Gov. Dannel P. Malloy”™s budget chief hopes to block legislation to expand tax increment financing for cities to include money raised from income and sales taxes ”“ dipping into the state”™s wallet ”“ in addition to the property taxes that support TIF financing today.
Separately, the Connecticut General Assembly is weighing whether to allow “transit hub development banks” to set aside money generated by developments for additional infrastructure.
The legislative moves come even as the state considers extending by three years authorization for a special taxing district encompassing Steel Point Harbor in Bridgeport, which voters approved last month. The district designation is aimed at making it easier to raise financing to support the project, which has yet to move forward.
Benjamin Barnes, secretary of the Connecticut Office of Policy and Management under Gov. Dannel P. Malloy, opposed the concept of blended TIF financing to include income and sales taxes.
“I cannot support a bill that siphons off portions of the state”™s primary revenue sources for municipal purposes,” Barnes said.
TIF programs raise cash for development projects by “backing” bonds ”“ fronting them, really ”“ with expected taxes generated from the companies that occupy new properties. Under a variation of that concept called “value capture,” TIF bonds would also count incremental tax revenue from other sources ”“ for instance income taxes ”“ to allow developers a deeper well of capital in arranging bond funding.
Connecticut is among the half-dozen most active states when it came to creating TIF-backed bonds between 2005 and 2010, according to a Securities Data Corp. analysis published by the Cato Institute. Connecticut ranked third on a per-capita basis behind only California and Colorado.
The New York City-based Regional Plan Association proposes a “value-capture” mechanism under which Connecticut would provide bonding capacity to municipal governments, which would enact any needed zoning changes around rail stations. A portion of any new revenue would be directed into a new transit hub development bank, RPA says, used to leverage public and private funds to be reinvested in station area infrastructure and development across the state.
“It”™s surprising that a financing strategy that could raise millions and potentially even billions of dollars without a definitive tax increase isn”™t used more,” said David Kooris, the Stamford-based Connecticut director for RPA, in a March blog entry touting the concept. “Value capture should be seen as another method of public-private financing, one that taps into future private wealth that public infrastructures creates, and uses it to create that infrastructure.”
Kooris noted New York City is using value capture to pay for a $2.1 billion extension of the No. 7 subway line into Manhattan, selling bonds pegged to expected taxes around the new station. And in Dallas, a TIF district allocates 40 percent of revenues generated at a subway station to economic development, with another 40 percent split to support new transit capital costs and 20 percent to affordable housing.
