Independent public-purpose facilities or public facilities within private-sector developments

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• Get More Information on Tax Increment Financing
• Attracts new private sector investment into blighted areas
• Promotes commerce and prosperity of citizens by providing public facilities, including but not limited to roads, water, sewer, parks and real estate devoted to open space
• Devotes the increment of new real estate taxes to a fund, with the current tax base held constant
• Supports Fairfax County tax base over the long term
• Provides tax-deductible financing with interest rates often 15 to 20 percent lower than commercial rates
• Produces significant cost savings from joint construction efforts under a public-private construction program
• Allows an affected jurisdiction to “reinvest” a portion of the net new real estate taxes back into a revitalization project
• After the public investment is amortized, the full tax benefit of the revitalization project is available to support the county tax base over the long term.

Opportunities:

• TIF financing gives a private sector master developer access to tax deductible (for federal income tax purposes) financing for the public purpose portions of a revitalization project. Interest rates on bonds that are tax deductible for the holder are often 15-to-20 percent lower than normal commercial rates
• TIF financing can be used effectively in cooperation with other public and private sector financial “packages”
• Proceeds from TIF bonds sold by a local jurisdiction are often made available directly to the private sector developer. The developer usually integrates the public facility construction within its total joint public-private project construction program with significant economies of scale – and usually with significant cost savings resulting from the joint construction effort
• The TIF district should be specifically defined to include neighboring properties that will benefit from the new public facilities. Hence, TIF financing can be used to attract new private sector investment into projects in otherwise lagging commercial centers that might otherwise continue to decline relative to the rest of the County
• TIF districts can encourage advanced developer financing for the entire infrastructure package involved in a major revitalization project – on the basis that the developer will be repaid from the TIF district as the district generates sufficient income
• Encourages a long-term vision for revitalization properties by allowing future owners/users to contribute to the up-front infrastructure requirements

Limitations:

• Tax increment financing is recorded against the total County bond debt levels outstanding. Therefore, it would be important to focus tax increment financing only in Board-approved revitalization areas where the specific projects cannot otherwise be funded from normal commercial lending sources. In brief, tax increment financing should be used to provide a competitive edge for attracting private sector investment back into older commercial centers and their adjoining neighborhoods.
• Tax increment financing cannot duplicate tax abatement projects. The County Board cannot simultaneously: (1) pledge incremental tax revenues generated by a project to pay off the TIF bond, while (2) providing tax abatement for the same project.
• Bonds supported by tax increment sources are supported by a pledge only of the revenues from the incremental increase in value of the improved property and not by the full faith and credit of the issuing locality. As a result, such bonds are often more expensive than traditional general obligation bonds.

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