This press report is the latest of a long series of critiques illustrating the abusive use of TIF (tax increment financing). Is there a better way to achieve success in the manner originally intended – upgrading underserved communities? Read on…
Subsidies meant for low-income communities are paying for luxury developments
By Sophie Kasakove
April 24, 2019
Excerpt:
The incentive in question, Tax Increment Financing, has become a mainstay in the toolbox of developers across the country, and especially in midwestern cities like Chicago and St. Louis,
Missouri. Through TIF programs, municipalities can divert future property-tax revenue increases from a designated district toward economic development in that same area. The program is intended to spur growth in underserved communities that developers wouldn’t be inclined to build in otherwise—areas designated by the city as “blighted.” Developers, essentially, can
recapture some of their own tax dollars if they partake in “community development” projects.
But, as with the program that begot Hudson Yards, “blight” is a malleable concept in the hands of developers and the politicians who support them. The area proposed for Lincoln Yards is surrounded by three of the whitest and wealthiest neighborhoods in Chicago, which have, for over a decade, received significantly higher investment in new building growth than the rest of the city. The area sited for Lincoln Yards is itself less developed because it was zoned for manufacturing until 2017, but in the parts that have already been developed, land values are increasing at a rate higher than the rest of the city, according to the lawsuit. The site’s plan calls for as much as $1.3 billion in TIF spending. Sterling Bay, the developer, intends to use the money to fill the 52-acre plot with luxury residential and office buildings, and park space (plan-B after Sterling Bay’s bid for Amazon’s HQ2 was rejected).
To read the full article click here: TIF paying for luxury
Commentary:
This press report is the latest of a long series of critiques illustrating the abusive use of TIF (tax increment financing). Hudson Yards in New York City and Lincoln Yards in Chicago are examples of this urban renewal financing tool used to support luxury developments. Is there a better way – other than gerrymandering UR districts to include high value sites to show impressive results – to achieve success in the manner originally intended – upgrading underserved communities? An idea gaining traction is the introduction of land value capture in targeted redevelopment areas.
By taxing land assessments at a higher rate and buildings at a lower rate, land speculation in urban renewal districts is discouraged; developers who put their capital into building projects are rewarded with substantial property tax savings. See the original working paper “Financing Community Redevelopment through Land Value Increments: An Alternative to TIF” or on Cooperative Individualism.
