[HK-Online] IBO: TIFs for subway to stadium: Red Flags and Pitfalls

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Hell's Kitchen Online                               9/25/02
http://hellskitchen.net "All the News the Times Won't Print"
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IN THIS ISSUE ...

1. IBO releases TIF report; Confirms fears on NYC Stadium funding

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There is a huge reason why NYC2012 and Deputy Mayor for the Olympics Dan 
Doctoroff have been refusing to release their internal reports (one such 
report was commissioned by Bear Stearns) on the viability of using Tax 
Increment Financing (TIF) to fund the #7 subway extension and other 
infrastructure necessary for their coveted Jets/Olympic stadium and larger 
land grab of Manhattan's West Side.

IT WON'T WORK.

The City will be left holding the bag -- the entire city. All taxpayers.

The report below admits it cannot look at all questions in its current 
scope, and hopefully the IBO will expand its investigation, but it 
highlights several issues we've previously raised about TIF financing.

- Revenue Shortfall - will the plan be able to raise sufficient taxes to 
pay for it all?

- Who pays when the bonds default? (the city would)

- This is clearly public financing

- TIFs have worked in some areas, but usually such areas are much smaller 
and economic predictions are more assured. Otherwise the plan is sheer 
speculation.

- How will this impact efforts to revive downtown (a disaster)

- Additional costs (municipal services) will be necessary - not from TIFs

- Impact on overall City Debt Structure


IBO RELEASES TIF REPORT; CONFIRMS FEARS ON NYC STADIUM FUNDING
September 25, 2002 - While couched in diplomatic 'concerns," this new 
report from the NYC Independent Budget Office essentially confirms that the 
propsed financing mechanism for the infrastructure needed for the West Side 
Stadium will probably not work. The report barely scratches the surface, 
but sends up many red flags.

-------------------------------------
IBO Fiscal Brief
September 2002
New York City
Independent Budget Office

Learning from Experience:
A Primer on Tax Increment Financing

SUMMARY

To fund the estimated $1.5 billion extension of the No. 7 subway and 
perhaps other redevelopment proposals on Manhattan’s Far West Side, there 
has been increasing discussion of using a borrowing method known as tax 
increment financing, or TIF. The basic idea underlying TIF is that a city 
or town finances an improvement in a specific district with the property 
tax revenue generated by that improvement. While TIF has been used 
extensively throughout the country in cities such as Chicago, Los Angeles, 
and Washington, D.C., it has never been used here.

This report provides a primer on TIF­­what it is, key features of the laws 
that authorize it, the types of projects undertaken, some of the reasons 
for its popularity, and a review of how it has worked in some other 
localities. Among the lessons from our review:

• While TIF has proven to be an effective and flexible financing method in 
a variety of settings, some municipalities have encountered problems with 
their projects, including insufficient revenue to pay debt service.

• TIF has been used to finance a variety of public works projects, but most 
have been small-scale. Larger projects usually have been joint ventures, 
mostly with private partners. No TIF project has been as costly as the 
proposed No. 7 extension.

The report concludes with a discussion of issues that will have to be 
considered before relying on TIF for financing the proposed subway 
extension. These considerations will be more closely examined in a 
subsequent IBO report that will look at the viability of tax increment 
financing for extending the No. 7.

INTRODUCTION

Extension of the No. 7 subway line west and south from Times Square is seen 
as critical to the success of several of the major proposals for 
development of Manhattan’s Far West Side as an extension of midtown.[1] 
These include proposals from the Department of City Planning, the NYC2012 
Olympic Committee, and the Group of 35, chaired by Senator Charles E. 
Schumer and former Treasury Secretary Robert E. Rubin. To pay for the 
estimated $1.5 billion subway extension—and possibly other capital 
improvements in their plans—each of these groups propose using tax 
increment financing (TIF), a method of financing projects never used before 
in New York City.[2] This report provides a primer on TIF­­what it is, key 
features of the laws that authorize it, how it has been used in other 
places, and some of the reasons for its popularity.

