How does the city of Grand Junction pay for streets and curbs, sidewalks, street lights and sewer and water lines where none existed before without simply digging into reserves?

It uses something called tax increment financing, or TIF. The Dos Rios development at the edge of the Colorado River is an example of how the city can earmark anticipated gains in property value to pay off debt incurred to spur development.

The current undeveloped 60-acre Dos Rios site has little value. But once it's fully built out with a mix of business and residential property, it should become a significant source of property-tax and sales-tax revenue.

TIF is a common device of urban renewal and development responsible for uplift in every American city. As businesses locate in Dos Rios, the property values will rise. Instead of collecting the increased taxes, the city will split the revenue into two streams. The first stream is set at the original amount of the property value before the redevelopment. This is known as the "base rate." But since Dos Rios is brand new with no existing commercial or residential value on vacant land, the base rate is effectively zero.

The second stream contains the additional tax money generated by the higher property value, or the "tax increment." Rather than going to the city's general fund to pay for local services, it's used to pay off debt for infrastructure and other improvements, usually over a fixed period of time and typically for 30 years, at which point the revenues revert back to the general fund.

As the Sentinel's Joe Vaccarelli reported in Wednesday's paper, TIF is being used in two ways to make Dos Rios a reality. The Downtown Development Authority agreed to help support the project by pledging $5.1 million in TIF dollars. Next week, the City Council will vote to establish a general improvement district which will be able to issue $10.4 million in bonds at Dos Rios for infrastructure improvement and recoup that money through new district property tax revenue and the pledged TIF funds.

Municipal financing tools are about as exciting as watching paint dry. But imagine if the city had to pull $10 million to $15 million out of circulation to pay for Dos Rios infrastructure at the expense of city services. Instead, it's creating new revenue that might not have existed otherwise in a way that doesn't inflict pain on taxpayers.

As City Manager Greg Caton noted, the DDA's commitment "was critical," for it gives the project its first infusion of cash. The DDA's 6-1 vote speaks to the project's importance, a point which Mayor Rick Taggart echoed Tuesday.

"This is an opportunity to develop one of the most valuable spaces this city owns," he said.

TIF has its downside. If Dos Rios generates new demands for public services (fire, law enforcement, schools, etc.) it won't carry its weight until the development debt is paid off. But it's been instrumental in shaping the downtown area and that experience should offer some optimism about Dos Rios' economic potential.

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