The House Economic Matters Committee has killed a bill which would have made it more difficult for counties to use tax increment financing (TIFs). HB 466 – Prevailing Wage – Tax Increment Financing Developments – Application would have required payment of prevailing wages on construction contracts receiving any funds from TIF bond proceeds.
Counties had concerns that the bill would drive up costs of public infrastructure projects, stifle use of a demonstrably successful economic development tool, and squeeze out small businesses from participating in infrastructure construction projects. In addition, it unfairly applies prevailing wage requirements to certain projects receiving TIF bond proceeds when those projects would not otherwise have to comply even if financed with other public funds.
TIFs are a demonstrably successful economic development tool that enables counties to finance public infrastructure improvements using future property tax revenues associated with the new development. These are revenues which the county would not receive at all unless the development came to fruition. Creating a viable TIF district and development plan requires careful financial planning and forecasting to ensure that the future tax revenues received from the project more than cover expenditures on the infrastructure required to support that development. In general, counties will only use this tool if the development is not financially viable without the benefit of the TIF; in other words, if the numbers do not add up, the county does not issue the TIF bond, and the development never happens.
….This bill will significantly raise costs for development projects funded with TIF bonds. If costs are raised over and above what the development will return in future tax revenues, the county will not issue the TIF because it is not economically viable. This generally prevents the development from occurring, sacrificing blight elimination, job creation, targeted economic development, and growth to the taxable base.