Media Releases

Tax increment financing makes small dent in transit infrastructure costs

March 30, 2016

Toron­to, ON — Is tax incre­ment financ­ing (TIF) a good option to pay for Toronto’s infra­struc­ture? A new paper from the Insti­tute of Munic­i­pal Finance and Gov­er­nance (IMFG) reveals that this line of financ­ing is only one of many that the City should con­sid­er. In the paper, called Can Tax Incre­ment Financ­ing Sup­port Trans­porta­tion Infra­struc­ture Invest­ment?, authors Mur­taza Haider and Liam Don­ald­son study Toronto’s Shep­pard East sub­way exten­sion and its impact on sur­round­ing prop­er­ty val­ues to deter­mine if it could have been financed by TIF.  The paper shows that while TIF is a viable fund­ing option, it is not enough to cov­er the full cost of major infra­struc­ture projects.

“Mas­sive invest­ments in pub­lic tran­sit are need­ed to address the grow­ing traf­fic con­ges­tion in our cities,” says Haider. “Equal­ly impor­tant for us is to know how we will pay for these invest­ments. TIF could pay for par­tial costs, but not all.”

As Cana­da pre­pares to embark on a decade of major infra­struc­ture spend­ing, this poten­tial rev­enue tool has attract­ed renewed inter­est. In Toron­to, tax incre­ment financ­ing has been pro­posed as a way to fund the city’s Smart Track ini­tia­tive. The ques­tion is whether it would work in prac­tice, and how much mon­ey it might raise.

Haider and Don­ald­son find that the rev­enue from a 30-year TIF on the Shep­pard sub­way line would only have cov­ered a small frac­tion of con­struc­tion costs. They argue that TIF is more appro­pri­ate for projects up to a few hun­dred mil­lion dol­lars, and should be com­ple­ment­ed with oth­er rev­enue sources.

“We need to be mind­ful of how we will pay for large invest­ments to expand urban tran­sit,” says Haider. “TIF, Land Val­ue Cap­ture and oth­er financ­ing tools should be a part of the debate on improv­ing tran­sit ser­vices in Cana­da.”

The paper was made pos­si­ble by the gen­er­ous sup­port of Sus­tain­able Pros­per­i­ty at the Uni­ver­si­ty of Ottawa and can be accessed at: http://bit.ly/1MyJXVm

About the Authors

Mur­taza Haider is an asso­ciate pro­fes­sor at the Ted Rogers School of Man­age­ment, Ryer­son Uni­ver­si­ty, Direc­tor of Regio­nom­ics Inc., and an adjunct pro­fes­sor of engi­neer­ing at McGill Uni­ver­si­ty. He is the author of the recent­ly pub­lished book, Get­ting Start­ed with Data Sci­ence: Mak­ing Sense of Data with Ana­lyt­ics. In 2015, he was a Vis­it­ing Schol­ar at the Insti­tute on Munic­i­pal Finance and Gov­er­nance.

Liam Don­ald­son is an urban plan­ning con­sul­tant with Regio­nom­ics Inc., and a research assis­tant with Ryer­son Uni­ver­si­ty.

About the Insti­tute on Munic­i­pal Finance and Gov­er­nance (IMFG)

The Insti­tute on Munic­i­pal Finance and Gov­er­nance is a research hub and think tank that focus­es on the fis­cal and gov­er­nance chal­lenges fac­ing large cities and city-regions. It is locat­ed with­in the Uni­ver­si­ty of Toronto’s Munk School of Glob­al Affairs.

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For more infor­ma­tion, please con­tact:

Sele­na Zhang
Man­ag­er, Pro­grams and Research
Insti­tute on Munic­i­pal Finance and Gov­er­nance
Uni­ver­si­ty of Toron­to
Tel: 416–978-2168
selena.zhang@utoronto.ca

www.munkschool.utoronto.ca/imfg