The pros and cons of a TIF Plan
Published 7:00 am Wednesday, June 10, 2015
When development of land takes place, especially in the business sector, land values generally increase, thereby increasing the amount of taxes collected.
But should tax funds be used to foot the bill?
Typically, taxes are collected by a government entity for use in the continued support of the community in the form of salaries for government employees, continued maintenance of public services and to retire bonds that were taken out to perform upgrades or create new services. A Tax Increment Financial Plan allows a developer to recoup 50 percent or more of their expense in the establishment of the necessary infrastructure needed to build a new business, including the road, curb and drainage and utility connections.
In order to pay off the bond associated with a successful TIF Plan, almost all of the additional taxes collected from the establishment of the business are used to pay off the bond, instead of being added to that government’s general budget.
If those taxes were added to the general budget, then the entity would be able to hire more staff, build more roads and better maintain the existing infrastructure.
However, there are two ways to look at this program. While those funds are not initially being added, once the bond is repaid they are added to the budget the government agency has on hand. But only after 12 to 15 years, which is the typical life of a TIF bond. On the bright side, by utilizing this method to entice a business to further invest in a community, additional jobs are created, which means more homes are constructed, which subsequently draws in even more business.
On the face of this program it appears as though the big businesses are being presented with a plot of land on a silver platter, but at the same time the economic development planned to take place once that infrastructure is in place will hopefully outweigh the loss of 12 to 15 years of additional tax dollars. If there was a way to entice a business to the area without losing those funds that would be the ideal program.