Tax increment financing has become a controversial policy in North Dakota of late. Indeed, it’s the subject of a lawsuit filed against the City of Bismarck by the North Dakota Policy Council. What is tax increment financing, or TIF? It was originally intended as a way for local government to raise funds to restore areas classified as blighted. It was urban renewal policy, though of late it’s less about “urban renewal” than about economic development pork.
But I digress.
TIF works by freezing property valuations in a given area, and then taking the revenue from taxes on subsequent valuation increases above that line and putting it into a TIF fun that is then used for the urban renewal/economic development.
The problem? As usual, things have gotten carried away to the point where some property owners are paying taxes but not seeing any of those taxes going to the government for the services they receive. Rather, all of the money goes into the TIF fund. Meaning that the burden for paying for government services falls to other property owners.
TIF effectively shrinks the pool of people paying property taxes for government services and, thus, inflates the amount of those taxes.
An example of this, as the NDPC points out, is the Radisson Hotel in Bismarck. Between 2001 and 2009 the Radisson paid $972,960.10 in property taxes. Of that total, exactly $0 went to government for government services. All of it, thanks to TIF, went to economic development.
Meaning that other property owners in the Bismarck area had to bear a heavier burden.