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New projects include TIF as finance option
Published: 2010-03-10 07:44:59
The Buchanan Galleries expansion scheme in Glasgow awaits Scottish Parliament approval to use Tax Increment Financing (TIF) for funding, as Scotland continues to be the frontrunner in pushing forward with TIF.
Business rates in Scotland are a devolved tax, so the Scottish Parliament can sanction their use in this way and has indicated its support for the mechanism.
While Alistair Darling's pre-budget review indicated that there would have to be more research before it supported implementation of TIF elsewhere in the UK, many believe that there is sufficient support for its eventual introduction to include it in their plans.
"We are helping several authorities to prepare TIF / Accelerated Development Zone (ADZ) proposals as part of their regeneration plans," said Stuart Howie, director, PwC Advisory.
Despite the fact that TIF may appear to be on the back burner politically, he added: "there’s a lot of work going on behind closed doors".
PwC has been involved in formulating proposals presented to the Treasury and worked with the Core Cities group of local authorities on developing the Accelerated Development Zone concept, based on TIF principles. More recently, it has also been involved with the Glasgow and Edinburgh TIF projects as well as others elsewhere in the UK.
"Whether TIF is appropriate depends on the project," Howie told SocInvest2010. "It's more akin to public/private partnerships where you have to look closely at risk and return and make sure that the deal stacks up for all concerned. It's important to remember that TIF is a financial instrument and its use should be planned accordingly."
According to Howie, the fundamental principles are sound, but he added: "A lot of the devil is in the detail. It all depends on the scale and nature of the project. It means answering questions like: who takes key risks, will it be on or off balance sheet, how will project changes be accommodated?"
The long-term success of TIF, if introduced, will depend on how it's applied. "Government will need to lay down the rules which determine its use," Howie said. "I don't envisage a US-type situation being allowed to develop, where high numbers of small local TIFs are created. I expect it to be more about enabling key strategic investment to happen."
Stuart Howie speaks about the next phase of TIF development at SocInvest2010 on June 16th.