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The National Academies

TCRP J-05/Topic 18-01 [Active]

Tax Increment Financing for Transit Projects

  Project Data
Funds: $50,000
Staff Responsibility: Gwen Chisholm-Smith
Research Agency: University of Texas - Austin
Principal Investigator: Gian-Claudia Sciara
Effective Date: 9/26/2018
Completion Date: 9/26/2018
Comments: Research in Progress

 BACKGROUND

 

As the cost of capital projects and financial needs increase, transit agencies continuously search for additional sources of funds. One source of funds that transit agencies are turning to is Tax Increment Financing (TIF). TIFs are a public financing method where municipalities divert future property tax revenue to a geographic area that will benefit from a resulting transit improvement. TIFs may also be referred to as special taxing districts, development authority districts, community facilities districts, or community management districts.

 

TIFs are legal in most states. Examples of states where TIF has been applied for transit include Illinois, California, Oregon, and Georgia.

 

TIFs are becoming an increasingly important source of funds for projects. They have the potential of being a key part of project financing. TIFs, however, can be complex, with many requirements and restrictions.

 

A recent review of three TIF-funded transit projects—Contra Costa Center (CCC) Transit Village, Contra Costa County, California; Wilson Yard Station, Chicago, Illinois; and Portland Central Streetcar, Portland, Oregon—identifies several constraints to the use of TIF for transit. For example, in California and Illinois the state-level TIF-enabling law allows use of TIF funds for operations and maintenance (O&M), including transit projects. In Oregon, the funds can only be used for capital expenses. While TIF revenues can fund transit-related infrastructure such as rail lines and train stations, none of the three states has TIF-enabling legislation that explicitly allow use of TIF funding for rolling stock (e.g., train cars and buses, etc.). The California Redevelopment Law and the Illinois Tax Increment Allocation Act allow TIF funds to be used for “transit-related” infrastructure.

 

There is a need to identify TIF-funded transit projects throughout the United States and to understand the financial and legal structure of the projects. This information will provide guidance to transit agencies considering TIFs as a source of funding for projects. 

 

OBJECTIVES

 

The objectives of this research are to: (1) identify TIF-funded transit projects and state-level TIF-enabling statutes; (2) document and analyze the legal issues associated with the use of TIF to fund transit; (3) suggest ways to make the use of TIF legally defensible, especially to fund rolling stock, repairs, and O&M expenses; and (4) produce a report that includes issues of control and allocation when TIF revenues are shared by multiple overlapping public entities, such as cities and transit agencies.

 

RESEARCH IMPLEMENTATION

 

This research will be conducted in four tasks pursuant to a firm fixed price agreement. The tasks will be as follows:

 

Task 1. Research plan and detailed report outline. The consultant will conduct background research and collect relevant material. Based on the initial but complete review of the source material, consultant will propose a detailed report outline. The outline should be at least 8 to12 pages, include a proposed survey if one is to be used, and contain sufficient detail to inform the TCRP project panel of what a 75- to 100-page report will contain. This outline should also contain the estimated pagination for each proposed section and/or subsection. This material will be submitted to TCRP for consideration and approval.

 

Task 2. After approval of the work plan, the consultant should conduct additional research, and case and statutory/regulatory analysis.

 

Task 3. Draft report in accordance with the approved work plan (including modifications required by TCRP).

 

Task 4. Revise report as necessary. The consultant should estimate that two revisions will be necessary. One revision may be required after review by the TCRP staff and members of a select subcommittee. Additional revisions may be required after the full committee has reviewed the report.

Status: Research in Progress

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