Throughout the U.S., tax increment financing (TIF) is a municipal finance innovation adopted to raise public sector capital for a variety of redevelopment projects. And given the staggering infrastructure investment needs in New York State, it should have been welcomed as one more important tool in the economic development toolbox. The logic is simple and as potent as the arguments for workplace diversity: more diverse tools, more diverse solutions. Granted, there was justification for lack of interest prior to 2012. Back then, the authorizing sections under the New York State Municipal Redevelopment Law complicated TIF’s use in most cities and villages. However, it was in 2012 that educational efforts conducted by retail real estate industry volunteers (including yours truly) would eventually yield fruit: The governor and the legislature approved important changes to the law. Of course, it was also helpful to have great counsel to guide us through the labyrinth of state politics.
We New Yorkers proudly think of ourselves as leaders in the national culture and economy. We gave the republic six presidents, including Teddy Roosevelt and Franklin D. Roosevelt—that bipartisan duo being particularly notable for how they led the nation. New York also takes credit for breaking the color barrier in professional sports with the 1947 debut of Jackie Robinson on the Brooklyn Dodgers. But in the field of tax increment finance, New York State has been a laggard—its municipalities have sat on the bench, content to let other programs take their swing at bat. That’s probably attributable, primarily, to a lack of awareness of TIF’s benefits. (Former Assembly Speaker Sheldon Silver was reputed to be loath to the notion of using TIF in New York City.) I discovered that many lawmakers were unfamiliar with TIF when I was recruited several years ago to provide guidance to the Yonkers City Council.
Prior to 2012, Yonkers was the one major exception to this failure to get in the game. I was enlisted as a consultant to their city council to help them review a major financing proposal: the $200 million revenue bond issue for a proposed mixed-use project in downtown Yonkers. Those bond proceeds would have financed the construction of a parking garage, new roads and the redevelopment of a combined sewer system almost a century old. In total, the planned improvements and retail and residential development would have brought vitality to the downtown of that riverfront city. And then the Great Recession arrived.
Although the City of Yonkers stepped up to the plate to pioneer, what may have been, the largest use of TIF financing in state history, the underlying project did not move forward. The City didn’t strike out: It did its part; it took a disciplined approach to vetting the deal and obtaining the necessary approvals—and those approvals were contingent upon the developers’ ability to execute. But such are the vagaries of development, and, at least, Yonkers attempted to build its way out of its fiscal difficulties.
However, New York now has another forward-thinking city ready to join the ranks of American jurisdictions that have used TIF. That city is Glen Cove, which is located on the Long Island waterfront in the Greater New York area. As a proponent of TIF in New York State, I will be sharing my observations of its proposed TIF deal during a panel on brownfields redevelopment entitled “Challenges & Opportunities: Redeveloping the ‘Undevelopable’.” That forum will include the mayor of Hernando, MS and other brownfields experts; it will be hosted on May 23rd at the annual convention of the International Council of Shopping Centers (ICSC) in Las Vegas. So, just as the Brooklyn Dodgers broke the color barrier by placing Jackie Robinson on the playing field, Glen Cove appears poised to do the same with the state’s de facto TIF barrier by fielding a $100-million TIF bond issue. We should all root for the successful structuring, approval and execution of that effort. For if Glen Cove succeeds, other cities may follow suit: In that sense, “build it and they will come.”
At that ICSC panel presentation in May, I will also discuss other TIF deals—ranging from a $16mm bond financing for one of my projects in San Diego (City Heights Retail Village), to a $145mm financing in Stamford, CT. That presentation will highlight the scalability of TIF as a funding source, as well as how TIF deals can be structured to manage public sector risks. To be clear, TIF is not going to be selected as MVP for every redevelopment problem. It is not a solution for every economic development initiative. However, it should, at the minimum, be scouted for its ability to accomplish public-private partnership objectives in New York State. San Diego’s redevelopment agency recognized this in the late 1990s, and the video clip below shows the City Heights Retail Village project made possible with support from tax increment financing. Follow this blog for future posts on tax increment financing and public-private partnerships. – Lamont Blackstone