The City of New Ulm is going to study a proposed TIF project, one that would build a 50-unit apartment building near the Martin Luther College Campus.
TIF, or tax increment financing, has been around for over 40 years. It involves a city selling bonds to finance an improvement or development of a low-tax producing property, using the money for some kind of improvement, like demolishing blighted buildings or paying for infrastructure that would allow development, then using the higher tax revenue from the property to pay off the bonds. It is supposed to be used in cases where the development would not be able to proceed without TIF incentives. For many years it has been one of the few economic development incentives cities have available.
The populurity of TIF projects has waxed and waned over the years, and it is on the rebound in recent years. Counties and school districts don’t like them much, since the city captures all the increase in property tax revenue, or increment, until the bonds are paid back.
The state sees TIF as a means of stimulating the economy, providing construction jobs and creating building starts.
We think the city should be willing to use TIF for worthwhile projects. New Ulm is certainly not suffering from a surplus of residential property, especially rental property. At the same time, it should give a thorough inspection to any proposal for TIF, to make sure any project is a proper use, to make sure the development will deliver the necessary increment in property taxes to make it work, and to make sure the project is indeed one that couldn’t be undertaken without the use of tax increment financing.