portion of the taxes from new TIF properties (about 31% of the property tax revenue). Metro would keep the 15% to pay bond debt and the 31% to fund our schools. After this, the majority of the tax funds from new TIF properties would still be available to pay for development loans.
I won’t go into detail here, but this isn’t a crazy concept. All over the country, cities and counties are reassessing whether tax increment financing should use all of the new tax money from development or leave some meat on the bone for an operating budget. Here’s one article from a few days ago to get you started.