Liberal Talk Radio

(But not about that craptastic game this morning — fire Bruce Arena!)

Happy, that is, about Seattle finally realizing that property taxes go up when you make good investments, and that you can use the resulting “tax increment” to finance those investments.

“Tax increment financing” (TIF) has been around for 20+ years, but for some reason it’s taken a long time to make its way into the Seattle political landscape (and even then, only in a somewhat watered-down form).

Basically, TIF is a way to get around the fact that in government accounting, expenditures need to be booked when they’re incurred, and can’t be amortized over the life of an investment (as they are in nearly every business). So in government, you’re continually paying today’s dollars for tomorrow’s returns, and it’s very difficult to justify long-term investment given the lifetime of, say, a highway. This is one reason why the U.S. has underinvested in transportation infrastructure over the last 30 years.

In the classic TIF model, the government issues bonds to pay for redevelopment, and the bonds are underwritten by some portion of the expected future tax revenues. Nickels’ proposal seeks a one-time “special assessment” to pay for viaduct improvements. It’s basically the same thing, with the exceptions that 1) the decision on whether or not to pay for it will be made solely by property owners and 2) they may be asked to cough up the money in a one-time payment.

Point 1 is important, because a TIF requires that the tax code be jiggered to allow the increment to be diverted away from the general fund and into a special project, which means that politicians get involved, which means that it would give good ol’ Seattle (yet another) opportunity to shoot itself in the a*s. Point 2 will disincentivize some property owners from supporting the proposal, but as long as Nickels doesn’t try to squeeze too much out of them, they’ll have to see the light.

At least, that’s my take on this whole thing. Well played, Mayor Nickels.