HOW TIF WORKS

In theory, tax increment financing works as follows:

• a geographic area is designated (the TIF district)

• a plan for specific improvements in the TIF district is developed

• bonds are issued and the proceeds are used to pay for the planned 
improvements;

• the improvements encourage private development and thus raise property 
values above where they would have been without the improvement

• with higher values, property tax revenues rise, and

• property tax revenue from increased assessments over and above the level 
before the TIF project began (the tax increment) is used to service the debt.

In some states, private developers can also arrange their own financing, 
and the municipality uses the tax increment to reimburse the developers as 
the tax revenues are received.

In the case of the Far West Side, the various plans indicate that the TIF 
district could include much of the area between 28th and 42nd Streets 
between 9th and 12th Avenues. The key improvement to be financed would be 
the extension of the No. 7 line west from Times Square.[3]

STATE AUTHORIZATION

Although TIF differs from traditional methods of financing public 
investments, it is still a form of public debt and as such must be 
authorized by state legislation. The first state law to authorize tax 
increment financing was passed by California in 1952, although most states 
were slow to follow.[4] By 1970, just six more states had enacted laws 
authorizing TIF­­Minnesota, Nevada, Ohio, Oregon, Washington, and Wyoming.

By 1997, however, 48 states had enacted TIF laws, and the District of 
Columbia joined the list in 1998. New York’s TIF law (General Municipal Law 
Section 970-a et.seq.) was passed in 1984. As of today, North Carolina and 
Delaware are the only states that have not authorized the use of tax 
increment financing­­although the Delaware House of Representatives 
recently passed TIF legislation.

The widespread adoption of TIF laws since 1970 reflects a combination of 
several factors. While the continued decline of urban areas—particularly of 
central cities—created a growing need for redevelopment in the 1970s and 
1980s, federal assistance for urban renewal projects fell, and voter 
opposition to new taxes rose. Tax increment financing represented a 
politically viable tool for local government officials to publicly finance 
infrastructure and other economic development initiatives without drawing 
on existing revenues or proposing new taxes.

Characteristics of TIF laws.

Like TIF laws in most states, New York’s law provides TIF as a tool to 
eliminate “blight,” subject to the constraint that a municipality can only 
engage in redevelopment which “cannot be accomplished by private enterprise 
alone” (General Municipal Law Section 970-b Legislative findings and 
declaration). The law stops short of saying how this private enterprise 
condition should be satisfied, however, and gives the municipality 
significant discretion in defining blight.[5] Relatively few state laws 
provide quantitative criteria to be applied in identifying blight. Some 
state laws explicitly allow the use of TIF for economic development without 
a finding of blight.

Under New York State’s law, a municipality has the power to issue TIF 
bonds.[6] In contrast to general obligation bonds, TIF bonds are not 
secured by the “faith and credit” of either the city or the state, and the 
TIF debt does not count against the municipality’s constitutional debt 
limit. Like general obligation debt, however, interest on TIF debt may be 
tax exempt if it satisfies certain criteria set out in the federal Tax 
Reform Act of 1986.

Although some states allow municipalities to use sales or personal property 
tax revenue to finance TIF debt, the law in New York and most other states 
allow only real property taxes to be used. Specifically, the New York law 
requires that property taxes for the TIF district be divided as follows: 
the municipality receives an amount equal to the current property tax rate 
applied to the last assessed property value for the TIF district before the 
TIF district was formed; once the municipality has been paid, the remaining 
revenue can be used to pay the service on the TIF debt; if there is any 
excess revenue, it must be returned to the municipality.

New York State’s current TIF law has no provision for sharing the tax 
increment with other taxing entities­­ although in the case of New York 
City, which is a single tax entity that provides all services typically 
provided by a municipality, school district, and county combined, such a 
provision would be irrelevant if it did exist. In some states in which 
entities other than the municipality have claims on local property taxes 
(school districts and counties, in particular), state laws require that 
these other entities get a share of the tax increment. For example, 
California requires that a TIF district allocate a fixed percentage of the 
tax increment to the other tax entities, and the required percentage rises 
with the age of a project. Such provisions allow the other tax entities to 
benefit from growth within the TIF district.

