The UNC School of Government has just released a new report on tax increment financing (TIF).  As I will highlight, it supports exactly what JLF has been saying for years.

What We Have Said

Recently, Joe Coletti wrote this excellent report in 2007 countering the rhetoric on TIFs.  Earlier this year, Joe and I wrote this report
detailing common sense reforms to the TIF law.  I’m usually
modest, but this report is a true thrill-ride packed with excitement
and humor.

The Agenda 2008 has a section on TIF reform as does the Center for Local Innovation’s City and County Guide.

What the UNC Report Says (Highlights)

– “Tax
increment financing is not a silver bullet solution to development
problems. There is no guarantee that the initial public investment will
spur sufficient private investment, over time, that creates enough
increment to pay back the bonds. Moreover, even if the investment
succeeds on paper, it may do so by ?capturing? growth that would have
occurred even without the investment. Successful TIF districts can
place an additional strain on existing public resources like schools
and parks, whose funding is frozen at base valuation levels while
growth in the district increases demand for their services. Similarly,
the rising property values that accompany a successful TIF can be a
boon to many, but they may effectively price some residents out of
their communities.”

– “The inherent speculative nature of TIF bonds makes them a
potentially risky proposition. If a TIF project fails to generate
enough new revenue repay the bond debt, it is conceivable that
taxpayers may eventually bear the brunt. The uncertainty of incremental
tax revenues could mean that TIF bonds in North Carolina are ‘unlikely
to get [a] favorable nod from ratings agencies.’   TIF bonds
that are backed only by incremental tax revenues are not typically
considered to be investment grade and thus will bear higher interest
rates.”

_______

This sounds familiar.

The problems with TIFs are widely recognized and hopefully policymakers
will pay attention and reform the state’s TIF law to recognize these
problems.  If they don’t, more TIF abuse will be on the horizon.

To see how TIF abuse can play out in practice, we need to look no
further than the Randy Parton Theater debacle.  As most of you
know, Carolina Journal’s Don Carrington has done incredible reporting on TIFs and the Randy Parton Theater.  His articles are a must-read on this topic.