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5 Policy and Institutional Risks

Policy and Institutional Risks – Social Equity

Risks generated by the VC technique/project that has a disproportionate impact on low-income or other disadvantaged communities.

Example 10: When development or re-development associated with a TIF district project affects low- income/minority residents.

TIF districts are used to pay for projects that spur development or redevelopment in blighted neighborhoods, sometimes disproportionally affecting low-income residents through gentrification and displacement.

Existing low-cost housing units are cleared and replaced with higher income units or commercial development, forcing the migration of lower income and minority residents.

Mitigation: Utah requires the development of affordable housing in Housing and Transit Reinvestment Zones. California and Portland, Oregon have similar requirements for TIF districts.

Utah: U.C.A. 63N-3-603; Portland HOU-1.06; California HSC Division 24 (33000 – 37964)

Policy and Institutional Risks – Administration and Transparency

Risks arising from limited transparency or communication of risk cost, risk allocation rationale, and the risk-return decision-making including the non-disclosure of unknown project risks.

Example 11: Lack of transparency in the distribution of funds in TIF districts.

One study found that in some instances, TIF district project funds were redistributed without informing the public in a way that could be easily understood:

• How funds were distributed between projects in low-income areas vs. projects in higher-income areas.
• How much property tax revenue was diverted away from public schools.

Potential mitigation measures:

• Develop a TIF district master plan
• TIF district capital budget to allocate district resources
• TIF performance monitoring

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