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New Downtown TIF will benefit only Downtown area; Other states do it differently

Columbus City Council approved another TIF district that's supposed to help with Downtown's revitalization. WOSU took a deeper look into the TIF structure and how one other state handles TIFs.

"This should have been the first TIF."

That's what Columbus City Councilmember Mary Ellen O'Shaughnessy said of the city's 50th TIF district that city council approved this week.

TIF stands for Tax Increment Financing and here's how it works.

Property taxes from any new development in Downtown Columbus over the next 30 years will be spent only on downtown projects. The money would be used for building new parking garages and making other infrastructural improvements. That means new property tax revenue from downtown will not be shared with the rest of the city. And agencies that depend that revenue like Children's Services, Columbus Metropolitan libraries and the Columbus Zoo and Aquarium could stand to lose millions of dollars. They'll still get their portion of existing property taxes which totals nearly $43 million.

"Does it hurt in the short-term? Yes. Does it benefit everyone in the long-term? Yes."

Council member O'Shaughnessy predicts infrastructural improvements downtown will draw more jobs and residents to the area, securing the income tax base which she says funds the city. In the long run, O'Shaughnessy said, services that rely on property taxes like the zoo and libraries will benefit.

Northwest Civic Association president Bill Carleton, who's a long-time downtown worker, is OK with the new TIF - as long as it benefits the area. Carleton said he's not sure how it will affect the northwest area of the city.

"We all have to be a little bit more creative in the way that we raise funds for public areas within our areas," Carleton said.

Since 1996 the city has created 50 TIF zones. Easton was the first, then Polaris, then Tuttle - all in 1996. The bulk of the city's TIFs, though, came in 2005 when city council approved 23 of them. Some of those include Hayden Run North, East Broad Commercial, The Brewery District, Upper Albany West and Dublin-Granville North and South.

Carleton said he does not think Columbus has too many TIF districts. He said he thinks they've benefited the areas they were meant to help. But...

"I hope that we all don't have to go to TIFs to get things done. But if that's the way, I guess we have to go that way," he said.

With so many TIFs it may seem like everyone should have one. But O'Shaughnessy said no. She said the area has to have a good mix of new developments and the possibility for future ones.

"If you don't have new development, you don't get the tax increment so you don't get to finance the infrastructure," she said.

Franklinton Area Commission chair Carol Stewart says Columbus does have in her words "quite a few TIFs." But she said Downtown is the core of the city and it needs up keep.

"Downtown has been slowly dying and I think this will benefit the whole city. And it will make a stronger, more vibrant Downtown," Stewart said.

State and local governments started using tax increment financing in the late 1970s.

Charlie Frances, a financial consultant based in California remembers the birth of TIF's well. He was a finance director for Indian Wells, a resort city in Southern California that he said was one of the first to benefit from tax-increment financing.

Frances recalls a flood blighted Indian Wells in 1978 and a California voter approved law prevented the city from increasing property taxes.

"So the city council say, gee, you know, if we can get resort hotels, if we can get a golf course, if we could use some kind of financing mechanism to woo hotels to come here and build, perhaps we can save our future. Today it's just a beautiful city and it's a shining example of how tax increment financing can provide economic development for a city," Frances said.

Frances calls tax-increment financing ingenious. He said a city like Columbus can use it for infrastructural improvements, but the city can also use it as collateral when seeking bonds.

"That increment can be forecast based on development plans and then leveraged for bond financing," he said.

Although Frances is a proponent of TIFs, he said there are valid arguments against them.

"One could say the development will never occur so, therefore, the additional property tax revenues wouldn't be realized by a city and the social services would still be unmet," Frances said.

Unlike Columbus where 100 percent of the TIF money stays in its district, Frances said California has a provision to ensure 20 percent of the increment generated by a TIF is used to build affordable housing. And he said...

"Each taxing entity the city, the county, library districts, other kinds of districts that provide social and welfare networks, they negotiate how much of the increment will be passed through back to the taxing entity and how much of the increment will be used solely for development. So at least California created a mechanism to provide for both."

WOSU asked Frances is there a tipping point for TIFs?

"I don't think there's a point where there's too many TIFs in a city. Sometimes the TIFs and the urban blight can be manipulated to reach political objectives and at that point I think it's an abuse of the financing district," Frances said.