chapter 04
innovative land and property taxation
and developer includes a provision reducing the former’s investment if the latter’s rate of return exceeds a certain target. However, because it has an impact on local government district financing, such as for schools, TIF is highly controversial. In general TIFs in Illinois have had a lifespan of approximately 23 years; during this period the most contentious aspect of this type of land value capture is how TIF finances redevelopment by increasing the taxes. According to Quigley (2007), if TIF captures approximately 40 per cent of the tax base, then TIF districts will have a lower tax base, and thus a higher tax rate in relation to taxing districts without TIFs. Each of the seven local governments has its own TIF zone. He observes that approximately 40 per cent of the incremental property value of these districts would have taken place even without TIF, so the tax rate should actually return the 40 per cent of the incremental property value. Therefore, ‘every taxpayer in Chicago – whether he or she lives within a TIF – pays the TIF tax’ (Quigley, 2007). The development by the private sector through concessions and tax relief mechanisms of specific hubs of the public transport network is a successful example of an applied TIF scheme. Large stations with a high level of traffic represent a clear opportunity for commercial and business property development. In Brazil, Belo Horizonte and Porto Allegre, which are transfer stations of their respective BRT systems, have been developed under TIF. Another possible alternative of TIF transport application involves the upgrade of the zone classification along the corridors of the mass transit. In Curitiba this action affecting the zoning system has, however, produced various negative impacts such as speculative processes of land development and the displacement of low-income residents in the urban peripheries.
48
When we look at the tax increment finance programme, it is often very effective in addressing the interest of the private investor through fiscal incentives, but it sometimes overlooks, and thus negatively impacts upon, the greater urban area, above all on the most vulnerable residents and services of the community. According to Payne (2003), ‘informal partnerships appear to have been operating at a large scale and are more successful in serving the needs of the poor.’ This success is mainly related to the ability of the public sector to operate outside the often too-stringent and cumbersome regulatory frameworks, and thus be able to respond adequately to local pressures without the need for new policies or regulations. In both cases of formal and informal partnership, the common element of the TIF mechanism is to promote private investment through tax mechanisms such as capital allowances, and to respond mainly to the local context and needs with a strong decentralised approach to fiscal measures. 4.5 Joint Development Projects
In a joint development project a local authority or government, in order to finance and maximise the profitability of its investment in public transport, particularly in transit systems, encourages property development (residential and/or commercial) close to stations. As described in Cervero et al. (2004), ‘joint development at transit stations includes air-rights development, ground-lease arrangements, station interface or connectionfee programmes, and other initiatives that promote real-estate development at or near transit stations to the mutual benefit of public and private interests.’ In the United States, several joint development projects are found within a Transit-Oriented Development, a pedestrian-friendly and transit supportive development or redevelopment (Boarnet and Crane, 1998; Cervero et al., 2004).