Not all that long ago, Vancouver’s waterfront was dominated by a shuttered paper mill and an aging hotel.
The transformation has been remarkable. Now, gleaming restaurants, residences and hotels have taken the place of an 80-year-old Boise Cascade plant that inhabited much of the space along the Columbia River. And next to that property, the Red Lion at the Quay has been demolished, replaced by a new hotel and by grand plans for the property known as Terminal 1.
Recently, officials from the Port of Vancouver, the city and the Legislature lauded the future of the Terminal 1 site, which is owned by the port. In the process, they brought attention to tax incremental financing.
That system will be used to help rebuild the dock that was the site of the Red Lion and is designated as the future spot of a public market.
“Our public market will become a recognizable icon and destination for the entire region,” said Julianna Marler, CEO of the Port of Vancouver. “By harnessing (tax increment financing), we can get there much sooner with this new financing tool championed by the leaders with me today. We’ll be able to rebuild the 100-year-old dock and have it ready for the new public marketplace in a few years.”
Tax incremental financing is new to Washington, having been approved by the Legislature in 2021. But there is nothing innovative about it.
As The World Bank explains: “TIF allows local governments to invest in public infrastructure and other improvements up-front. Local governments can then pay later for those investments. They can do so by capturing the future anticipated increase in tax revenues generated by the project. This financing approach is possible when a new development is of a sufficiently large scale, and when its completion is expected to result in a sufficiently large increase in the value of surrounding real estate such that the resulting incremental local tax revenues generated by the new project can support a bond issuance.”
That sounds encouraging. But academic studies have revealed mixed results for the process. As a professor at the University of Chicago told Bloomberg News in 2018: “In the end, it can be a valuable mechanism. It’s not something I’d like to get rid of — but it deserves a lot of scrutiny because public sector dollars are being re-routed into a different task, away from general purpose funds.”
And as an opinion piece in The Washington Post surmises: “Economic development could be hurt if politics and special interests are allowed to shape the focus of TIF.”
In the case of Terminal 1, the only properties involved in the tax incremental financing plan are owned by the Port of Vancouver. This will ensure appropriate use of the tax, rather than drawing revenue from other properties and away from general funds. It also will go to the development of the dock, creating a foundation for further development.
Speaking of Terminal 1, State Treasurer Mike Pellicciotti called tax incremental financing a “smart financing tool that allows for private development infrastructure growth without costing additional tax dollars to the people of Washington.”
Between the financing plan and a $3.5 million allotment from the Legislature for removal of the aging dock, state and local governments are making a wise investment that will benefit the region.
As state Sen. Annette Cleveland said: “This Terminal 1 project — when it’s finished — will help ensure that this new beautiful waterfront of ours is accessible to every person in our community, and our state and beyond.”