This commentary is from Burlington’s Michael Long, who served on the Burlington Development Review Board for more than a decade and was active in efforts to moderate the redevelopment of Burlington’s downtown mall.
Tax Increment Financing – TIF for short – is a statewide boondoggle that is misunderstood and marketed with little regard for truth or fine print.
It subsidizes development, gives politicians and public employees money to spend, but does little or nothing to spur development that wouldn’t happen on its own.
Worst of all, the TIF is raiding the Education Fund and local municipal coffers like a big, fat piggy bank – telling us, don’t worry, no problem; this piggy bank will be filled to overflowing a few decades later.
The City of Burlington is back on the March ballot asking voters to pledge “the full faith and credit of the city” in favor of a $26 million TIF bond for “Great Streets.” The plan itself is too vague at this point to be worth supporting.
But even if the plan was well drawn and clear – the city won’t even estimate how many parking spaces will be lost – the TIF is a cumbersome, deceptive and expensive method of financing, bad for schools and municipal services and high in administrative costs.
The mayor and other TIF sellers say, “TIF is designed to make improvements to the tax increase revenue fund,” so your taxes don’t go up. This is wrong in two specific ways and only true if you extend their claim to mean that the city will not tie an explicit tax increase to the repayment of the TIF debt.
The fact remains that TIF takes millions of tax dollars that would otherwise fund education and municipal services and uses those millions instead to repay principal and interest on TIF debt. Our schools – here and across the state – and our local municipal services are still funded by our taxes.
The millions diverted to the TIF are millions taken away from our support for schools and municipal services.
Since the TIF diverts taxpayers’ money from education, police, fire and other municipal services, this diverted money must be replaced in whole or in part by additional taxes.
It is a tax increase. The claim that the TIF does not raise taxes is false.
The Vermont Legislative Joint Fiscal Office “estimates that Vermont’s TIF program represents a negative cost to the Education Fund of between $3 million and $7 million per year from 2017 through 2030.”
He further warns that “it will take more than 50 years for the Education Fund revenues of an average Vermont TIF district to catch up with the revenues of the same geographic area without a TIF district.”
The second misrepresentation regularly made in the promotion of the TIF debt is that the debt will be paid exclusively by the new taxes, the so-called “tax increase” which will result from the new development stimulated by the TIF dollars.
This can be a heartwarming argument: even if taxpayers’ money is paying down TIF debt instead of funding schools or municipal services, those are tax increase dollars that wouldn’t even exist without it. TIF. The development spurred by the TIF created these dollars, so there is a right to them, the argument goes.
Of course, it is impossible to know or prove that a development is the direct result of TIF expenditures and would never have happened without it. Nonetheless, TIF boosters award one TIF credit for every new dollar on the big list in TIF districts, whether plausibly related to a new development or not.
In fact, many tax dollars clearly unrelated to the development stimulated by the TIF are diverted to pay the TIF debt.
If a property is tax-exempt upon establishment of a TIF district, its original tax value is set to $0. If this property later becomes taxable, as in the case of the former YMCA building which was sold in 2018, the full assessed value is declared a “tax increase” and most of the $80,644 owed annually goes into the TIF fund, not into Vermont schools. or City of Burlington services.
Many properties have their full assessed value classified as an increase, diverting additional millions year after year to the TIF service.
Worthwhile public projects should be supported directly. Using the TIF instead compromises schools and public services and dishonestly claims spending millions has no impact on taxes.
The TIF may be the darling of some politicians, but it is not a public policy we can trust. The Joint Fiscal office is pointed and adamant: “The extent to which the TIF has provided and will provide the expected economic benefits to the state is unclear. Academic and other state research focused on TIF has also found little economic benefit to its use. … Vermont’s TIF districts have largely met their property value growth projections, but have missed the incremental tax revenue and private investment estimates by wide margins.
TIF is not free money. The TIF is not an opportunity to be seized, but a mistake to be avoided.