For so many years, whenever I was in a room or panel and the issue of housing or urban development came up you could be sure that I would make sure Tax Increment Financing (TIF) got into the discussion. It was a predilection that I took with me when I went to work at the Sightline Institute where we were able to get the most respected scholar on the Washington State Constitution, Huge Spitzer, to draft a constitutional amendment that would have made TIF possible. It was a major accomplishment to get lots of really smart people to finally accept that an amendment was truly the only way to get to real TIF in our state. But what is even more difficult is to get lefty legislators who wrongly thing TIF is a developer boondoggle and conservative legislators who wrongly think it would lead to huge increases in debt to vote by supermajorities to put it on the ballot; then people have to vote for the amendment which has the word “tax” in it.

Still, I think it’s time to bring TIF back.

Aside from the huge political problems TIF faces there are the Constitutional ones that I describe in all their boring glory in an old Sightline blog post.

Under Washington’s constitution a city is able to borrow money to improve public infrastructure and those improvement might result in increased property values. But the taxes that the city collects on those properties are NOT based on their assessed value. Those properties are taxed based on a rate set by the value of new construction throughout the city, the previous year’s city budget, and up to an additional one percent of the previous year’s city budget. That rate is applied, equally per $1000 of value, to ALL properties across the city.

This is the hardest thing I’ve ever had to explain to anyone aside from the fact that Housing Affordability and Livability Agenda (HALA) Committee recommendations and Mandatory Inclusionary Zoning (MIZ) are not the same thing.

Without even explaining TIF here (I’d read the Sightline post), the TIF idea has a hard time getting off the ground because our State has legal limits that are both Constitutional and in the Revised Code of Washington (RCW). Among them are the uniformity issue I point out above and the fact that we have limited ourselves to less than the allowed 10 percent of property taxes, something that means local jurisdictions have to fight with each other for tax capacity under the self imposed limits.

What TIF does do, especially the proposal we offered years ago, would be real value capture; that is the City of Seattle could truly capture tax revenue generated by new development and pay back money it borrowed to make infrastructure improvements or, yes, maybe, even building housing on City owned land. I’m really just raising the issue without fully playing it out here in this post. I’ll do that later. But I think as long as we have consensus on so many items, perhaps we could get Tax Increment Financing added back into the housing discussion. I’ll write more about this soon.