TAX INCREMENT financing, or TIF, in which the District issues bonds to finance construction, can be a good way to provide public financing for meritorious economic development projects in the city. But money available for TIF funding is not unlimited. Neither are all proposed TIF projects financially feasible. For that reason, the TIF law requires the city's independent chief financial officer to analyze TIF proposals to see that they are structured to ensure that the bonds will be sold and repaid. Legislation before the D.C. Council would cut the CFO out of the approval process. That would be a disaster.
The impetus for circumventing the CFO comes from developers who have complained to council members, with some justification, about city delays in awarding TIF money and about the absence of rules explaining how the TIF certification process works. The lack of clear ground rules and timely decision-making obviously is frustrating. The recent completion of a TIF Procedures Handbook by the CFO and the deputy mayor for economic development may help close the information gap. But staging an end run around the CFO and legislating the issuance of bonds -- as a bill proposed by council member Jack Evans (D-Ward 2) would do -- is the wrong way to go.
As Chief Financial Officer Valerie Holt testified this week in hearings on the Evans bill, the council can pass a law issuing TIF bonds, but legislation won't sell the bonds. If the project financed by the bonds is viewed by the city's chief financial officer as unsound, the District may end up holding the bonds because no underwriter will touch them. Moreover, imagine the market's reaction the next time the District tries to sell TIF bonds without the chief financial officer's certification. The TIF program itself will be in jeopardy. The D.C. Council's seal of approval simply isn't enough.
Yesterday, following six hours of hearings, Mr. Evans said he agrees that the CFO should remain in the picture. He proposed his bill and held a hearing on the certification process, he said, to jump-start decision-making on pending applications. The hearing managed to get the city's attention. Now the council should let the CFO get back to work.