Transportation Reinvestment Zones
Transportation Reinvestment Zones (TRZs) are designated areas located around transportation projects created to encourage development and capture property tax increments to help fund the improvements. TRZs can be used to capture both present and future economic growth created as a result of the transportation improvements. TRZs do not raise tax rates. Rather, they allow sponsors to issue debt by leveraging new property tax revenues generated within the TRZ. In order to be designated as a TRZ, the land involved must be underdeveloped and receive direct benefits from the transportation improvement. Benefits may include improved access, public safety, and congestion reduction. Unlike tax increment financing, TRZs do not involve new taxes and they do not normally necessitate a board of directors. They may be used in conjunction with other value capture methods.
Although there are differences in state legislative requirements for establishing and operating TRZs, they generally follow the same framework. Boundaries for the zones must be established and a benchmark year should be designated when the collection of the tax increment would begin. The sponsoring entity should conduct a feasibility study to determine the terms and conditions of the value capture. Public hearings are then conducted to obtain feedback from the public. The financing details of the TRZ are determined and a mechanism is established to issue TRZ-backed debt. A monitoring system oversees the TRZ and tracks increment tax collections.
Depending on the state, there are different mechanisms used to collect funds generated by TRZs. Texas uses a pass-through financing program, requiring communities to pay some project costs upfront. This money is repaid from future revenues generated by the TRZ. In Texas TRZs may be established at the municipal or county level.