Other rules for TIF projects are relatively flexible under New York State’s 
law. Industrial, commercial, and residential development can all be 
included in a redevelopment plan for a TIF district.[7] Unlike some states, 
which impose size (acreage) or time limits on specific TIF projects, New 
York imposes neither.

TYPICAL TIF-FUNDED PROJECTS

TIF has been used to finance a wide array of projects, including public 
infrastructure, private development, and brownfield cleanup. Public works 
projects are typically small-scale. Examples include land acquisition, 
installation of streetlights and water and sewer lines, roadway expansions, 
and construction of public parking garages. Large-scale projects have 
usually been joint ventures, most often with private partners. In joint 
ventures, the TIF financing is used only to finance the public contribution 
to the project. Examples of relatively large TIF-funded projects include 
the following:[8]

• Chicago helped finance the expansion of the University of Illinois at 
Chicago ($50 million in 2000), renovation of several theaters ($18 million 
for the Cadillac Theater, for example), and streetscaping of Michigan 
Avenue in the Central Loop ($15 million in the late 1990s). Chicago is 
currently financing the construction of two schools (about $50 million per 
school).

• Fremont, California is contributing to the upgrade of four major 
interstate interchanges ($50 million for construction in 1999 through 2005) 
and is planning to finance the construction of a Bay Area Rapid Transit 
(BART) station ($75 million).

• Indianapolis helped finance the construction of the Circle Centre mall 
downtown ($187 million in 1995) and the United Airlines Maintenance Center 
($244 million in 1991).

• Los Angeles helped finance the renovation of the Los Angeles Central 
Library ($135 million in the early 1990s) and expansion of the Los Angeles 
Convention Center ($126 million in 1986-1987).

• Minneapolis helped finance 900 Nicollet Mall, a downtown Target store and 
office complex ($62 million in 2001), and City Center, a downtown retail 
and hotel complex ($50 million in the mid-1980s). It also used TIF to 
acquire the Target Center, home of the Timberwolves basketball team ($72 
million in 1994).

• San Jose financed the San Jose Arena ($140 million in 1993) and a 
convention center ($163 million in 1986), and it is currently financing its 
share of the total cost of a Joint City/University Library with San Jose 
State University ($73.4 million).

• Washington, D.C. used TIF to help finance the International Spy Museum 
($6.9 million in 2001), the Mandarin Oriental Hotel Project ($46 million 
this year), and the Gallery Place Project, a downtown retail and 
entertainment complex ($73.6 million this year).

THE DRAW AND DRAWBACKS OF TIF

For local policymakers, TIF has many attractive features. But it also has 
potential drawbacks that need consideration.

The TIF draw.

There are several features that draw policymakers to using TIF financing. 
As noted previously, TIF debt typically does not count against a 
municipality’s debt limit, nor is the municipality or state responsible for 
repayment from sources other than the tax increment for the TIF district. 
Perhaps equally as important, the local government essentially has full 
control once the state TIF law is in place. Plans are generally not subject 
to state approval.[9]

Another factor explaining TIF’s popularity is voter opposition to tax 
increases. Because property tax revenue from pre-TIF assessments flow from 
the TIF district to the municipality as before, it is possible to portray 
any additional property taxes paid by property owners in the TIF district 
as payment for benefits received from TIF improvements.

Potential drawbacks. While TIF has proven to be an effective and flexible 
financing method in a variety of settings, some municipalities have 
encountered problems with their TIF projects.

Sufficient revenue. Actual TIF revenues may fall short of the projections 
made when the TIF bonds were sold. Unlike a municipality with a variety of 
revenue sources to draw upon for debt service obligations, a TIF district 
generally has only one source: incremental property taxes. A shortfall 
risks default or a bailout using other municipal revenues, undermining the 
reason for using TIF in the first place.

