Clearing the Air about TIF
Article featured in The Bridge.
There's been a lot of buzz lately about the proposed Tax Increment Financing (TIF) District in Montpelier and it’s important for residents to understand the purpose, function, and process of implementation, starting with these frequently asked questions:
What is Tax Increment Financing?
At its most basic level, Tax Increment Financing is a financing mechanism that pays for public infrastructure improvements. Investing in public infrastructure spurs new real estate development that increases property tax revenue. That added tax revenue is incrementally redirected to pay for public infrastructure debt. When considering a TIF District, the City needed to garner evidence that enough real estate projects would occur to adequately cover the debt for the public infrastructure
What projects are proposed in Montpelier?
If certain public infrastructure improvements occur, several real estate projects are likely to follow. Most people have heard about the proposed hotel and parking garage, but several other projects have been identified in Montpelier’s TIF District application. These include developments along State, Main, and Barre Streets, with proposed improvements to water, sewer, transportation, and parking infrastructure. A full report of potential projects is available on the City of Montpelier’s TIF webpage.
What did City Council approve?
City Council completed one of the first phases of implementing a TIF District by approving a resolution to set the boundaries of the district and freeze property values. It also approved the proportion of the incremental municipal taxes that would go towards paying public infrastructure debt. Council did not approve any specific projects; they simply approved the creation of the mechanism.
The City’s TIF District application is currently under review by the Vermont Economic Progress Council. If it approves the District, which could occur later in July or August, the City will seek voter approval to incur debt for public infrastructure projects.
Will this take tax revenues away from the Education Fund?
No. When the TIF District was approved by City Council on May 23, it froze the property values within the designated boundary. Tax revenue at this original value will continue to go into the Education Fund. It’s the resulting incremental property tax revenue that is redirected to pay back the public infrastructure debt. Since real estate development ultimately increases the Grand List, it will increase tax revenues for the Education Fund in the long-run.
Where else has this been implemented successfully?
There are currently 10 active TIF Districts throughout Vermont, including one recently approved in Bennington. One of the most visible examples of success is the Burlington Waterfront. The Waterfront TIF District was established to redevelop the Lake Street area and reclaim the post-industrial waterfront area to promote economic development and increase public access. Improvements to public infrastructure spurred additional public and private investment that enhanced the vitality of the area.
Who really benefits?
In a way, everyone benefits. The infrastructure improvements that occur are enhancements to public infrastructure. It may not appear directly beneficial, but everyone gains from improvements to essential infrastructure like water, sewer, roads, and parking.
New developments will bring additional amenities to the community such as housing, hotel rooms, retail and office space. The developments will attract visitors and residents who contribute to the vibrancy of Montpelier, while increased tax revenues will fund important programs and services for the City.
Private developers will also benefit. Their investment is an important part of the equation, but they won’t commit to a project unless there can be a clear return on their investments. As is hoped for in any public-private partnership, there is a benefit to all parties.
How do I learn more?
There is an abundance of information on the City’s website, as well as documents and helpful examples on the Vermont Agency of Commerce and Community Development website.
The Montpelier Development Corporation exists to ensure the long-term viability and prosperity of Montpelier. It does so by supporting economic activity that is in line with community values and by helping inform and educate the public. You can send your TIF questions to firstname.lastname@example.org.