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TIF: The Canadian Experience (Part 2)
By Luciano P. Piccioni
In Part One of “Tax Increment Financing: The Canadian Experience”
(Volume 8, Issue 5), we explored the legislative authority and use of TIF in
Canada. Due primarily to “anti-bonusing” legislation in most provinces,
TIF is currently only being utilized to promote brownfield redevelopment in
the Province of Ontario.
We also drew some general conclusions about TIF as practiced by U.S. municipalities
versus Canadian municipalities. Part Two discusses recent experiences and emerging
issues around the use of TIF by Ontario municipalities.
Recent Experience
While numerous municipalities in Ontario began using TIF to promote downtown
redevelopment in the mid-to-late 1990s, few municipalities in Ontario were using
TIF to promote brownfield redevelopment until just a few years ago.
In 2001, the City of Hamilton was the first municipality in Canada to adopt
a comprehensive plan to promote brownfield redevelopment over a large area (3,400
acres) that included TIF-based grants. Other municipalities such as Guelph,
Brantford, Kitchener and Toronto subsequently adopted similar TIF-based grant
programs to promote reinvestment in their brownfield areas.
Municipalities such as Niagara Falls, Chatham-Kent and Cornwall are now preparing
brownfield redevelopment community improvement plans that will likely contain
TIF-based grant programs. These programs essentially provide an annual rebate
or grant of the property tax increment created by the brownfield development.
This tax rebate is paid in the form of an annual fixed rate of the tax increment
(e.g., 80 percent, or a sliding scale from 100 percent of the property tax increment
in the early years decreasing to 0 percent of the tax increment at the end of
the term). Typically, the term of this tax rebate is approximately 10 years.
Eligible costs covered by the tax rebate or TIF-based grants normally include
the costs of environmental studies and remediation. Some municipalities have
also included the costs of demolition, on-site infrastructure upgrading and
building retrofit and rehabilitation.