Does Tax Increment Financing Still Make Sense?
Over the past decades, we, as a city, have used tax increment financing (“TIF”) to promote development in “blighted” parts of Nashville. (A s a matter of full disclosure, when I was on the Metro Council, I supported some of those projects and subsequently as a member of the board of a local non-profit, I voted to approve loans on other of these projects. )
With TIFF, the increased property tax revenue generated by new development does not go into the general fund but instead is used to pay for part of the cost of the development. The idea behind TIF is that certain projects will only happen if the community finds a way to pay for part of the cost. The community allows tax revenues to pay for part of the building instead of them going directly into the general fund to pay for schools, police, roads, etc. In exchange, the community gets a project that will spur other development in a blighted area, starting a transformation of the community.
The Current Status
In Nashville, some of these recent TIF projects have suffered setbacks. Some projects sit mostly empty. Some projects may not pay back their TIF loans within the original term. More importantly, private development, done without TIF has preceded some nearby projects done with TIF which suffered serious setbacks. These circumstances should make one think about how TIF works, and whether we should review its status in Nashville. Similar circumstances have led to criticisms and revisions of TIF programs in other jurisdictions.
Over the next couple of posts, I’ll throw out a few things that I’ve been thinking about in this context. I’ll present a couple of examples that present the issue. And I’ll probably make a suggestion for the next Mayor and Council to consider.