Note from Storm: If you’ve read my new Renewal Success Guide, you know that I believe that Tax Increment Financing (TIF) is an excellent revitalization tool, but it’s often:
- Misused [such as for sprawl]
- Abused [such as for developer subsidies], and
- Overused [which leads to general revenue depletion].
This article indicates that New Britain, Connecticut intends to use it as it for the revitalization of a distressed area, which is good. But they are using it to subsidize a private developer, which is often not so good It occasionally pays off).
The best application of TIF is in preparing areas for redevelopment, such as via infrastructure renewal, removal of blighted non-restorable buildings, and brownfield remediation. That attracts private investment, usually at a ratio of about 10:1 (ten times the public investment).
Subsidizing a private project is riskier. If the project fails, the public money is wasted: there’s no improvement to point to. But if the TIF funds are used to improve the area, the area remains more attractive to private redevelopment, even if the initial developer fails.
New Britain is doing this “TIF subsidy” cautiously, not parting with any funds until the project is complete. But being complete doesn’t guarantee that this one project will be successful in revitalizing the area and attracting other additional redevelopment, as wider-scale infrastructure improvements do.
While it might not be ideal, it’s far better than doing nothing, and I wish New Britain the best of luck with it. If the area’s infrastructure is already in fine shape, this TIF strategy might, in fact, be totally appropriate.
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City and business leaders are hopeful that downtown New Britain, Connecticut can become a Tax Increment Financing district by September of 2016, making it easier for developers to do business here, officials said.
New Britain was recently told that the Downtown District had been awarded a $10,000 grant to work with the city on the creation of the new district. The funds were provided by the Hartford-based Connecticut Main Street Center.
New Britain would become one of the first communities in the state to have a TIF District, as legislation permitting such districts in Connecticut took effect Oct. 1, 2015. “It’s a great win for a developer and a city,” said John Simone, president and CEO of Connecticut Main Street Center, which pushed for the legislation.
Simone noted the city pays nothing until the property is built and taxes are owed. The win for the city, Simone said, is that, without TIF, the property is vacant and not being taxed. “Under this scenario, the city would be getting $25,000 a year in tax revenue as opposed to zero,” Simone said.
Photo credit: Sage Ross