This commentary is by Michael Long of Burlington, who served on Burlington’s Development Review Board for more than a decade and has been active in efforts to moderate the redevelopment of the Burlington Town Center Mall.
Tax Increment Financing — TIF for short — is a statewide boondoggle that’s poorly understood and marketed with scant regard for the truth or the fine print.
It subsidizes development, gives politicians and public employees money to spend, but does little if anything to stimulate development that would not have occurred on its own.
Worst of all, TIF raids the Education Fund and local municipal coffers like a big, fat piggy bank — telling us, don’t worry, no problem; that piggy bank will be filled to overflowing some decades down the line.
The city of Burlington is back on the March ballot asking voters to pledge “the full faith and credit of the city” in support of a $26 million TIF bond for “Great Streets.” The plan itself is too vague at this stage to merit support.
But even if the plan were well drawn and clear — the city won’t even estimate how much parking will be lost — TIF is a fraught, deceptive and expensive financing method, bad for schools and city services and high in administrative costs.
The mayor and others selling TIF say, “TIF is designed to have tax increment revenue fund improvements” so your taxes will not increase. This is false in two specific ways and only true if you stretch their claim to mean that the city will not link an explicit tax increase to the repayment of TIF debt.
The fact remains that TIF takes millions of tax dollars that would otherwise fund education and city services and uses these millions instead to pay off the principal and interest on TIF debt. Our schools — here and across the state — and our local city services are still funded by our tax dollars.
The millions diverted to TIF are millions subtracted from our support for schools and city services.
Because TIF diverts tax dollars from education, police, fire, and other city services, these diverted tax dollars must be replaced in whole or part by additional tax dollars.
That is a tax increase. The claim that TIF does not increase taxes is false.
The Vermont Legislative Joint Fiscal Office “estimates that Vermont’s TIF program represents a negative cost to the Education Fund of between $3 million and $7 million annually from 2017 to 2030.”
It cautions further that “it will take over 50 years for Education Fund revenues from an average Vermont TIF district to catch up to revenues from the same geographic area without a TIF district.”
The second false claim made routinely in promoting TIF debt is that the debt will be paid exclusively by the new taxes, the so-called “tax increment” that will result from the new development spurred by TIF dollars.
This can be a comforting argument: Even though tax dollars are paying off TIF debt instead of funding schools or city services, those are “tax increment” dollars that would not even exist if it weren’t for TIF. Development stimulated by TIF created those dollars, so it’s entitled to them, the argument goes.
Of course, it’s impossible to know or prove that any development is a direct result of TIF spending and would never have occurred without it. Nevertheless, TIF boosters give TIF credit for every new dollar on the grand list in TIF Districts, whether plausibly linked to new development or not.
In fact, many tax dollars clearly unrelated to TIF stimulated development are diverted to pay TIF debt.
If a property is tax-exempt when a TIF district is established, its original tax value is set at $0. If that property subsequently becomes taxable, as in the case of the former YMCA building that sold in 2018, the full taxable value is declared a “tax increment” and the bulk of the $80,644 due annually goes into the TIF till, not to Vermont schools or Burlington city services.
Many properties have their full taxable value categorized as an increment, diverting additional millions year after year to service TIF.
Worthy public projects should be supported directly. Using TIF instead compromises schools and public services and dishonestly pretends that millions in expenditures have no impact on taxes.
TIF may be the darling of some politicians, but it is not public policy we can trust. The Joint Fiscal office is pointed and adamant: “The extent to which TIF has and will provide the expected economic benefits to the state is unclear. Academic and other states’ research focused on TIF has also found little economic benefit to using it. … Vermont’s TIF districts have largely achieved their projections of property value growth, but have missed incremental tax revenue and private investment estimates by wide margins.”
TIF is not free money. TIF is not an opportunity to seize, but a mistake to avoid.
