BY DONOVAN DELA CRUZ – As Honolulu moves forward with mass transit, the City will have a chance to transform urban Honolulu into a vibrant and thriving metropolis. In order to accomplish this goal, the city will need to invest monies to help facilitate transit- oriented development and improve public infrastructure. This investment will revitalize Honolulu by allowing growth to be focused in the urban core and along the rail line, and away from our rural areas.
It will be important for the City to have a toolbox of financial incentives at its disposal to promote density in urban Honolulu along the rail line.
In order to accommodate this increase in density within urban Honolulu, the city will need to work cooperatively with the private sector and improve the existing infrastructure, i.e. aging sewer system. One very effective tool to pay for such infrastructure improvements is called Tax Increment Financing (TIF).
What is Tax Increment Financing? In communities or areas where TIF districts are established, the real property tax base is frozen at the pre-development level. The increases in tax revenues generated by the increased valuation after the new infrastructure or project is in place, are used to pay off the bond that was issued to finance the improvements. Thus, this money pays for the improvements made in the area. TIF districts allow a city to re-invest all “new” property tax dollars in the neighborhood from which they are generated.
TIFs have been in existence throughout the U.S. since 1952 and have been used successfully in cities such as Dallas-Fort Worth, Atlanta, Chicago and Portland.
The benefits of TIF are great, especially for Honolulu. TIF monies can be used to pay for improvements, such as repairing our aging sewer infrastructure, sidewalks, street improvements, landscaping, lighting, signage and parking structures. The best thing about TIFs is that the City will get the infrastructure improvements and urban redevelopment at no cost to you and me since monies will be paid back with property tax revenues generated by the new development.
One city of note that has had success with TIF is Grant Park. The downtown area of Grant Park in the City of Minneapolis was once the site of a vacant warehouse and a gas station. This urban core area had not seen development in 20 years in spite of being located near multiple transit lines.
Today, Grant Park is a mixed-use, transit-oriented development consisting of market-rate, owner-occupied residential units with retail space. The development included 47 townhouses, a 27-story tower with 291 condominium units, and 98,000 square feet of retail and service spaces.
Grant Park was privately funded and developed at a total cost of $90 million. The City of Minneapolis invested $7.3 million in TIF monies and an additional $300,000 through a Neighborhood Revitalization Program Grant. TIF monies were used to acquire the vacant property, demolish the buildings and prepare the site, relocate utilities and pay for the cost of constructing parking spaces.
The City of Honolulu should learn from the success of cities that have used TIF for redevelopment and take full advantage of the opportunities and benefits made possible by the establishment of a TIF district.
Tax Increment Financing could well be the most practical tool we possess for creating incentives for increasing density in urban Honolulu, build transit-oriented development and fixing our aging infrastructure.
But first, the City will need enabling legislation. I have introduced Resolution 10-102 which urges the State Legislature to amend the State Constitution to give the Counties the authority to issue Tax Increment Bonds. I ask for your support of this Resolution that will create a valuable financing mechanism for the City and County of Honolulu.
DONOVAN DELA CRUZ is a Honolulu City Council member and candidate for mayor in 2010