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With a TIF, the District borrows the money and gives it to the developer. The District then levies the taxes that would ordinarily be levied, and that tax revenue goes to pay off the loan instead of going into the general fund as it normally would. There is an unstated assumption that the development will result in more tax revenue than the District would otherwise have, and if done correctly, it would. But many of the projects that have received TIF money are projects that would have happened otherwise, so there is no increase in tax revenue. In the stadium case, they did levy an extra tax, but is not the way it has generally been done. And, I think it is clear that with the stadium tax, many of the businesses that are paying the tax are not receiving any benefit from the stadium, just paying additional taxes.

There can be TIF projects that really do spur new development that might not have happened otherwise, and thus produce additional tax revenue at least sufficient to pay off the loan. I doubt that a TIF to pay the owner of Georgetown Park the cost of remodelling to attract an anchor store would generate additional tax revenues. Most retail centers undergo periodic remodelling without a government subsidy, and if Georgetown Park were not given a TIF, would the owner decide not to make the improvements necessary to have a profitable development?

You can think of a TIF as similar to you taking out a loan to put an extension on your house. Instead of making a separate payment on your home improvement loan, you ask the District to send your property taxes to the bank, so your property taxes can be a substitute for your loan payment, rather than paying for the public services we all use. Dedicating all this future tax revenue to pay off the TIFs is likely to start affecting our bond rating.

by J on Jul 29, 2008 6:37 pm • link • report