One of the hottest issues in the current debate over financing needed infrastructure in White Flint is whether to use something called Tax Increment Financing, or TIF. The County Executive is vehemently against a TIF; Executive staff have confronted and threatened TIF supporters. Most speakers at last night’s Montgomery County Council hearing supported a TIF. Friends of White Flint supported a “dedicated source of reliable and sustainable revenue,” including a TIF, although my testimony last night pointed out that “we don’t care what you call it.”
The Executive and the two witnesses who supported the Executive claim that a TIF is used only in “blighted areas” and is thus not suitable for an existing area such as White Flint. Supporters claim that is nonsense, pointing out that TIFs are used throughout the country, and Fairfax County is going to use a TIF for the Tyson’s renovation. Indeed, County Executive Ike Leggett’s favorite museum (according to a recent news story) is the International Spy Museum in the District; that renovation was funded by a TIF, and Montgomery County activist Ed Rich was involved in crafting that TIF.
Now Arlington County has announced its use of a TIF for Crystal City:
Arlington County Board Adopts Innovative Financing Tool for Crystal City Infrastructure Improvements.
- Helps realize Crystal City vision
- Helps pay significant portion of $207 million in infrastructure improvements
- Not a new tax
ARLINGTON, Va. – The Arlington County Board today approved the creation of a tax increment financing area and fund to help pay for infrastructure improvements in support of the Crystal City Sector Plan. Board members emphasized that this is not an additional or new tax.
This will be the first time that the County uses this tool in support of large scale infrastructure improvements. Approval of the funding mechanism is an important initial step toward realizing the vision for a more transit-oriented, walkable, lively Crystal City as laid out in the Crystal City Plan.
“This mechanism will help us fund a streetcar and other infrastructure improvements that will help transform Crystal City, an area vital to the ongoing economic health of the County,” said Board Chairman Jay Fisette. “It means that initially, a third of the revenues generated by growth in property assessments in this area will be used to make improvements within the area. This reflects our commitment to turn our vision for Crystal City into a reality.”
The Crystal City Plan, adopted by the Board in September, includes approximately $207 million of public infrastructure improvements in streets, transit and public open spaces over the next 20 years. Tax increment financing will pay for a significant portion of these costs, particularly in the plan’s latter years.
Frequently used method across the nation
Tax increment financing (TIF) is a mechanism frequently used across the nation. It supports development and redevelopment projects by capturing the increase in property tax revenues created by the development or redevelopment area and investing a portion of those funds in improvements associated with the projects. Unlike a special district, it is not an additional or new tax; it redirects and segregates a portion of the net new property tax revenues for a specific purpose.
The amount of TIF revenue is determined by setting a baseline assessed value on a certain date (January 1, 2011, in this case) and in each subsequent year tracking the incremental increase in assessed values relative to the base year.
For an example: A hypothetical property in the redevelopment area is valued at $1 million as of January 1, 2011. The following year, the same property is valued at $1.1 million, an increase of $100,000. All, or a portion, of the real property tax revenues attributable to the $100,000 increase would be segregated in a separate fund. Under the action taken today by the County Board, property tax revenues up to $33,000 of the incremental increase would be dedicated to the TIF fund.
Highlights of the Board’s action include:
- The TIF area includes Crystal City, Potomac Yard, and Pentagon City. Plan investments will support infrastructure serving all three areas, such as a streetcar and related street improvements.
- Initially, up to 33 percent of increment real property tax revenues would be dedicated to infrastructure improvements. The balance would remain in the General Fund. Under conservative redevelopment projections, incremental real property tax revenues are projected at $82 million over the next six years. Up to $27 million would be dedicated to the TIF fund and infrastructure improvements, leaving $55 million available for General Fund purposes.
- The TIF fund will be part of the County’s annual budget process.
- The effective date of the TIF – when the base value is set – will be January 1, 2011.
The Board voted 5-0 to approve creation of the TIF. For more information on how tax increment financing works, read the staff report (Item #38 on the Oct. 26, 2010 Agenda).
We’ve used Arlington as an example of what we want to do, especially in the Rosslyn-Ballston corridor, where ten percent of the county produces half the county’s tax revenues by putting development close to Metro stations. Now they’re leading the way again in using a TIF.