Yesterday, City Council met and discussed (among other things) a draft policy on tax-increment grants (TIGs), that public-private partnership mechanism Kane wants to use for Downtown South but doesn’t exist yet in the City of Raleigh.
Click here for a quick refresher on what TIGs are!
TIGs are a new-ish way that cities can encourage developers to invest in projects that they may not do otherwise. Unlike the more popular TIF, taxpayers aren’t at as much financial risk.
Why is it less risky for taxpayers (at least in my eyes)? That’s because a project’s developer enters a contract with the city to make certain investments within the project area, and the developer gets reimbursed up to 75% of the rise in property values goes back to the developer. This means the public benefits of a project comes before developers’, and a new project that turns out to be a disappointment won’t be as painful to the city’s bottom line.
For example, let’s say DTS gets approved, and Kane enters a 10-year-long TIG with Raleigh where he’ll create enhanced greenways along Walnut Creek etc. If the city designates the DTS site as a Priority Area and its annual city property tax jumps up by $10M due to the land becoming more valuable, Kane’s company could get up to $7.5M refunded annually until the end of the 10 years. After that, the city gets to tax Kane for the full $10M every year.
One of the reasons why this policy has been taking so long to make is that this new TIG policy is being created for the whole city -not just Downtown South.
Links to: memo describing the draft policy / the draft policy / slide deck presented in above video