A revenue shortfall can occur for a variety of reasons. The projected level 
of development might not be reached­­or might be reached with significant 
delay. Assessed property values for a TIF district might also decline, at 
least temporarily. The city of St. Petersburg, Florida ran into 
difficulties in its TIF districts because of recession, public acquisition 
of private property, and acquisition of private property by tax-exempt 
entities within the district, removing them from the TIF tax base as 
well.[10] In their Bayboro Harbor TIF district (established in 1988), for 
example, the actual 1998 taxable property value for the district was $20.7 
million­­about 60 percent less than the projection made at the start of 
project, and about 25 percent less than its pre-TIF value of $28.1 million. 
Tax increments may also drop or grow more slowly than expected due to 
policy decisions. California’s Proposition 13 probably represents the most 
familiar example of an unexpected change in the property tax code.[11] More 
recently, when the state of Minnesota took over education finance last 
year, the education portion of local property tax increments that 
previously had gone to TIF projects was redirected to the state. TIF 
districts suddenly lost about 37 percent of the total increment they had 
received before the change in policy.

Property tax abatements or exemptions, which are often used as incentives 
for developers, can also reduce tax revenues below projections if not 
anticipated correctly. A study of Michigan TIF districts found that taxable 
property values in some districts actually declined from their base values, 
despite positive growth in commercial property values. The reason was the 
concurrent granting of property tax abatements for properties in the 
districts.[12]

Some project costs or changes in property values also are very difficult or 
impossible to anticipate. For example, the town of Greenburgh, New York 
accumulated legal bills and settlement costs when it was sued over the 
price it paid for a property in its TIF district. The city of East Grand 
Forks, Minnesota saw a drop in taxable property value in one of its TIF 
districts when a grain elevator burned down.[13]

To reduce the risk of default, a municipality may designate a relatively 
large TIF district. Indianapolis did this when it used TIF to finance its 
downtown Circle Centre mall.

Alternatively, a back-up revenue source can be built into the plan. St. 
Petersburg has used franchise taxes and parking revenue as its secondary 
revenue source, while East Grand Forks used lease payments and general 
revenue to fill its gap. Of course, both of these policies redirect 
resources from other uses and stand at odds with the conceptual 
underpinnings of TIF.

The Redevelopment Agency of the City of San Jose, California uses a third 
strategy to reduce the risk of default—joint financing of TIF districts. 
Bonds are issued for all projects funded by the agency and tax increments 
from all TIF districts are used to service the debt. Their 2003-2007 
Capital Improvement Plan includes 157 capital projects and programs in TIF 
districts all over the city with a total cost of $882 million.[14]

Yet another strategy to reduce risk is a loan guarantee from a private 
developer. Hoffman Estates, a suburb of Chicago, required such a guarantee 
when it entered a TIF deal with Sears for relocation of its headquarters 
and development of a new office park in Hoffman Estates. When tax 
increments have fallen short of required payments, Sears has paid the 
difference.[15]

In the event that tax increments do fall far short of projections, the 
initial debt might be refinanced or restructured. St. Petersburg has taken 
both measures in recent years, in addition to lining up secondary revenue 
sources.

Cost spillovers. Another potential problem with TIF is spillover of costs 
to taxpayers outside the TIF district. Municipal service requirements­­such 
as police, fire, sanitation, education, and transportation­­will almost 
certainly rise as development occurs within a TIF district. In turn, the 
regular property taxes paid to a municipality by property owners within the 
TIF district—which are based on pre-TIF assessments—could well fall short 
of the cost of services provided for the TIF district. When this happens, 
taxpayers outside the TIF district are faced with the tab. The larger the 
TIF district, the larger this impact will be on the surrounding area.

One source of revenue to cover these additional costs could be the 
additional sales and income tax revenue generated by the new development in 
the TIF district. Whether these additional revenues are sufficient will 
depend on the intensity of the development induced by the TIF-financed 
improvements and whether other sales and income tax incentives are also 
available within the TIF district.

