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Government confirms TIF pilots
Published: 2010-04-14 09:17:05
The 2010 Budget made £120 million available to pilot accelerated development zones (ADZs) in England.
Based on US tax increment financing (TIF) principles, the programme allows local authorities to retain uplifts in business rates that result from regeneration schemes, and borrow against future rates, to pay for infrastructure that enables the developments and the jobs and economic growth that ensue.
Core Cities director Chris Murray welcomed the announcement. "Potentially this could lead to a revolutionary new way of financing future projects," he told SocInvest 2010.
"This is a significant commitment from government. Work should now continue on the detail of how to operate tax increment financing on a much bigger scale, so we don’t have to rely on such grants in the future, and ensure cross-party agreement for the next stage of development."
Core Cities, along with PricewaterhouseCoopers, was responsible for the original thinking behind ADZs, publishing a report in 2008 and lobbying government to adopt this version of TIF.
Since then, the scope for TIFs has been explored by the Treasury and the Department for Communities and Local Government with a working group including Core Cities, PricewaterhouseCoopers, British Property Federation, Chambers of Commerce and others.
The ADZ fund has been set aside for 2011-2012, suggesting that there will be a selection process and further work before schemes go ahead. There will be close monitoring of schemes to examine what increases are created in business activity and business rates.
"The wording of the budget seems to suggest the pilot scheme will favour proposals in cities and city regions, areas that can deliver real business growth from the investment," added Murray.
"The real goal is implementing tax increment financing, which will unlock much more than £120 million for cash-strapped councils, bringing big economic benefits when they are most needed."
PricewaterhouseCoopers director Stuart Howie, who has led much of PwC’s work on ADZs, said: "The announcement is a major milestone for towns and cities across the UK in their quest for new ways to finance critical infrastructure investment. It represents a much needed step in the right direction for local funding flexibility.
"While more detail will be forthcoming to outline the selection process governing potential ADZ pilots, it is clear that potential ADZ cases will need to be well developed and robust if they are to be considered for pilot status. Given the lead time to investment set out by government, I think project sponsors should also anticipate they may need to answer any call for pilots relatively quickly."
Stuart Howie leads a workshop on TIF and ADZs at SocInvest 2010. For programme details click here.