Investment in infrastructure three pillars of city resilience

Value Capture Component
Such flood premium to be administered by the Municipal Corporation and has to be utilized for riverfront development
INVESTMENT IN INFRASTRUCTURE
Tax Increment Financing (TIF): Overview
DESCRIPTION

• TIF provides an alternative to finance urban infrastructure in blighted and underdeveloped areas, unlocking (private) development that wouldn’t otherwise occur in the absence of those up-front investments
• TIF aims to capture and leverage estimated future revenues from incremental increases in collection of property (or other) taxes within a geographically specified area of redevelopment, a “TIF district”.
• Local governments use a debt instrument (bonds or loans) backed by the projected future tax revenue within the TIF district. The debt instrument proceeds to pay for up-front investments such as land acquisition, upgrade of water system, road improvements, or remediation of environmental contamination.
• Up-front investments create the real estate market and economic conditions that lead to the incremental increase in land value and tax revenue, which closes a virtuous cycle in which “growth pays for growth”

KEY REQUIREMENTS / IMPLEMENTATION FACTORS

• Robust land cadaster, land assessment and tax administration capacity at the local level
• Strong political backing to enabling legislation
• Might require credit enhancement (e.g guarantees) from the city or the nation
• Strong real estate markets maintaining enough demand and growth potential for high-density development
• Relatively deep capital markets

Tax Increment Financing (TIF): Lessons Learned
INVESTMENT IN INFRASTRUCTURE
OPPORTUNITIES
CHALLENGES

• Not all cities, not at all times: it requires a robust real estate market
• Requires a strong cadastre and tax collection system
• It absorbs and restricts the use of future revenues (the delta generated by development)
• It is vulnerable to national and local economic crises, which creates repayment risks
• It requires a strong commitment of the city beyond political cycles to ensue continuity of economic development and TIF legislation between administrations

• It complements the traditional financing instruments
• If properly structured, TIF debt does not affect the balance of the city
• Maximizes private investment since it uses financial structuring
• TIF allows for greater private economic investment without requiring infrastructure investment by the city official books
• Strengthens municipal management as it requires high coordination between entities
• Promotes the depth of capital markets in municipal financing