Skint Aberdeen City Council willing to gamble all on a maybe. Tif scheme comes closer.

Aberdeen City Council maintains the reasons for its slash and burn policy of closing facilities and services for the people of the city, especially the disabled, is because it is deeply in debt and a victim of COSLA’s unfair distribution of local authority funding, not because it likes to pick on easy targets. (See examples throughout my blog pages.)

Well, it has a strange way of dealing with its debts. Upping the already huge salary of its Chief bureaucrat to £142K the Council shows once more it cannot be trusted with public money.

Cash support and premises withdrawn from day centres for the elderly, the deaf, the disabled in moves which are an affront to this Council’s responsibility for social inclusion and underline its lack of any sense of decency for the well-being and independence of its most vulnerable of its citizens. And yet and yet . . . the escalating costs of the AWPR (bypass) – £90 million already spent on initial costs and compulsory purchase of land and buildings on the proposed area. If it ever gets built the initial forecasts of £350 million will undoubtedly be shown to be way out. Possibly that much will be spent without a yard of tarmac being laid. Inevitably, Aberdeen City Council’s contribution will also rise substantially. And how many millions more will the Council pour into the AECC, already £28 million in debt?

But let me get to the point – the highly controversial proposal for the Ian Wood Memorial Park aka Union Terrace Gardens aka City Square aka Piazza Woodii etc etc. This ego park and associated development is estimated to come in at around £200 million.

Easily flattered Councillors kow-tow to Sir Ian Wood over his pet project yet there are no guarantees it will make a jot of difference to the revenues coming into the city but what is guaranteed is the city will lose its one remaining distinctive feature of the sunken gardens.

How can the Council possibly find the cash? The saviour is to be Tax Increment Financing -Tif.

This is a system used by some LAs in the States to pay for urban infrastructure improvements by designating an area a Tif district from which taxes are collected for the specific Tif scheme. The idea is that the regenerated areas will attract commerce and housing, pushing up property values and the amount of local taxes collected from these will continue to grow. Interesting how LAs are all so optimistic when it comes to pet schemes and their projected successes.

It is also worthy of note that the discredited ACSEF consultation exercise on Union Terrace Gardens threw up several, similar, references to Chicago’s urban renewal in support of the proposed development and surprise, surprise, Chicago has adopted Tif as its means of paying for much of this regeneration. But while Tif has its devotees there are others who are more dubious about it. Tif schemes not only create funding opportunities, they can also tie up money.

Is Aberdeen City Council happy to take a huge gamble with taxpayers’ money that Tif will be a success? Of course the Councillors who take decisions today will not be around when the criticisms come in years down the line. So yes, possibly they will be happy to gamble with this US-style infrastructure funding tool to help pay for the city-centre project. The US is not known for diving head-first into financial experiments, is it?

So what exactly is Tif? It is a scheme by which an LA borrows to implement a development, against future tax revenues resulting from the regeneration. A Tif district aims to raise property value in one of three ways: 1- new buildings can be built on vacant land, 2-improvements can be made to existing buildings or 3- existing buildings without improvements can be assessed at a higher level.

A feasibility study carried out by consultancies CB Richard Ellis and PricewaterhouseCoopers for Scottish Enterprise examined the potential for using Tif to help finance Aberdeen’s proposed new city centre development. Estimates from the study projected £7.2 million of additional business rate revenues each year. On top of this it suggests housing developments in the city centre capable of creating £2million annually from council tax. Aberdeen Council is looking to fund around half of the £140 million proposal from Tif with the other half coming from the private sector.

Now with Tif the area revenue is preserved for the development it is supporting for the duration of the term of the scheme. I have seen examples of 23 years which means that for around two decades the Tif site holds onto the revenues it raises to cover its own costs.

As the point of Tif is to attract businesses into the Tif area then this will deplete the amounts of revenue raised by businesses outwith this area. For the duration of Tif, the Council will have less money coming in to pay for essential services such as schools, libraries, parks etc. If Tif becomes successful and attracts more and more companies into its sphere so the other revenue for the City’s essential services will decline for the two decades or whatever term is determined for Tif in Aberdeen. Either that or Aberdeen citizens will have to dig deep into their pockets to make up lost income to the City through increases in Council Tax.

 

A study by NCBG ( a coalition of around 200 community organisations in Chicago) has shown that, contrary to the argument that there are no negative costs to Tif, the opposite is true. There tends to be a trend of Tif extending to embrace other areas of a municipality, and remember within these areas the revenues are reserved, so that across the whole City there will be less coming into pay for essential services for the whole duration of the project. X% of Council revenue will therefore be tied up in Tif districts, meaning all new growth in these areas will not contribute to the funding of basic services.

Where essential service costs rise there will have to be revenue raised from sources other than the lucrative Tif area. The most profitable areas covered by Tif will not be able to add to the revenue required for essential services – for the duration of the scheme – which you can count in tens of £millions. In the longer term this will lead to an overall depletion of monies raised within the City for essential spending.

Those who are sceptical about Tif suggest it can be costly to run and it is the politics of madness to borrow large sums of money to support development projects through Tif unless it can be shown absolutely that Tif will deliver what it promises. Not all US cities have found Tifs plain sailing: smaller than expected revenues, none of the expected rises in property values resulting in short-falls in the amount raised to cover its annual payments.

What then for public services? More and deeper cuts and lay-offs, and the spectre of raising specific local taxes to cover the expenses accruing from non-contributory areas such as a Tif funded Union Square. And remember, the projected benefits of this rich man’s vanity project will not be proven until the end of the period of Tif while the loss of income into the City from the Tif areas will be a reality that has to be paid for by Aberdeen’s citizens – and those in the shire, as no doubt by then Aberdeen and Aberdeenshire will again have become one local government body.

It does not inspire confidence in the future of Aberdeen with its tendency to splash out huge sums of public money on unpopular and questionable schemes that its Chief Executive of two short years has already found herself a new job, in Edinburgh.

Three other Scottish councils are also looking at Tif to finance schemes: Glasgow and North Lanarkshire and Edinburgh.

Check out:

http://www.progressillinois.com/posts/content/2010/06/16/chicago-teachers-increasingly-complaining-about-tif

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3 Responses to “Skint Aberdeen City Council willing to gamble all on a maybe. Tif scheme comes closer.”

  1. Yes Subrosa, it doesn’t seem right that someone with no associations with an area can sweep in, sign off damaging cuts to services and a highly controversial scheme to destroy Aberdeen’s heritage then up and away to an even higher paid job. Just waiting for the council to come up with a City Square tax to pay for its latest folly. No principles. No sense.

  2. The CEO moving on already? Speaks volumes. You’re so right about Tif, but then as you say Aberdeen knows how to squander money. My sympathies lie with the local taxpayers.

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