Connecticut is the Place to Be – for Tax Increment Financing

I rent a lot of cars when traveling on business, which definitely saves wear and tear on my own vehicle, but I do miss my Sirius XM Radio. Specifically, I miss hearing Bing Crosby and Judy Garland sing “Connecticut” on Sirius XM’s “40’s Junction” when I’m on the road to a committee meeting or public hearing in the Nutmeg State. 

“I guess it suits me to a T,  Connecticut is the place for me!”

sings Bing. For my travels, the “T” has been for Tax Increment Financing (TIF), Connecticut’s version of Value Capture, a local economic development financing tool that helps communities capture increased tax revenue from private development, and direct it toward projects that support and encourage that development.

Why the excitement this summer?

Since Chapter 105b of Connecticut General Laws was amended in 2015, twelve communities have implemented Tax Increment Financing Master Plans, or are in the process of implementation. The pace is accelerating, with five of the twelve enacted in 2019, and two more potentially adopted by the end of this month.

Word is getting out.

Camoin 310 has worked with the Town of Canton, City of New Britain, City of Bristol, Town of Cheshire, the Town of Groton, and jointly with the Town and City of Groton. 

A second reason is a technical amendment to the TIF Statute, effective October 1, 2019. This will enable a municipality to move forward with adopting a Master Plan as soon as the Planning and Zoning entity has issued its advisory opinion that the plan is consistent with the local Plan of Conservation and Development (POCD.) A 90-day review period was intended to give Planning and Zoning time to review, but for a well-understood and supported Master Plan, the opinion sometimes came within a few weeks and left the community watching the calendar for two months or more, which is a challenge when your assessments effectively change each October 1. The amendment (HB-7361 of Session Year 2019 for those who love to read legislation) also allows a municipality to establish the district’s boundaries and adopt the Master Plan that sets forth goals, projects, and management, at separate times.

We’ll update you as we learn how communities decide to take advantage of the optional “two step” process. Massachusetts has a similar separation in its District Improvement Financing statute, and I have worked with two communities who enacted districts to establish a low baseline of assessed value, maximizing the amount of value that may be captured, and then spent more time reviewing and refining the development program so that plans, projects, and especially costs were more complete.

Enacting TIF still takes time, because like any statute or program, municipalities need to do the groundwork to decide what they want to accomplish, to build public and local electoral support, and to create plans that will be clear, workable, and easy to understand. The amendments do increase community control over scheduling and planning.

What’s been happening outside of the Statehouse?

Whether I’m working with a committee or making a public presentation, I come prepared to answer a range of questions and give examples. Some highlights:

Why go through this? If we want to provide financial assistance, why not just use our regular tax abatement program? Tax abatements in Connecticut work by reducing taxes paid on the property, based on an established schedule or percentage. The town or city receives a net amount. But what if the business has not met the terms of the assistance, by underinvesting or not creating enough jobs? Recapturing the financial benefits after noncompliance takes time, lawyers (often), and may not ultimately work if the business is failing. By contrast, when tax reduction is accomplished through TIF with a Credit Enhancement Agreement (CEA), the property owner pays full taxes and is rebated. If the business is noncompliant, the municipality has the full tax payment in hand and does not need to claw back cash, at least for that year. This gives the municipality more protection.

Does TIF do an end run around my budget? No. A TIF Master Plan sets forth goals and potential projects, but spending is authorized through the usual budgetary process.

I want more! How can I educate myself? Come to SNEAPA 2019 on October 17, for a panel on “Lessons from Community Successes & Strategies for Integrating Economic Development into Your Planning.” Arrive early for a session on Opportunity Zones, since Value Capture programs like TIF in CT and RI and DIF in MA “Play well with others” to help you build a portfolio of economic development tools.

How is TIF being used? Here is a sampling of what we’re seeing so far:

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