UTG TIF and other TLAs

UTG stands for Union Terrace Gardens, a sunken Victorian garden space in the centre of Aberdeen.

TIF stands for Tax Increment Financincing, whereby Local Authorities borrow money using predicted growth in their locally raised business rates as collateral.

TLA stands for Three Letter Acronym.

UTG is a divisive issue for Aberdonians. I express no view on it here. In fact, I managed to disenfranchise myself in the close referendum in favour of the City Gardens Design Project by not being on the electoral roll at my new address in time, so my democratic right to moan is decidedly compromised. Therefore I will restrict myself to one point.

I really don’t get TIF.

Is the fact that I don’t get TIF is something that people should take notice of? Perhaps not, but then again I used to work for the capital projects team of an Edinburgh law firm, which advised various sponsors (i.e. the entity that would take a project forward) and funders (i.e. the banks or financial institutions putting the majority of the money on the line) in PFI/PPP infrastructure deals. (TLA alert: PFI = Private Finance Initiative; PPP = Public Private Partnership.) I have my commemorative paperweight from my role as a legal adviser to the Pinderfields & Pontefract Hospitals Development PFI Project, that obscure memento of the £330 million healthcare project surely proves beyond all reasonable doubt that I am not a complete numpty on matters infrastructure (he wrote optimistically). Add to that I worked for a few months on secondment at the investment arm of a significant player in the UK construction industry. So, what do I think about how we should be procuring infrastructure in this country?

I am pretty open minded. So open-minded, in fact, that I think PFI/PPP can work, when you get away from the headlines that suggest we are mortgaging our future that quote prices that take no account of the fact you are paying for an asset, its servicing and its lifecycling over a period of (say) 25 years. It incentivises a process and can bring expertise to bear in a way that traditional models might not. It might not always work, but in hindsight I think it would have been perfect for Edinburgh Trams. If no money had to be shelled out until the Services Availability Date was reached (i.e. when the trams started running) we might not have ended up in the guddle that we apparently have, but so be it.

So far, so open-minded. But what is the deal with TIF? To my mind, it can only work when new rate-payers are brought to the TIF area. Internal moves within the TIF area are not enough. All such moves do is shuffle rate-payers around, when the money was already committed to the area. To that extent, I do get TIF. But will UTG bring enough new rate-payers to meaningfully bridge the £92m funding gap Ian Wood’s funding contribution leaves? I struggle to see how it can. If it is not going to bring new rate-payers to this city (which already has Union Square, various oil and gas players and First Group on site), you just end up hitting rate-payers that are already paying. If the contrary can be proved to me, I will listen attentively.

Good luck to the council today. Whilst I might not have voted in the referendum, I did vote in the more recent local elections and I sincerely hope Aberdeen is not bounced into the adoption of a financial model that might see the city in a situation akin to negative equity, where a mortgage debt exceeds the value of the home secured by the debt. Borrowing money is not the problem. Borrowing money sensibly is.

About basedrones

Bachelor of Laws. Scots lawyer working at the University of Aberdeen. English law qualified. Took far too long to write this bio. Blogs on legal issues, with occasional veering into other purportedly intellectual stuff from time to time. Tweets about legal issues, education, law clinics, fitba, music, rogue cell division and not at all about politics at @MalcolmCombe.
This entry was posted in Aberdeen, Infrastructure, TIF. Bookmark the permalink.

3 Responses to UTG TIF and other TLAs

  1. andywightman says:

    I have tried to fathom TIF too. There are many critics. It was a US scheme designed for run down cities and now being applied to regeneration of mature and (relative to US) prosperous cities. I wrote three blogs about it a while back http://www.andywightman.com/?s=increment

    • basedrones says:

      Thanks for the comment and link, Andy. The landownership/windfall point is an interesting one, and perhaps one that I have not considered fully, but I think that would introduce another strand to this particular blog that could end up dominating the debate (or at least muddy the waters).

  2. Pingback: TIF at UTG: Take 2. | basedrones

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s