The research confirms that tax breaks and other incentives for developers, investors and residents could play a significant role in improving the physical and economic environment in our cities. But it also warns that any tax-based measure needs to operate within a clear planning and regulatory framework. And it is essential to recognise the different ways such measures may operate under different national and local taxation regimes, as well as the relative performance of national and local economies and the parallel performance of local property markets.
The research – by academics at the University of Dundee and the University of Ulster –assesses the effectiveness and outcomes of tax-based approaches to urban regeneration in three cities – Dublin, Chicago and Los Angeles:
The Irish experience
In Dublin, fiscal incentives to encourage residential and commercial development were put in place in designated geographical areas in the 1980s. The move was influenced by the need to respond to the long-term consequences of urban decline and the reality of limited financial resources in the public sector, but the measures actually took off as the national economy boomed.
The research shows that:
The American experience with TIFs and BIDs
‘Tax incremental financing’ (TIF) is a hypothecated tax that uses the increased revenues to stimulate ‘redevelopment-from-within’ through improvements in a designated area. In Chicago, there are 105 TIFs and there are some important lessons from this approach. The research suggests that:
Business Improvement Districts (BIDs) represent a local self-help initiative and funding mechanism for coalitions of business interests and property owners. BIDs are a voluntary form of self-taxation for hypothecated purposes, usually the physical improvement of the defined locality based on the principle of stake-holding in the local community.
The intention is to enhance the residential, commercial or retailing values of the BID area. Supplementary functions include security and police enforcement, maintenance and sanitation improvements and facilities, provision of promotions and special events. The BID revenue can also be used to provide capital improvements, such as street furniture, landscaping and street signing.
The research indicates that BIDs have the potential to achieve a range of regeneration outcomes. But they also involve problems: they are time-consuming to set up, operate and renew –much time and effort must be spent on effective communication to stakeholders in the BID area to avoid wasteful conflict between groups.