TAXATION (GENERAL); RIVERS; ECONOMIC DEVELOPMENT;

RIVERS; ECONOMIC DEVELOPMENT;

You asked for a description of how tax increment financing (TIF) could be used to improve rivers and riverfronts.

SUMMARY

TIF is a financing technique that uses the anticipated increase in tax revenues associated with a project to back bonds or other debt used to pay for the project. TIF could be used to fund river and riverfront clean up and improvement projects, under the rationale that such projects could increase the value of adjoining properties and thus the property taxes they generate. We are aware of at least three instances in other states where TIF has been used for riverfront improvements. Connecticut law allows municipalities to use TIF for economic development projects, but it does not appear that current law allows this technique to be used to restore natural areas outside of the context of economic development.

TAX INCREMENT FINANCING

Tax increment financing is a technique governments use to repay bonds or other debt they incur to finance a development project. The technique taps the increased tax revenue (i. e. , the increment) the project generates to repay the debt. Tapping the tax increment for this purpose allows governments to finance projects without raising taxes or diverting funds needed to pay other expenses. However, if the project fails to generate enough incremental revenue to cover the debt, the municipality must find other revenues to repay the debt. Theoretically, any type of revenue can be used to repay the debt, but TIF is most commonly based on property taxes. TIF has been widely used in some states, notably in the Midwest, but it appears that it is not widely used in Connecticut.

USE OF TIF FOR RIVERSHED IN OTHER JURISDICTIONS

In November 1996, the South Carolina Rivers Alliance proposed that a 12-mile linear park system be created in the area in and around Columbia.   Local governments in the area agreed to go forward with the project’s estimated $ 18 million estimated cost with the proviso that the Alliance recommend an acceptable funding strategy.   In April 1997, the Alliance recommended and the member governments began to implement a regional strategy based on TIF.   Several municipalities, Richland County, and the Richland school district have established a Tax Increment District to fund the projects. Improvements completed to date include 8-foot wide pathways, vandal-proof lighting, trash receptacles, water fountains, picnic benches, overlooks, bank fishing access, canoe/kayak access, a public restroom and parking.  The project has been linked with housing development in Columbia, which has increased tax revenues. Further information on these projects is available on the Rivers Alliance’s Website, http: //www. riveralliance. org/3rg. htm.

TIF has also been used to fund a 158-acre natural area on a 2-mile stretch of the manmade Calumet Sag Channel in Palos Heights, southwest of Chicago. The financing, which took place in 1989 and 1990, reestablished a native prairie and woodlands as well as an arboretum. Further information about the project is available on the Palos Heights Website, http: //www. palosheights. org/lake/indexlk. html.

Traverse City, Michigan, has used TIF to construct a riverfront boardwalk as part of a larger project, which included remediation of the Boardman River.

CURRENT CONNECTICUT LAW

Connecticut law allows towns to use incremental property tax revenue to finance economic development projects, including the remediation of contaminated sites (brownfields) for this purpose. The law dictates how towns must determine the incremental revenue and requires them to use it to repay the debt. Further information on Connecticut’s law can be found in OLR report 2001-R-0737.

It does not appear that the current law would allow the use of TIF to restore natural areas, such as riverfronts. One statute that authorizes the use of TIF, CGS § 8-124 et seq. , deals with redevelopment projects. Under these provisions, redevelopment means improvement by (1) rehabilitating or demolishing existing structures, (2) constructing new structures, improvements, or facilities, (3) locating or relocating streets, parks, and utilities, or (4) a combination of these techniques. Another provision, CGS § 8-186 et seq. , permits the use of TIF in connection with municipal development projects. A development project must involve the use of land or buildings principally for industrial or business purposes.

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