Part I
:: Trickle Down…
Issue 1
Volume 2
"Blight" + Tax Increment Financing
by Chris Hu
The City of Providence is currently considering the creation of a Tax Increment Financing (TIF) district encompassing parts of downtown Providence and Federal Hill. Although Providence has used TIF districts in the past—at Corliss Landing in the mid 1980s, the Manchester Street Power station in the 1990s, and Eagle Square in Olneyville more recently —this proposed TIF area would be the largest yet. In addition to this TIF district, which city officials have dubbed the “Westside Connector TIF,” the developers of a condominium project in the Valley neighborhood of Providence have proposed that the city create an additional TIF district to facilitate the development of that project. Although Mayor David Cicilline has thus far expressed skepticism about this new TIF, it is not inconceivable that this TIF district will be considered if the Westside Connector TIF is able to overcome mounting political opposition to its creation.
Tax Increment Financing is a widely used but controversial development strategy. It works by first designating a given area, which is considered “blighted” and in dire need of development. From then on, any property tax revenues above the base value prior to the district’s creation—the so-called “tax increment” created by development—are diverted into a special fund that is then used to finance infrastructure improvements in the TIF area (see Figure 1-1). Often, municipalities will then borrow money to finance these infrastructure projects immediately, then relying on the “increment” revenue to repay these monies. Originally devised to raise matching funds for “blight removal,” TIF is now used for a broader range of urban redevelopment purposes. As a result, there is often tension between the original, and often legally stipulated, requirements that TIFs be used in “blighted” areas where development would not occur “but for” the TIF district, and these newer, more broad goals.
In Providence, the Westside Connector TIF is slated to encompass an area from Weybosset Street to the Westin Hotel and across the Atwells Avenue and Broadway bridges over I-95. The final boundaries of the TIF area have not yet been set, and may change based on debate in the Providence City Council, but currently the proposed area is a semicircular region bounded by Weybosset Street, Memorial Boulevard, Exchange Street, and Dean Street (see Figure 1-2). This area is already the site of development investment—including plans for a 300,000–square foot office building in LaSalle Square and the conversion of the Holiday Inn at 21 Atwells Avenue into a Hilton, just part of the estimated $2 billion in redevelopment projects currently underway or breaking ground soon —but city planners hope that TIF revenue spent on infrastructure in this district will spur further economic development, and eventually greater tax revenues for the city than would be the case without TIF.
In the short term, the city hopes to use the TIF “increment” to beautify the I-95 overpasses, build a public parking garage, and demolish Bishop McVinney Auditorium. The most costly part of this plan is the proposed public parking garage at LaSalle Square, which will cost an estimated $30 million. In order to finance these infrastructure improvements in the short term, the city plans to borrow somewhere between $60 million and $90 million by issuing bonds, and expects to make this money back in increased property tax revenues; the duration of the TIF would be 20 years from the date of its creation. The ALCO TIF, if created, would be limited to the site being developed by Struever Bros., Eccles & Rouse, and would use $40 million in bonds to pay for roads, river paths, and bridges across the Woonasquatucket River.
However, the proposed Westside Connector TIF has drawn harsh criticism from skeptics, who claim that this TIF is risky, unnecessary, and even a roundabout way of enriching developers at the cost of draining public resources. In February and March, local activist groups held a series of community workshops throughout Providence, including one at Brown University, which sought to educate the public about the proposed TIF in a highly critical manner ; these culminated in a city-wide summit in early March, at which City Council President John Lombardi spoke, criticizing the lack of community input in the city’s TIF plan. In order to be created, the Westside Connector TIF proposal must be approved by the City Council, and is currently under review by the council’s Finance Committee. In addition to Lombardi, both the traditionally “progressive” Councilmen David Segal and Miguel Luna and the more business-friendly Councilman Terrence Hassett have publicly criticized aspects of the city’s plan.
