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The Right Note: Another TIF Heading Our Way

Mark KellyThe Right Note is a weekly opinion column. The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.

The Board this week approved the first step in creating the third Tax Increment Financing (TIF) district in Arlington.

The TIF plans dedicate a portion of future tax revenue to a specific project or set of projects. In the most recent proposal, the funds would be used to pay off a bond taken out to pay for a portion of the redevelopment of the Ballston mall.

The money taken out of future budgets for a TIF is not eligible to be used for anything else. Not on schools or infrastructure or public safety. In this case, the number is proposed at 40 percent of future revenue in this TIF district to pay for a $45.5 million bond.

The argument for TIFs is that the development being paid for by the TIFs will increase revenue to the County above what we would have otherwise received. Therefore, despite setting aside a portion of that revenue to subsidize development, it is still a net benefit to the taxpayer.

However, if a private developer cannot secure financing for a project in one of the most attractive real estate markets in the country, why should taxpayers agree to make up the difference?

The County Board has not really seen any pressure on budgets from these revenue set-asides yet because they are a relatively new idea here. But, we can look to a prolific TIF user, Chicago, which has been using them since 1986.

At one point, Chicago had over 150 TIFs. Chicago is roughly 12 times the size of Arlington, so that would be like a dozen or so TIFs here. In 2013, Chicago TIFs held $1.7 billion in unspent funds in their accounts after taking in $412 million in revenue.

The TIFs began to squeeze Chicago’s revenues to the point that Mayor Emanuel had to campaign on the promise of rolling them back and opening them up for more transparency. Many opponents argued they had become a slush fund to benefit favored developers and projects at the expense of other core budget priorities.

In July, the Mayor announced he would phase out seven of the TIFs and put $250 million back into the city’s budget over the next five years, half to go directly to the schools. And, the Mayor is putting in place a requirement that TIFs return at least 25 percent of their surpluses to the city, which will net an anticipated $150 million.

Granted, Arlington is not Chicago, which according to one review had more public corruption convictions than anywhere in the country. However, the idea that future revenues will be diverted to pay for private development should at least raise some concerns for Arlingtonians. Ballston is almost certainly not the last TIF the Board has in mind.

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