November 6, 2006
TIF to TRID?
Over at CommissionerSam.com, Sam is enthusing over a new financing tool he heard about at RailVolution, Transit Revitalization Investment Districts. The idea is to capture the value created by transportation improvements, and use that to fund the improvements. Similar in concept to Tax Increment Financing, but in operation more like beefed up versions of the Local Improvement Districts we've used already on Streetcar. Interestingly, the Local Improvement Districts (which are semi-voluntary, elected by a majority of the property owners) have been increasing in value, from about 17% on the first Streetcar project to about 50% of the capital costs on the Lowell extension that is now under construction.
November 6, 2006 10:36 AM
Matt C. Says:
How would operations be funded?
November 6, 2006 11:07 AM
Frank Dufay Says:
Funding --or at least subsidizing-- operations sounds like a key benefit because LIDs and SDCs can't be used for operating costs, but are limited to capital expenditures.
November 6, 2006 11:08 AM
Chris Smith Says:
I don't know if the TRIDs are purely for capital or also cover some portion of operations.
November 6, 2006 11:46 AM
The main challenge with TIF based funding is that property taxation rules lead to a bias for certain developments (residential and retail/office space) while discouraging industrial or other low real property intesive development. (Industrial investments are not focused in real property but in machinery and equipment which depreciates and is useless to TIF.)
But more of the challenge is that the Legislature would have to approve the TRID and the tax climate is awkward at best (and some statewide opponents of TIF might be motivated to rally against anything that looks TIF-ish.)
A core question is if it is right for infrastructure development financed by TIF type tools only broadens the gap between the haves and have nots. If improvements only occur where property values are going to be safe sources for revenue bond sales then we will likely have to expect some neighborhoods will never benefit.
November 6, 2006 11:54 AM
Matt C. Says:
From Commissioner Sam's blog -
"The revenues above a certain amount from property taxes, business license fees, system development charges and other revenues within the boundaries of a TRID district are used to pay Portland Streetcar for bonds that fund transit improvements, subsidize operating costs and other public benefits such as housing within the TRID district."
So from this description it sounds like the City collects a portion of taxes and fees in the TRID and then pays Portland Streetcar for bonds to fund the improvements.
I still have questions as to how the City would raise the revenue and what competing taxing jurisdictions may be affected. We may run into the same issue with some of the URA's with regards to depriving tax resources to the Portland School district and the County. Not that this problem can't be mitigated, but still this could potentially place a larger strain on competing tax jurisdictions.
At first glance this model seems to be a more tactical and comprehensive way of funding large transportation infrastructure additions than through URA's - as it would take into account both capital and operational expenses. Still, it is important to understand exactly how the revenue to pay the bonds is going to be generated.
November 6, 2006 5:01 PM
Paul Edgar Says:
Everyone has to remember TIF districts gobble gains in real property tax and leave liability for any new general service obligations like public safety for other to pick up the tab.
TIF and most any TRID would hurt seniors who own property with new taxes or they will see reduced service levels. I think the AARP will take a look at this.
November 6, 2006 5:24 PM
TIF and TRID both present a philosophical question - if we carve out the popular parts of government to their own governance (special districts) or their own fianance packages (TIF) what is left behind and how does it ever get paid for?
November 6, 2006 8:46 PM
I have a feeling this whole issue wouldn't BE an issue if the state could get its tax system completely overhauled so it could actually afford thet school system its' got.
November 6, 2006 8:50 PM
Terry Parker Says:
Like tax increment funding in urban renewal districts, it appears as if a TRID skims dollars off the property taxes on increased development. Like both property tax abatements and tax increment funding, as compared to population growth, a TRID shrinks the tax base used to fund schools and government services. It sounds like a TRID is yet another way to use money today by borrowing against the future. Then just like when a balloon payment comes due and taxes no longer keep up with the services needed by an expanding population, there is a mad scramble to raise taxes on that part of the population still paying a full share for schools and government services just to recover the money being siphoned off by those who do not pay a full share.
November 6, 2006 9:16 PM
Chris Smith Says:
Like any business, the City needs to take it's revenue streams and decide what to spend on current operations and what to invest for future prosperity.