Some critics of TIF have questioned whether the amount of tax revenue 
generated by TIF improvements actually equals the tax increment revenue 
allocated to pay for the improvements. Using data for a sample of 38 TIF 
districts in California and 38 matched areas with similar characteristics, 
the most comprehensive analysis of this question found only four TIF 
districts where property values outgrew their matches by enough to justify 
the tax increment received by the TIF districts.[16] A total of eight 
projects generated at least 80 percent of the revenue they received. Not 
surprising, the TIF districts with the most vacant land before the projects 
began showed the greatest tax increment growth. Overall, the study found 
that the 38 TIF districts collectively generated about half the tax revenue 
they received. This suggests that, on average, the TIF districts could have 
generated additional revenue equal to half the revenue generated with the 
TIF improvements even if the improvements had not been made, and that this 
revenue would have been available to pay for some portion of the additional 
services required by the TIF districts or other capital improvements.

Benefit spillovers. In direct contrast to concerns about cost spillovers 
are concerns about benefit spillovers. If a TIF improvement has regional 
benefits, many who benefit significantly from the improvement may make no 
contribution to cover the cost. For example, the taxpayers of Indianapolis 
are financing a mall and two sports arenas with TIF, while benefits are 
enjoyed by all in central Indiana.

Fragmentation of the tax base. Some observers say that the use of TIF may 
ultimately lead to fragmentation of the tax base, under which thriving 
neighborhoods would retain all growth in their property tax collections for 
their own development, rather than contributing part of this growth to 
citywide investments and assistance for less prosperous neighborhoods. 
Concern about fragmentation has been expressed in Chicago, which now has 
over 100 TIF districts within its boundaries.

Distribution of development. Another potential problem is not specific to 
TIF but instead pertains to all geographically targeted economic 
development programs. It is possible that TIF projects may simply shift 
development around the city, rather than attracting new business to New 
York City from elsewhere in the region and beyond.

This appears to be happening in Columbus, Ohio, where the city has sold 
more than $30 million in TIF bonds to finance infrastructure improvements 
for the new Arena District, a large office and retail development project 
that is centered on the new home of the Columbus Blue Jackets hockey team. 
Just a few miles downtown, office vacancy rates are above 20 percent and 
the City Center mall (which was built in the 1980s with city assistance) 
sits half empty.[17] Similar criticism has been voiced in Dallas about the 
proposed Victory office-retail complex between the city’s new hockey arena 
and downtown.[18] Opponents argue that downtown Dallas retailers will be 
hurt, and they point to other city priorities, including more than $1 
billion in needed roadway repairs elsewhere in the city.

In a worst-case scenario, TIF could shift development from more to less 
productive locations. If this happens, tax revenue­­property, sales, 
income, and others­­could actually be reduced from its potential maximum. A 
study of municipalities surrounding Chicago found evidence consistent with 
this hypothesis.[19] Their results suggest that total assessed property 
values in cities that used TIF grew more slowly than in cities that did 
not, after controlling for area characteristics.

Potentially expensive debt. Also of concern may be the relative cost of TIF 
debt. Because TIF debt is not backed by the “faith and credit” of the city 
or state, investors could view it as more risky than general obligation 
debt and demand a higher interest rate. To reduce the potential risk of 
default to investors, policymakers might designate a relatively large TIF 
district or build in a back-up revenue source, but these tactics have 
opportunity costs, as noted above.

An additional issue that arises with large-scale TIF-financed projects is 
required payment of debt service before significant revenue gains are 
realized. For large projects in a city’s general capital plan, funds may be 
drawn from alternative sources. But in the absence of such other funding 
sources, the first several years of debt service must also be borrowed, 
adding to the total project cost.

CONSIDERING TIF FOR EXTENDING THE NO. 7 LINE

Determining whether tax increment financing is the best financing 
method­­or even a viable one­­for the proposed extension of the No. 7 
subway line goes beyond the objective of this report. But the information 
provided above points to some of the major issues that must be addressed 
when evaluating the subway TIF proposals.

Property tax revenues for the TIF district must be projected 
cautiously­­allowing for potential fluctuations in the real estate market 
and local economy, construction delays (for the subway and other projects), 
and other factors that have created financial difficulties elsewhere.

