When I first got involved in revitalization issues from the perspective of an advocate, I generally was against "taxpayer incentives" for developers, because I thought as profit making entities, why should they get subsidized.
The reality is a lot more complicated. In weak markets, either generally like an entire city, or by submarkets such as the H Street neighborhood in DC or the Short North neighborhood in Columbus Ohio or Center City Philadelphia, if you want to jumpstart the revitalization of the community, you need a wide variety of inducements, strategies and tactics to move the market forward.
When there is no movement at all, free land and other inducements can be necessary or you'll have no activity at all. For example, to boost residential living in Center City Philadelphia, the city passed a law providing for a ten year property tax abatement on properties (office, warehouse, manufacturing) converted to residential, in a defined area of the Center City. That was an inducement for developers to convert properties, and it was an inducement for people to relocate to downtown, despite other downsides (safety, amenities, high taxes, other issues) that come with being an "urban pioneer."
The proviso is that there needs to be a plan in place and it needs to be good.
There are plenty examples of failures of such projects all around the country (although some people will argue that the failures were actually successes, just the way particular stages of a long term process end up working out in the context of the overall market).
Tax increment financing is one of the tools of these kinds of revitalization funding programs. The idea is that the new project will generate increased property tax revenues, and increased land values in an area which will also generate new revenues, and rather than these revenues going into the general fund, they can be captured to provide funding to the project, which is done by selling bonds (obligation notes) against the anticipated increase in revenue.
This interview with the director of TIF projects for Madison, Wisconsin,"When it comes to TIF redevelopment projects, Joe Gromacki is the city's dealmaker
" from the Madison Capital Times
is interesting, because he discusses how he got involved in economic development work and why TIF projects are important and how you have to separate out your emotions about "helping developers" from the results you are trying to achieve and the process you use to achieve those results.
Labels: commercial district revitalization planning, commercial real estate market, real estate development, tax incentives, urban design/placemaking, urban revitalization