TIF – creating, capturing taxes from new value
By: Bert Belanger//Guest Columnist//January 31, 2019
Still subbing for professor David Chapman, I thought I would comment on an economic development tool still often misunderstood – tax increment financing.
TIF has been “legal” – constitutionally doable – in Oklahoma for only 15 years. Until the 2004 passage of State Question 707, our state was a minority of two (us and Arizona) that didn’t allow its use. Since then, it has been proven throughout Oklahoma to be an effective tool to create, capture and target new tax incremental revenue (hence the name) to allow cities and developers to team up and create value through development that would not happen otherwise.
From Guymon’s Seaboard plant to the Tulsa Hills Shopping Center, projects have overcame challenges. In the Tulsa Hills example they dealt with a canyon that cost $20 million to fill and prep for the Lowe’s and Target that now serve thousands and keep sales taxes inside Tulsa proper.
Oklahoma City has been an effective and prolific pioneer in the use of TIF, with over two dozen TIF districts in place. Early TIFs covered broad swaths of downtown on both sides of Interstate 235; later TIF districts covered smaller areas, sometimes only the footprint of the target project (Skirvin Hilton).
Some critics say there are now too many TIF districts, but I would suggest that we have just scratched the surface of TIF’s potential for good in Oklahoma, and would contrast our metro to Chicago’s, where over 350 TIF districts have rightly prompted charges of abuse.
Each TIF district alters, for a relatively short period of 10 to 25 years, the split stream formula for distribution and use of the new taxes (whether sales/use taxes or property taxes, or both) that are generated within the TIF’s boundaries. These new taxes are directed back into and used within the TIF district during this time period; after a TIF expires, the old sharing formula resumes (as between the city, county, library system and school district).
Oklahoma County elected officials should consider TIF to help fund a fix for two glaring problems – the notorious county jail and the overcrowded Juvenile Justice Center. Both are urgent concerns, not just for the human beings housed in these two facilities, but for all resident taxpayers, who deserve efficient stewardship; this could include the land under both buildings. More thoughts on this notion next week.
Bert Belanger is a broker with Adept Commercial Real Estate and a real estate attorney with Riggs Abney (bbelanger@riggsabney.com).