Province mulling stricter rules for tax-increment financing
New framework coming for funding mechanism, which has been applied to Investors Group Field, True North Square
The province is overhauling the rules for tax-increment financing, a funding mechanism that uses future tax revenue to stimulate development today.
Brian Pallister's Progressive Conservative government is working on a new regulatory framework for tax-increment financing, also known as TIF, which has been applied to Winnipeg projects as disparate as the the construction of Investors Group Field, new residential towers at True North Square and improved sidewalks outside Bell MTS Place.
"The intention of the new approach is to ensure that TIF is only used where there is clear economic and public benefit and no liability to taxpayers," Progressive Conservative government spokesperson Caitlin MacGregor said in an email.
"It will also establish a transparent process for applying for TIF, and indicate what conditions the province would require in order for consideration to be given to tax increment financing. The framework will also promote increased co-ordination with the City of Winnipeg and other municipalities."
The new framework for TIF will be complete later this fall, MacGregor said.
In most North American cities, TIF is used as a means of stimulating economic development in undesirable, underdeveloped or otherwise blighted neighbourhoods. Property owners in those areas are often reluctant to invest in upgrades for fear of getting hit with higher property-tax bills after the improvements are made.
What TIF does is allow cities to capture the additional tax revenue generated by properties that are improved and then do a number of things with that money.
The cash can be returned to the developers as tax rebates, which is the plan for a new luxury condo tower proposed for the west side of True North Square.
It can also be spent on public amenities in the vicinity of the property in question, which is the case in the downtown Sports, Hospitality and Entertainment District, where new tax revenue from existing components of True North Square have paid for streetscaping outside MTS Centre.
Through TIF, governments can also use development in one area to pay for a project elsewhere. The best-known example is Investors Group Field, which is partly financed by tax revenue generated by developments at the former Canad Inns Stadium site.
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It's not clear whether the province will insist future residential projects built with the help of TIF must offer some units at median market rent.
An expired city-provincial program aimed at stimulating downtown housing required 10 per cent of the units in TIF-enabled buildings to be rented at median market rates, which work out to $1,147 a month for a two-bedroom apartment.
A new mixed-use tower rising above the south side of Winnipeg Square, near the corner of Main Street and Graham Avenue, possesses some of these units. A new apartment building at True North Square as well as the proposed luxury condos will not.
Winnipeg Mayor Brian Bowman said he would prefer to see affordable housing remain a part of the provincial TIF framework,
"The more that can be done to increase affordable housing in Winnipeg and in downtown, the better," Bowman said Monday.
The mayor said he is not concerned by the absence of median-market housing at True North Square, asserting taxpayers will receive a strong return on its investment in a $550-million private development.
The project will also generate about $25 million in provincial sales taxes and about $75 million in provincial and federal income taxes during the construction period, True North vice-president Rob Wozny said.
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