I would agree that the district model is not a particularly rational way to do that, particularly now that we don't have large "blighted" districts (although the legal definition of blight has been stretched to cover almost anything).
And of course it would be great it the City's capital budgeting process didn't borrow from other jurisdictions without their consent. Of course, the other jurisdictions also need to make investments, and it would be nice if they all coordinated their investment plans!
November 6, 2006 11:46 PM
Instead of large Railroad Corporations and Traction Companies of the past building transit and handling all this for about 1/5th the amount of money now the Governments are REALLY getting into it.
So what's the real difference at the end of the day that the Government does it vs. private industry?
TRID, RID, LID, etc... they're all schemes to fund via distribution of the costs indirectly. It makes sense, but how much more does it cost for the public sector to do this than the private sector (without manipulating the prices via force)?
I'd bet there are multiples of 2-4x as much.
Needless to say, it's interesting to see how many ways people can come up with to describe the functional act of theft.
... then as Terry points out also, it's not even really theft, it's pretend theft against the earned money of next year, or the year after.
?? When is all this methodology going to break down, and how dangerous will it become?
I'm real curious as what others think of this.
November 7, 2006 8:20 AM
Paul Edgar Says:
These "Special Districts, like TIF & TRID" would create the ability to create liabilities to be paid for in out years by my grandchildren and that is insane.
The Oregon State Legislature must provide new legislation that could be modeled after what the State of Pennsylvania did which allows for a fee structure for funding general government services offered and received by non-profits and entities in TIF Districts where they can be charged and where fees can be collected for these general services obligations with pass through funding to entities like public safety (Police and Fire), libraries and schools.
Until that is done there should not be any talk of TRID's. We need to get our hands on the current problems and lack adequate funding pass through that exist with the TIF Districts that we currently have where adequate compensation for growth in increased obligations is paid out of TIF District real property tax collections.
November 7, 2006 8:46 AM
Chris Smith Says:
Adron, I'll bite. If we did a Streetcar on say Hawthorne, we create a number of 'winners': existing businesses who get more customers, property owners who can develop properties and sell or rent them at a higher asking price, nearby residents who gain more convenience and can avoid costs of car ownership in some cases.
If we built such a system as a private venture, how would you capture that value to help finance the system? Your argument would say that the residents would pay at the farebox, but how about the guy who can charge an extra $20K for a condo?
Paul, while I appreciate the need not to divert funds to the extent that we cannot fund basic services, I hope that you can appreciate that the investment creates activity that in turn produces tax revenue that would not have existed without the investment. Surely we can apportion some of that new revenue to finance the investment without pulling out so much that we can't fund the basic services required by the higher level of activity?
November 7, 2006 9:33 AM
Paul Edgar Says:
Chris, I am not against TIF/UR Districts in a blanket rejection of this method to encourage investment and re-development.
The problem is currently there is NO apportionment of any of the new revenues to fund basic services at higher levels. That has to change!
On a side note, how can I send you my initial draft of my PSU Transportation Class Project/Report
November 7, 2006 9:34 AM
Matt C. Says:
"Surely we can apportion some of that new revenue to finance the investment without pulling out so much that we can't fund the basic services required by the higher level of activity?"
Agreed. There is a balance that can be struck that allows for investment that provides long-term benefit while not sacrificing the quality of basic services today.
Also, there are examples of URA's in Portland that were set up so that the portion of the property tax that would normally go to the PPS and the County still do. So my point is that how much this impacts basic services really depends on how you structure this district.
I still think you would be better off bringing the impacted jurisdictions to the table with voting rights and have them coordinate investments.
November 7, 2006 1:35 PM
Unforetunately the expiration of URA's seem to drift out further and further and if they start out with a 30 year life and say 15 to 20 year bonds, you do not retire the district for over a generation.
(Granted the level of debt service will go up and down - but there is no requirement that TIF be collected only at the level to service debt, it can exceed that level.)
The tough part of the TIF story is that personally I love a lot of the improvements PDC and TIF have brought to the community and presume TRID would do the same. But I worry that it is not a sustainable system and it also presumes Portland remains a hotbed of real estate appreciation. At some point we run out of low hanging fruit.