If you can’t say anything nice . . .

. . . say something funny?

I love the Cascade Land Conservancy. In fact, when I applied to be on the Seattle City Council back in 2006 I brought a prop, the CLC’s awesome map showing what growth should look like. It’s called the Cascade Agenda, and I am a true believer.

The CLC has turned the somewhat arcane idea of Transfer of Development Rights (TDR) into a viable business model and a smart way to promote growth in our region where we want it, in cities.

So it’s kind of a hassle to have to point out that the recent bill that CLC promoted as a Tax Increment Financing (TIF) bill isn’t really TIF at all. The Governor is all set to sign the bill into law at the CLC’s big breakfast coming up. I’m glad the bill passed.

But the bad news is that, as I have described before, without a constitutional amendment we can’t get TIF in Washington. We also can’t do some of the cool things that people like Peter Katz urge us to do to promote smart growth. In Washington there is no way to capture an incremental increase in property tax because of public financed improvements because we have a “budget based” tax system. We don’t collect property taxes based on a percentage of a properties value, but we raise an annual budget for taxing districts by collecting it, uniformly, from the aggregate value of all the properties in the district.

I worked with some really smart folks, including constitutional expert Hugh Spitzer, to push for amendments and legislation that would get us real TIF. That effort didn’t succeed in Olympia this last session. Hopefully, we can give it another try. I don’t think that the CLC effort will hurt that effort. I hope it won’t but there is a chance it will.

First, legislators already think we have TIF in the form of TIF “lite,” a law which the CLC bill amends. That legislation has been used, but with minimal effect. The problem is that every time we pass a “TIF Bill,” we have to go back and explain why that TIF isn’t really TIF. It’s hard enough explaining what TIF is, why we can’t have it in Washington State, and how to fix that, without also explaining what legislators think they passed isn’t really TIF.

Second, it’s highly unlikely that anyone is going to use the CLC TIF TDR legislation. The “TIF” tool that is available once the Governor signs the CLC bill is kind of like one of those tools that come with IKEA furniture. It works, but only for a very specific and narrow purpose. It’s helpful if you’re putting together that IKEA bookshelf but not so handy if you’re trying to install shelving in your kitchen.

Here’s a quote from a recent Crosscut story:

But building enthusiasm was a different matter. With the help of the Heartland Institute, they worked with the cities of Montlake Terrace, Renton, and Tacoma to see, with real numbers, how the program might work for them. At the session, the Association of Washington Cities supported the bill at every hearing, and both Futurewise and the Washington Environmental Council leant support. In addition, the Realtors and Master Builders were on board. It was a very big tent indeed. And, of course, the bottom line, as Chahim notes, is that tax-increment financing “doesn’t take state resources at a time at which there just aren’t any.”

Passing the law doesn’t get CLC to the end of the road. Now, Chahim says, the question becomes “do we see projects on the ground?” Cities must choose to adopt the new program. Developers must choose to buy rights. Right now, with the real estate market languishing just north of the drain, there’s not much demand.

Big tents are great. But this isn’t TIF. And Chahim points out that there isn’t much interest in this. Essentially the foundation of this “TIF” program is a voluntary effort to dedicated a portion of property tax collections to retire bonds that funded infrastructure. Cities and Counties can do this and get a credit against sales tax collections.

It’s a complicated scheme. But the CLC proposal adds in requirements to buy into TDR. That’s an added cost, and there isn’t exactly big demand for TDR credits now. That’s partially a function of the real estate market and partially a function of trying to find a decent receiving site for the credits (see my TDR tutorial here).

The passage of the CLC TIF TDR bill (we could call it the sustainable acronym act of 2011), won’t hurt things like smart growth and Transit Oriented Development. It won’t hinder efforts to get good zoning or to facilitate more use of Transfer of Development Rights. It could help push a great project over the finish line somewhere in the Puget Sound.

But it could make efforts to get the big lift of real Tax Increment Financing a bit more confusing. My one request is that we don’t call it TIF and that we all get together to give the constitutional amendment a big push next session.

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2 Responses to If you can’t say anything nice . . .

  1. Pingback: Folkenomics: Land use and TOD as fiscal policy | Seattle's Land Use Code

  2. Pingback: Land use and TOD as fiscal policy | The theory and practice of folkenomics

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