Media Releases

Tax increment financing makes small dent in transit infrastructure costs

March 30, 2016

New paper from the Institute of Municipal Finance and Governance offers cautionary advice to city policymakers.

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:

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.


For more infor­ma­tion, please con­tact:

Sele­na Zhang
Man­ag­er, Pro­grams and Research
Insti­tute on Munic­i­pal Finance and Gov­er­nance
Uni­ver­si­ty of Toron­to
Tel: 416–978-2168