In his budget address, Gov. Cuomo noted that the single most important question of government is how to spur private sector job creation while maintaining fiscal discipline. A daunting task for certain, but there are some ways that this can be done.
There is an economic development tool available to New York that fits seemingly well with the Governor’s vision of creating the type of public-private partnerships as outlined in his budget plan. This tool is Tax Incremental Financing (TIF).
TIF is a financing tool that empowers municipalities to issue revenue bonds, which are then repaid by the increased value of the projects they fund. This requires no increase in taxes and importantly – relies on no hand-outs from the State. The bonds issued are known as “TIF bonds.”
New York law restricts the use of TIF, save for a limited number of allowable economic development purposes. TIF law encompasses the development and/or redevelopment of blighted areas (broadly defined); but is focused on development that could not be done by private sector investment alone – creating a recipe for the type of public-private partnerships that many Upstate communities need. Because of the restrictions for use of TIF, it also creates opportunities for municipalities and investors to work together to identify a plan that best fits their community.
TIF has been used quite successfully in U.S. cities with a similar make-up of areas like Binghamton, Buffalo and Rochester – i.e. cities that once had a large industrial presence that must now reinvent themselves as part of the “new economy.” TIF does not require cash-strapped local governments to use their general revenues to pay back TIF bonds; and encourages private sector development by allowing the marketplace to determine the value of planned projects. Thus offering a preview of what the value of a project may be. Most importantly, it allows local governments and private investors to work collaboratively to put forward redevelopment plans that make sense to their communities.
New York is one of forty-nine states that have TIF legislation on the books, but because of a glaring defect in the law, it is widely underused. As it is currently written, TIF does not allow incremental school property tax revenues in school districts that benefit from increased revenues of redevelopment projects to be used to pay back TIF bonds. Making these funds available would go a long way to spur private development in many communities.
For several years, there has been legislation to correct this flaw in TIF that has stalled in the Assembly. The simple fix is to enable a voluntary opt-in for school districts located where a TIF redevelopment project is planned. Last year, the Senate passed TIF reform legislation and language correcting TIF was included in an omnibus bill that included the tax cap and rent regulations. Yet, as we begin 2012, this simple, yet critical fix, still has not been made.
Unshackle Upstate has outlined TIF reform as a “must-do” in 2012. UU is not alone in its support for TIF reform. Many other business and trade organizations, local governments and school districts have expressed their strong support to begin using TIF in their communities. Language regarding TIF reform has also been outlined in many of the state’s regional economic development council plans as an important strategy for growth.
Let’s finally get TIF done this year. Let’s give our local governments an important tool to attract new investment and get the Upstate economy moving.