|Friday, January 13, 2012|
Funding Transit with TIFs
A rendering of the rooftop park of San Francisco's Transbay Transit Center.
Tax increment financing (TIF) has been a useful funding mechanism for promoting community development without raising taxes. Historically in metropolitan Chicago, TIF has supported a range of redevelopment projects, including transit construction; but the establishment of a TIF district has been limited to specific community areas that meet certain requirements. Other regions across the country are thinking differently about how they use TIF money. They have modernized their programs to fund transit capital and maintenance across communities, and as a result are reaping economic development benefits thanks to the private dollars that follow public investments.
A traditional TIF district is created during a development period. The tax base is frozen at the predevelopment level on the assumption redevelopment would not occur in the area without public investment or intervention. Property owners continue to pay taxes, but the “tax increment” – tax revenues derived from increases in assessed values that result from new development – is either funneled into a special fund created to retire bonds issued to finance the development, or is used to leverage continued community revitalization by attracting additional private investment.
These goals – stimulating private investment and revitalizing communities – mirror the advantages of transit investment, which benefit much more than riders and motorists: In addition to reducing congestion, mitigating air pollution, increasing mobility options and accessibility, curbing our dependence on foreign oil, and creating jobs, transit leverages private business development, increases nearby land values, and creates development opportunities. So from an economic perspective, it makes sense to consider using TIF funds to upgrade and maintain transit.
That’s why several cities are stretching their limited transit dollars with TIF-style financing. For example, in 2005, the City of Atlanta created a tax allocation district (TAD) to finance the Atlanta BeltLine. The Atlanta BeltLine is a comprehensive redevelopment and mobility project that will build a network of public parks, multi-use trails, and transit, including a 22-mile rail line that will serve 45 neighborhoods and connect to existing MARTA service. The project will cost an estimated $2.8 billion, with the Atlanta BeltLine TAD generating approximately $1.7 billion of the total project cost over 25 years. When the TAD expires after 25 years, the City of Atlanta, Fulton County, and Atlanta Public Schools will receive the entire tax revenue generated by properties within the BeltLine TAD, but at a tax base projected to be approximately $20 billion higher than in 2005 as a result of the redevelopment associated with the BeltLine.
San Francisco is using TIF financing to support redevelopment of the Transbay Transit Center, a multimodal transportation hub that includes a 1,000-foot-tall office tower, a 5.4-acre rooftop park, and 2,600 new homes (35 percent of which will be affordable). It will connect eight Bay Area counties, 11 transit systems, and be the future stop for the High-Speed Rail line that will run from San Francisco to Los Angeles. Construction will generate more than 125,000 construction jobs and 27,000 permanent jobs. Funding for the $4.2 billion project will come from a variety of sources, including $1.4 billion in TIF funds, of which $171 million will be used to repay a federal TIFIA loan used for the Transit Center construction. It will accommodate more than 100,000 passengers each weekday and more than 45 million people per year, adding an estimated 10,000 daily transit trips in the corridor by 2030 – about 80 percent of which will be diverted from auto travel. The project will reduce vehicle miles traveled by 260,000 per day and reduce emissions by 28,200 tons per year.
A cross-section rendering of San Francisco's Transbay Transit Center.
Thinking Differently about TIFs
In metropolitan Chicago, TIF funding has supported transit construction in the Loop:
But what about considering a TIF specially designed just for transit? It’s sound economics, as these transit investments have generated a 10 to 20 percent increase in home prices (and the property tax revenues that accompany those bumps). A transit TIF would require amending state legislation to change current TIF eligibility requirements, including the “slum and blight” condition, which limits the application of a TIF to an area that is “rapidly deteriorating and declining.” It’s an idea well worth considering, as cash-strapped transit agencies look for innovative ways to modernize Chicago’s transit system with limited funds.
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