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beware of pitfalls
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Date Posted: 07:07:06 09/18/13 Wed
TIF districts have attracted much criticism.Here are further claims made by TIF opponents:
-as investment in an area increases, it is not uncommon for real estate values to rise and for gentrification to occur.
-Although generally sold to legislatures as a tool to redevelop blighted areas, some districts are drawn up where development would happen anyway, such as ideal development areas at the edges of cities.
-The TIF process arguably leads to favoritism for politically connected developers, implementing attorneys, economic development officials, and others involved in the processes.
=In some cases, school districts within communities using TIF are experiencing larger increases in state aid than districts not in such communities. This may be creating an incentive for governments to "over-TIF," consequently taking on riskier development projects.
-Local governments are under no obligation to recognize when TIF designation would adversely affect a school district's financial condition, and consequently the quality of some schools can be compromised.
-Normal inflationary increases in property values can be captured with districts in poorly written TIFs, representing money that would have gone into the public coffers even without the financed improvements.
-Districts can be drawn excessively large thus capturing revenue from areas that would have appreciated in value regardless of TIF designation.
-Approval of districts can sometimes capture one entity's future taxes without its official input, i.e. a school districts taxes will be frozen on action of a city.
-Capturing the full tax increment and directing it to repay the development bonds ignores the fact that the incremental increase in property value likely requires an increase in the provision of public services, which will now have to be funded from elsewhere (often from subsidies from less economically thriving areas). For example, the use of tax increment financing to create a large residential development means that public services from schools to public safety will need to be expanded, yet if the full tax increment is captured to repay the development bonds, other money will have to be used.
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