John Tory SmartTrack funding proposal is vague
Tax increment financing (TIF) has never been used, anywhere, to pay for a project so big. The vast majority of TIF initiatives are local improvements that cost somewhere between millions and tens of millions of dollars.
How big is Tory s project? The United States is the country that pioneered TIF.
To explain the unprecedentedly ambitious proposal, Tory has provided three vague paragraphs on his website. Those paragraphs, and his campaign s responses to questions this week, include so few details that it is impossible to definitively say whether or not the plan will work: there is too little to test.
Our detailed analysis, though, suggests the doubts expressed by Doug Ford (open Doug Ford s policard) and Olivia Chow are reasonable. There is a real chance of failure.
Tory is assuming Toronto will continue to boom for 30 years. That may not happen. And success is not assured even if overall growth remains strong: Tory needs major growth to happen in particular parts of the city he plans to designate as TIF zones. That is even less certain.
Tory is promising to build SmartTrack increasing property taxes. If the needed growth doesn t materialize if TIF fails a tax hike is likely. One: Declare certain neighbourhoods TIF zones for a certain number of years. Two: Borrow money. Three: when property values increase in the TIF zones, take all the extra tax revenue and use it to pay back off the debt, instead of paying for other programs and services.
Let use the 26 storey PwC Tower as an example. The tower caused the assessed value of its property, 18 York St., to rise from $22 million to $286 million. This increase produced an increase in taxes. If the tower was in a TIF zone, the city would continue to normally collect the amount of money it used to get when 18 York St. was worth $22 million. But all of the extra tax money the would go to SmartTrack.
One of the few TIF projects on the scale of SmartTrack is Atlanta BeltLine, a massive initiative to build new parks, trails, transit and housing on a 35 kilometre former railway copatagonia new downrridor.patagonia guide jacket kangaroo3 A form of TIF was supposed to raise $1.7 billion, 60 per cent of the project cost of $2.8 billion. recession, the revenue estimate dropped to $1.45 billion while the estimated project cost jumped to $4.3 billion leaving officials to find new funding sources, the Atlanta Journal Constitution reported in July.
were well along in the process to issue TIF bonds when the great recession hit, Keenan Rice, president of MuniCap, a consultancy that has worked on the BeltLine, told the Star. we found ourselves navigating a very different financial environment with an extremely risk averse bond market. On account of the recession and other unforeseen challenges, Rice said, about every fundamental assumption needed to be revisited. Officials, he said, are now pursuing other sources of funds, delaying phases of the project when prudent, and scaling back as necessary. Chicagoland has 435 active TIF zones.
Tory s sparse plan suggests he could cover the cost of SmartTrack merely with new office development in three zones: the core, the East Don Lands, and Liberty Village.
But is not an exhaustive, nor exclusive list, Tpatagonia special edition quilt again vestory campaign said in response to questions from the Star sugwhere do you buy patagonia jacketsgesting he might seek to create additional zones somewhere along the 53 kilometre length of the SmartTrpatagonia guide jacket kangaroo2ack line.
The campaign would not detail the number of zones or their location. That number is Tory own estimate of the city share of SmartTrack costs, which he says would total $8 billion. But it is not at all clear that the $8 billion figure is right, nor is it clear that the provincial and federal governments would contribute $5.3 billion.
For the sake of simplifying the analysis, we assume Tory numbers are accurate. The big question, twomens patagonia suede multicolor trail walking shoes size 10 new no boxhen, is whether values will rise enough in TIF zones to generate $2.7 billion, plus interest.
Tory asserts they will. To justify his optimism, he regularly cites two figures he got from a Toronto Life article in February: $25 billion spent on condo development since 2000, $7 billion in office development.
we just patagonia outlet store 362continued at that pace of development, and it spread over a 30 year period, we would have more than enough money to pay for SmartTrack and have new money coming in to the city coffers at the same time, he said Wednesday.
Tory figures, however, are estimates, calculated by the journalist who wrote the article after speaking with industry sources. Even if they are perfectly correct, they are secondary. What important here is not total investment: it how much property values increase, and where.
Debt and taxes by another name
TIF was originally intended to stimulate development in blighted areas. Tory TIF plan, like many others in recent years, would rely heavily on tax revenue from development that was going to happen anyway.
Even if Tory s TIF is in that it raises the funding SmartTrack needs, it isn free money. Rather, it is debt and taxes by another name: it simply allows the government to spend future taxes in the present by borrowing the money up front.
Devoting future taxes to SmartTrack would mean those taxes would not be available to the government for standard purposes: the TTC, parks, pothole repapatagonia guide jacket kangaroo0irs, everything else the city pays for including the new infrastructure and services required by the new development.
are taxing assessment growth and using it for a specific purpose. . . Quite frankly, what is the difference between that and what we doing for the Scarborough subway? city manager Joe Pennachetti said when asked about TIF in August.
That planned subway is being funded through a dedicated 30 year property tax increase. Tory says TIF would let him fund SmartTrack increasing property taxes. setting aside money, assessment growth that would have gone to the general revenues of the city, now specifically for that transit project. And that why council needs to be informed, understand what this tool can do, anpatagonia everlong review 870d make that decision. In other words, he could essentially be shuffling taxes around so as to claim his favoured projecpatagonia fleece sale new balancet doesn require tax hikes.
In a magical scenario in which the office property values immediately soared at the beginning of the 30 years, before SmartTrack was even built, they would have to go up by about $6.4 billion to raise $2.7 billion by Year 30, at a hypothepatagonia guide jacket kangarootical 1.4 per cent tax rate. In the more likely scenario that property values increased gradually, those values would have to go up by billions more.
For example: if values jumped only after Year 7, when Tory claims SmartTrack will be ready, they would have to go up by $8.4 billion to produce $2.7 billion by Year 30.
Toronto is experiencing a boom in office construction. But over the past 12 years, the city s total commercial property value has increased by only $4 billion across the city. While new office buildings have gone up, others have vanished, replaced by condos. In each of the years 2003, 2005 and 2007, the total value of commercial properties actually dropped.
Mike Williams, the city economic development chief, says the property value of offices can range from $100 perpatagonia guide pants 2 belt square foot to $800 per square foot. Let use the number in the middle, $450 per square foot. At that amount, the city would need 18.7 millionpatagonia hi loft down sweater reviews square feet of office construction to produce $8.4 billion in new value.
According to figures from brokerage Jones Lang LaSalle, 9.2 million square feet of office space has been built downtown since 1994. Five million more is expected between now andpatagonia guide jacket kangaroo1 2017.
