Tax Increment Financing Making a Return to California

Daily Journal, Thursday, October 9, 2014

Tax increment financing is back in California. New state legislation expanding the use of property tax increment through infrastructure financing districts (IFDs) gives local governments a tool to invest in needed infrastructure and economic development projects, much as they formerly could through redevelopment agencies until their elimination in 2012. However, it's clear that the new IFDs won't fully replace redevelopment agencies and the billions of dollars of tax increment they once generated. The new IFDs are best thought of as "redevelopment lite," a helpful but less lucrative tool for specialized situations.

The comeback of tax increment is made possible through the passage of several bills which expand the use of the state's infrastructure financing district law in different ways. The central bill is Senate Bill 628, legislation authorizing the creation of a new form of IFD named the "Enhanced IFD.” The Enhanced IFD concept began as an administration proposal contained in the 2014-15 state budget. While Gov. Jerry Brown has continued to veto legislative attempts to bring back revised forms of redevelopment (including this year's Assembly Bill 2280, which would have authorized "community revitalization and investment authorities" in low income areas), the governor has supported other efforts to make IFDs more flexible and useful for local government economic development efforts.

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