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THURSDAY, MARCH 16, 2006
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EDITORIAL

Tax increment financing a catalyst for development

Mayor Don Kyle says Decatur city officials are contemplating a tax increment financing-type mechanism to provide incentives for development downtown and at potential retail sites.

TIF districts allow government entities to make public improvements to spur development and then pay off those improvements with the resultant increase in sales and/or property tax collections. While other taxing bodies in the TIF area don't realize the incremental tax increase until the improvements are paid off — sometimes nearly 30 years later — they benefit from the resultant development in the long run, as well as any consequent spin-off development outside the TIF district.

Huntsville carefully and wisely used TIFs to stimulate development at Parkway Place, Westside Center on University Drive (home to SuperTarget and Dick's Sporting Goods), the North Huntsville Industrial Park (for a Toyota engine plant) and to build schools serving the upscale Village of Providence development.

The success of those TIFs, and the expected early retirement of the resultant debts, are due to careful planning by Huntsville officials and a thorough understanding of the nature of TIFs.

For example, the projects the government improvements and incentives spurred were virtually guaranteed to significantly increase property tax collections. Conversely, establishing a TIF district in an area that would have developed anyway takes vital tax dollars from other government entities. Likewise, creating a TIF in an area that is already highly developed results in a smaller incremental tax increase and a reduced benefit to the taxpayers.

Huntsville officials were also wise to use TIF financing for school improvements. The commercial and residential development spurred by the TIFs also naturally resulted in increased school enrollment. To have attracted more students without setting aside money for school improvements could have been disastrous.

TIF districts are not a panacea for municipal government. But, used wisely here, they can be useful and effective catalysts for development and result in keeping shoppers in Decatur and more property tax revenue.

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