Economic development policies for the TIF district need to be coordinated 
with development policies for the rest of the city. How will development of 
the Far West Side impact development elsewhere in the city, and vice-versa? 
In particular, how will development of Lower Manhattan interact with 
development of the Far West Side of midtown if the two projects occur at 
roughly the same time?

The city should also consider the cost of additional municipal services 
that the TIF district will require as the Far West Side develops. The final 
plan should estimate these costs and identify how they will be covered. The 
Department of City Planning has suggested the need for changes in New 
York’s existing law, but has not yet indicated what changes would be 
required. As it stands, the law does not authorize the city to establish a 
public benefit corporation to oversee the TIF district, for example, and 
the city might want to take this approach for many reasons.[20]

Limits on lessons learned. Lessons learned from other TIF users may take 
New York City only so far. Most important, the estimated $1.5 billion cost 
for the proposed subway extension dwarfs the project costs financed with 
TIF to date. TIF has been used in two locations in New York State, the town 
of Victor in Ontario County and the town of Greenburgh in Westchester 
County. In both cases, the commitment of the town was relatively small. 
Greenburgh used approximately $1.2 million to make road improvements 
(including the legal costs noted above).

Victor provided approximately $8 million in financing for the renovation 
and expansion of a mall.

Some projects outside New York State have been larger. But the most costly 
TIF project IBO identified was the construction of the United Airlines 
Maintenance Center in Indianapolis in the early 1990s. Although the total 
cost of the project exceeded $1 billion, the cost was shared by the city, 
state, and United Airlines. Indianapolis financed about $244 million with 
TIF. Measures that have allowed other cities to use TIF successfully may 
not work on a project as large as the subway expansion.

A second limitation of existing evidence on TIF is its lack of information 
about how private development responds to major infrastructure projects, as 
would be required in the Far West Side proposals. The large TIF-financed 
infrastructure projects that IBO identified were generally parts of larger 
plans with private developers lined up in advance. Because the scale and 
timing of the private development response to the No. 7 subway extension 
would be pivotal to success of the proposed TIF financing, the development 
responses to other major infrastructure projects­­including the New York 
City subway­­should be examined carefully as part of the evaluation of TIF.

Written by Theresa J. Devine

END NOTES

1 The geographic definition of the West Side targeted for development 
varies somewhat. The Department of City Planning defines it as the 59- 
block area defined by West 24th and West 28th Streets on the south, West 
42nd Street on the north, Seventh and Eighth Avenues on the east, and the 
Hudson River on the west. See New York City Department of City Planning, 
Far West Midtown: A Framework for Development, NYC DCP #01-21, page 3.

2 The Manhattan Borough President’s proposal also includes extension of the 
Number 7 as one of several transportation options for development of the 
Far West Side and TIF as one of a few financing options.

3 The exact route for the Number 7 extension is also unsettled. One route 
under consideration is west from Times Square to 8th Avenue, south along 
8th Avenue to 34th Street or 33rd Street, and then west again to a new 
transportation hub near 11th Avenue. See New York City Department of City 
Planning, Far West Midtown: A Framework for Development, NYC DCP #01-21, 
page 50.

4 For a discussion of TIF laws in place as of 1997, see Craig L. Johnson 
and Kenneth A. Kriz, “A Review of Tax Increment Financing Laws,” in Craig 
L. Johnson and Joyce Y. Man, Tax Increment Financing, State University of 
New York Press, 2001. For an earlier survey, see Jack R. Huddleston, “A 
Comparison of State Tax Increment Financing Laws,” State Government, Volume 
55, Number 1, 29-33. For discussion of the history and mechanics of TIF, 
see J. Drew Klacik and Samuel Nunn, “A Primer on Tax Increment Financing,” 
in Craig L. Johnson and Joyce Y. Man, Tax Increment Financing, State 
University of New York Press, 2001.

