EIFDs: Redevelopment 2.0?

 

When Governor Brown signed Senate Bill 628 in 2014, many were surprised about the return of tax increment financing in the form of enhanced infrastructure financing districts (EIFDs). But little was known about how the tool works. At RSG, we have looked closely at the details and honestly, we have yet to find many situations where it makes sense for a community to form an EIFD. Why?

First, unless you have a project that can only happen if an EIFD is created, an EIFD doesn’t generate any new dollars. Rather, your city offers up future General Fund dollars to get back those same dollars for investing into projects.

Second, school districts cannot participate – so in many cases, the largest share of property tax is unavailable. Getting other taxing entities to participate can be a challenge at best.

Third, forming an EIFD is an onerous process, which RSG estimates costs at least $500,000 from…you guessed it – the General Fund.

Finally, everything you fund is built at prevailing wage; the fiscal benefits of government underwriting don’t get stretched too far when you are paying 25% or more for added labor costs. 

To be candid, EIFDs are just not that great of a tool. Not yet, at least. In my next post, I’ll offer some ideas for improvement. I hope the law is cleaned up in the upcoming legislative sessions. If not, I suspect only a few of these will be created. 

Written by Jim Simon, a Principal at RSG