Not everyone is a fan of Tax Increment Financing, but for several Vermont communities, the state process will help pave the way to a more economically viable future for eligible downtowns. Mostly, it is because they do not understand.
TIFs are sometimes referred to as a “financing tool” for economic development. Other types of financing are available to towns and cities, but cutbacks at the state and federal levels have increased the popularity of TIFs.
While the idea of the financing mechanism has been around since the 1950s, it has only been used in Vermont since 1985. The idea behind it has not changed in 60-plus years: An area that has been blighted or otherwise in need of an economic boost is analyzed for its development potential and then designated by a municipality as a “tax financing district,” which is then targeted for publicly financed infrastructure investments.
In Vermont, the district allows towns to apply for use of incremental tax revenues through an application process overseen by the Vermont Economic Progress Council. It shifts money away from the Education Fund. It places no burden on taxpayers.
Before incurring any TIF district debt, much like a line of credit, the town or city must seek a popular vote on an overall debt ceiling.
Burlington has used its TIF to rebuild its waterfront; Milton and White River Junction have used them to make improvements to their downtowns. Now Barre is in the pipeline, pending voter approval, to reap the benefits.
Typically, public infrastructure investments include water supply, sewer expansion and repair, storm water drainage, street and sidewalk construction, parks and other green spaces, as well as parking structures. In addition, towns and cities have used TIFs for land acquisition, demolition, utility improvements, and environmental remediation.
A common misperception is that these are pie-in-the-sky projects placed on the backs of taxpayers. That is not the case. In fact, the projects shift 75 percent of the increment that goes back into community for 20 years. It is reinvesting back to the community — a way to pay down debt on infrastructure.
The payment schedule on these projects creates a stable income stream. No one turns a shovel until the money is in place.
Gov. Peter Shumlin’s stop in St. Albans this week, and Barre and Newport in as many weeks, demonstrates that he and his administration are concerned about Vermont over next 10 years and beyond.
Shumlin and leaders like Barre’s Mayor Thomas Lauzon know that some municipalities need an opportunity to attract development. For communities that get on board, TIFs are a good solution to long-term economic development.
For Barre, the TIF district would be $10.8 million; St. Albans was closer to $24 million.
Communities like Rutland and Montpelier should consider the TIF to complement the economic development being done in their communities. It ensures forward-thinking, and it forces politicians to look beyond the next election.
With uncertain budget considerations, a shaky economy and fresh demands on community building, such funding mechanisms are options that no town or city can look away from without ample consideration.
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