Photo by Mr. T in DC.
Buried halfway through this week’s Current, the paper ran an article reporting that both Mayor Vincent Gray and Council Chair Kwame Brown believe it might be a good idea to use tax incremental financing to lure a high end tenant to the mall.
Tax incremental financing (or “TIF”) is a process whereby the city issues bonds to raise money for a particular project. Typically this involves giving the funds to a private developer. A portion of the taxes from the project that gets funded by the financing are directed towards paying off the bonds. The idea is that the city will take the taxes that arise from the incremental increase in property and/or sales taxes from the now improved property to pay back the money.
The city has used TIFs in the past. For instance, the city used a $74 million TIF to help the Gallery Place development along. It used a $46 million TIF for the Madarin Oriental hotel. And it used a $7 million TIF for the Spy Museum. Each of these projects was successful and they even paid off the bonds ahead of schedule.
But TIFs only work when there’s an increment to be found. In other words, they work when they’re used in areas that will likely see a big improvement from the public investment. If there’s no increment, then the only way to pay off the bonds is to cut into the taxes that would arise from the property without the public financing. In that case all you’ve really done is give free public money to a private developer. Continue reading
The Georgetown Metropolitan 
You must be logged in to post a comment.