Back when SmartTrack was first announced as the centrepiece of John Tory’s mayoral campaign, the most obvious question was “how will you pay for this”. At the time, “this” consisted of very frequent service running over existing GO transit trackage plus a heavy rail extension to the Airport Corporate Centre, and it had a nominal price tag of $8 billion. On the presumption that each level of government, so overwhelmed by the obvious necessity of SmartTrack, would pony up 1/3 of the cost, the campaign then turned to the issue of how the City of Toronto’s share, $2.6b, might be financed.
Enter the tax wizards of Tax Increment Financing (TIF), a financial scheme not unrelated to pulling rabbits out of hats or making the attractive assistant float in mid-air with no visible means of support.
The premise of TIF is simple: If there is a piece of land that, but for public investment, would sit empty for all eternity, then any taxes that might arise from induced development there are “found money”. In other words, if we take a swamp, drain it, clean up the pollution, build roads and utilities and install a transit corridor, all with public money, then the development that follows can be used to finance the investment through its future property taxes.
It’s rather like investing in a pair of glass slippers and then charging Cinderella for wearing them. She’s going to marry into money, and her family can afford to pay you back.