5 Section 970-c, part (a), defines a “blighted area” as “an area within a 
municipality in which one or more of the following conditions exist: (i) a 
predominance of buildings and structures which are deteriorated or unfit or 
unsafe for use or occupancy; or (ii) a predominance of economically 
unproductive lands, buildings or structures, the redevelopment of which is 
needed to prevent further deterioration which would jeopardize the economic 
well being of the people.”

6 Nearly all states and the District of Columbia allow debt to be issued 
for TIF projects.

7 Some states have even more flexible rules. For example, Illinois allows 
municipalities to use TIF to fund workforce development programs that will 
improve the skills of current and prospective workers in a TIF district. 
For discussion, see NCBG’s TIF Handbook, Second Edition, Neighborhood 
Capital Budget Group, Chicago, IL, 2001.

8 Amounts shown are TIF-financed amounts; total project costs may be much 
higher. All amounts were obtained from TIF program officers or agency reports.

9 In New York, the municipality must file an annual report with the state 
Comptroller’s office, but state approval is not required for project plans 
or bond issues. Similar rules apply in California and elsewhere.

10 See 1998 Annual Report: Downtown St. Petersburg, City of St. Petersburg 
Community Redevelopment Agency.

11 Under Proposition 13, the property tax rate is 1 percent of market 
value, with market value defined as the last sale price plus a maximum of 2 
percent per year or the rate of inflation, whichever is lower. Revenue 
projections on pre-existing TIF projects did not anticipate this change in 
1978. It should be noted, however, that Proposition 13 also had the effect 
of increasing the use of tax increment financing in California, because 
Proposition 13 effectively prevented local governments from using General 
Obligation debt. The number of TIF projects jumped from 297 in 1976-80 to 
489 in 1981-85. (See Community Redevelopment Agencies Annual Report: Fiscal 
Year 2000-01, California State Controller, Figure 19) A law passed in 1986 
allowed tax increases above Proposition 13 levels to finance general 
obligation debt, but only with a two-thirds vote at the local level. TIF 
remains much easier to implement.

12 John Anderson, “The Landscape of TIF: Who Uses It?” presentation at 
conference on TIF, Institute of Government and Public Affairs, University 
of Illinois, June 2001.

13 Office of the Legislative Auditor, State of Minnesota, Tax Increment 
Financing­­Supplementary Report, Report Number 96-06, March 1996.

14 City of San Jose Redevelopment Agency, Proposed 2002-2003 Capital Budget 
and 2003-2007 Capital Improvement Program.

15 Technically, the Hoffman Estates financing mechanism for the Sears deal 
is not a TIF, but a one-of-a kind Economic Development Area (EDA) 
authorized by state legislation created solely for the Sears deal to keep 
the firm in the state; the EDA law was sunset shortly after the deal was 
established. Unlike Illinois’ TIF law, the EDA law did not require a 
finding of blight. A total of $190 million in bonds were issued in 1990- 91 
for the Sears deal.

16 Michael Dardia, Subsidizing Redevelopment in California, Public Policy 
Institute of California, 1998.

17 Michael Brick, “Commercial Real Estate: Downtown Columbus Loses Out to 
Its Fringe,” The New York Times, June 19, 2002.

18 Michael Brick, “Commercial Real Estate: Downtown Dallas Project Mired in 
Disputes,” The New York Times, May 1, 2002.

19 Richard F. Dye and David F. Merriman, “The Effects of Tax Increment 
Financing on Economic Development,” Journal of Urban Economics, 2000, 
Volume 47, 306-328.

20 See New York City Department of City Planning, Far West Midtown: A 
Framework for Development, NYC DCP #01-21. On page 63, the proposal states 
that the City would “seek state legislation for a tax increment financing 
district.”

---------------------------
Original report at http://www.ibo.nyc.ny.us/iboreports/TIF-Sept2002.pdf

New York City
Independent Budget Office
Ronnie Lowenstein, Director
110 William St., 14th floor
New York, NY 10038
Tel. (212) 442-0632
Fax (212) 442-0350
e-mail: ibo@ibo.nyc.ny.us
http://www.ibo.nyc.ny.us
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