TheWord (or in this case, words): Tax Increment Grants (TIGs) — also known as Project Development Financing — are public funds allocated to support private development projects that are expected to attract significant investment in the area.
How does it work? A local government will typically borrow funds as a loan and allocate financing toward public improvements. According to the UNC School of Government, “the debt incurred by funding the public improvements is both secured by and repaid from the additional property tax revenue resulting from the area’s new private development.” Per NC general statute 159-103(a), funds can only be used toward the capital costs of a development — including demolition of existing buildings, construction equipment or machinery, the securing of land or water rights, and survey data. For answers to other frequently asked questions re: TIGs, click here.
In recent news: Kane Realty has applied for a tax increment grant to provide upfront public funds to support the $2 billion Downtown South development in return for incrementally-increased property taxes. This type of funding has been used for projects in Charlotte and other NC cities, but has never been issued in Raleigh or Wake County.
Fast facts: Mayor Mary Ann Baldwin has expressed support for issuing the TIG. The local volunteer organization Liveable Raleigh has expressed opposition.
Key takeaways: The TIG formula that Raleigh would use follows one used in Charlotte. Effectively, developers are reimbursed between 50% and 75% of property taxes they would otherwise owe, incrementally over a 25–30 year period. In exchange, they must deliver certain community improvements — such as affordable housing units. Since current subsidies are capped at 2%, it is estimated the developers of a project such as Downtown South would save around $5 million.
What’s next: The City Council has tasked staff with developing a community engagement group to advise on what types of amenities the Downtown South development would need to include in order to be compliant with a TIG. According to Mayor Baldwin, this advisory group would be appointed by the current City Council later this year.
Clarification: In this conversation, we provided information on Tax Incentive Grants + Tax Incentive Financing. We failed to note, however, that these are two different things. If Kane Realty’s application for a TIG is approved, the City has said it will not incur any public debt. We apologize for the confusion.