Got TIF, PIF or RSF? How public-financing mechanisms work

Tax Increment Financing, Public Improvement Fees and Retail Sales Fees are important and necessary tools to aid and encourage development and redevelopment of communities throughout Northern Colorado. In the current environment of rising construction costs and city-imposed fees, most projects wouldn’t be economically feasible without the assistance of public finance methods generated by local governments and/or retail consumers.

Furthermore, these tools utilized by businesses and developers allow local governments and authorities to focus development and redevelopment on areas that need it most.

The Urban Renewal Authority and Downtown Development Authority are quasi-governmental bodies responsible for identifying specific areas of focus for development and redevelopment. Particularly in Fort Collins, the primary tool of the URA and DDA is Tax Increment Financing. TIF, introduced in the 1950s, is authorized at the state level and administered by local governments. The additionally generated revenue is used to encourage development and redevelopment investments. Essentially, new development raises property values in a given area and instead of the city simply realizing 100 percent of the increase in tax revenue, they divide this “increment” into two streams. One continues to go to the city as it had before while the other is diverted to help pay for a portion of the development or redevelopment. These additional revenues help close feasibility gaps and are responsible for much of the revitalization seen over recent years throughout communities in Northern Colorado.

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Public Improvement Fees and Retail Sale Fees are additional tools used by developers to pay for on-site public improvements and maintenance within a development or redevelopment project. These revenue-generating tools usually are seen on new developments and are collected from the consumer at the point of sale. The revenue is used to pay for the common, or publicly used, areas of a development project.

When talking about sales taxes, TIF, PIF and RSF, it is important to note the difference between a “fee” and a “tax”. In the situation of PIF and RSF, the “fee” revenue is directly applied to the cost of providing that service or amenity. Taxes, on the other hand, are in place to raise “general purpose revenues” and may be unrelated to the particular good or service it is applied to. PIFs are collected by a special district or a local government and funneled back to the developer or owner. RSFs are collected privately by the developer and used for the same reasons.

In projects where PIF and RSF are collected by retailers, customers are advised on all advertising including print, radio and television that prices are subject to state and local taxes and fees. The RSF also is required to appear on the register receipt as a separate line item from sales tax. PIF and RSF fees are generally insignificant to the consumer, usually amounting to 1 percent or less.

In a world of confusing public financing acronyms, these fees and taxes can be lost on a consumer. However, these tools make it possible for the developer to create and maintain a more attractive and quality public space in which the consumer shares a small portion of the cost while reaping a significant benefit through the end product.

Jake Arnold and Joshua Guernsey are commercial real estate brokers with Brinkman Partners in Fort Collins.