Incentive programs are major tools used by communities to spur economic development, but they are often misunderstood.
This will be a short series on economic development incentives. In each episode, I’ll discuss how a specific program works with a local example. Let’s start with Tax Increment Financing, or TIF.
At its core, TIF is simply a municipality diverting future property tax revenue increases in a defined area toward improvements for a period of time. So let’s look at what that means using the Marquette project in downtown Cape.
The City of Cape created a TIF district with many vacant or mostly vacant buildings, including the Marquette Tower and H&H. Developers then looked at that property with new math. If they rehabbed the building, they could retain some of the increased property and sales tax revenue to help pay a portion of development costs.
Now here’s the key. The city, county and school were making virtually no revenue from these two buildings. This development, as is the case with all TIF projects, would not occur without the TIF. It’s actually called a “but for,” meaning but for the use of these funds, this project wouldn’t happen. And it is illegal to allow the use of TIF dollars if a "but for" hasn’t been met.
Because of TIF, we now have a $20 million development including a hotel, restaurants and office space, that wouldn’t have occurred otherwise. City, county and school tax revenue stays exactly the same. Then the hope is that this development will help create other developments, ultimately increasing activity in downtown Cape and improving our community in many ways.