Letís assume we canít afford to build a by-pass and I-10 interchange around Crestview from existing tax dollars. What is ďTax Increment FinancingĒ, and can it create money we donít have?
Tax Increment Financing is found money. It takes money you never had, and without TIF, may never get, and applies that money to very specific purposes. Hereís how it would work: In an unincorporated area (like those south of Crestview) a resolution would be passed by the County identifying a TIF area. Within that area, all future construction of residential or commercial properties would be taxed exactly as properties outside the TIF area, but that tax income, or a defined portion of it, would be used to pay for public improvements like roads, to be defined in the resolution. There is no loss of existing tax revenue. Future revenues from the defined TIF area are used only for the purposes defined in the resolution. Within incorporated property, the City would pass a similar TIF resolution, and by inter-local agreement, the City and County would share in the funding of infrastructure. The infrastructure, (roads, inter-state exchange, bridges) would be funded by future growth, not by existing revenue.
The theory is that without the construction of roads or the expansion of water and sewer, or in developed areas like cities, without the construction of public facilities like parking, quality private development canít occur. This approach only works in an area where infrastructure improvements are relatively certain to be followed by surrounding private construction that creates new ad valorem tax revenue. A TIF project in an area zoned for farming for instance, wouldnít be likely to cause single family homes or commercial structures to be built, and would be of little benefit. But in places of high residential or commercial demand, the construction of roads, bridges, or other infrastructure to accommodate that demand can be expected to fuel future growth, and therefor can be an excellent community investment.
The reason these expenses are an investment is that the TIF is temporary. Unlike tolls, that can be extended by application to other projects, a highway TIF, for instance, has a precisely defined purpose and is extinguished when the roads are paid for. Generally, TIF income is used to repay bond issues, and there is no better time to borrow for public construction than right now.
TIF works in any area where surrounding property can be reasonably expected to infill quickly if the defined roads and other infrastructure needs are provided. If in downtown Fort Walton Beach, old and dated commercial properties would be replaced or improved if a multilevel parking garage were constructed, then a TIF financed garage would pay for itself. The enacting resolution would freeze the value of current properties and then apply all or a portion of future increases in revenue caused by increases in property value to pay for the structure. I have personally seen cities charge for public parking in a public-private partnership that awards tokens for retail purchases made in the benefited properties. That works especially well where one or more lead tenants seek to occupy adjacent or close-by locations to be benefited by the parking structure, and especially where they guarantee a portion of the cost.
The above discussion is a quick outline of how TIF works. Coming discussions in this space will address more specific questions. I invite your comments to my e-mail address, because TIF can only be successful in Okaloosa County if the public supports it. All elected officials have run for office pledging that there would be no additional taxes, and both those officials and the people who elected them will have to share the conclusion that TIF allows investment of dollars they donít have today for a better community tomorrow.
I want the Board of Realtors, the Homebuilderís Association, the Bar Association, and other groups involved in the community and responsible for public attitudes to help. If you agree, your role will be to educate each other and the public. There may be other ways to fund projects. State and Federal assistance may be part of the answer, but we have waited several generations for an outside benefactor. Letís be our own best friend. If we get assistance from other sources we can be pleasantly surprised and retire debt early.
Again, we need your comment and your help to make these important possibilities happen. Please email your questions or comments directly to me.
Mike Chesser is a Board Certified Real Estate Attorney with Chesser & Barr, P.A.