Academic journal article The Town Planning Review

Between Structures and Norms: Assessing Tax Increment Financing for the Dutch Spatial Planning Toolkit

Academic journal article The Town Planning Review

Between Structures and Norms: Assessing Tax Increment Financing for the Dutch Spatial Planning Toolkit

Article excerpt

Introduction: policy context

In the Netherlands local government has historically played a central role in the physical planning process, including land acquisition, site preparation, and public infrastructure provision. Following World War II, the public land development model became the cornerstone of the Dutch spatial planning and development process. By acting as an active player in the land market, municipalities were able to embed and recover the costs of local public infrastructure, such as underground infrastructure and utilities, and parks and play areas in the land price (Lowe et al., 2003). However, even before the economic crisis in 2008, the financial risk and steering role in the process taken by municipalities was in question (van der Valk, 2002). Moreover, despite changes to the Spatial Planning Act in 2008, designed to encourage greater involvement in land development by market-players, municipalities continued to participate as active players themselves (Halleux et al., 2012; Needham, 2007). As a supply-led model, Janssen-Jansen argues that due to the substantial revenues municipalities were able to realise, over-zealous participation in the land market has resulted in a distorted real estate market and oversupply of offices1 (Janssen-Jansen, 2012).

The degree of financial risk and substantial land holdings held by municipalities has been widely reported and criticised in the media since 2008. Discussions have since ensued about alternative models and consideration of instruments that do not rely on growth nor are driven by the public sector. Numerous studies have been commissioned by the national government, including a website hosted by the National Office for Entrepreneurial Netherlands called the Financial Structure Toolbox2 and reports by consultancies and research institutes (ECORYS, 2010; Heijkers et al., 2012; Ministry, VNG, and NEPROM, 2009; Planbureau, 2014; Planbureau and Urhahn, 2012; VROM, 2010) that identify planning and financial instruments from other countries as possible tools in the Netherlands to stimulate investment and broader participation from market players in the planning and development process (Heurkens, 2012; van der Krabben and Needham, 2008). The range of possible instruments tend to be reviewed based on general characteristics and possible regulatory restrictions. The analyses often lack a full account of the wider institutional context, which would include both legal and socio-political considerations. The analyses also tend not to identify more general limitations that municipalities may face in relation to operationalising the majority of the financing instruments. Constraints may extend beyond regulatory issues, such as limited local knowledge and financial resources that are often needed in order to lever alternative funding sources (i.e., such as different bonds products in the private market). Finally, little attention is given to cultural matters, such as norms and values, that play a role in defining policy instrument selection. The latter consideration is particularly important when considering instruments from other countries, which have their own particular policy context.

Tax increment financing (TIF), commonly used by North-American cities, has also been cited as a possible mechanism for Dutch municipalities (Heurkens, 2012; JanssenJansen et al., 2012; Offerman and van de Velde, 2004), however, few studies have analysed the use of TIF in the Netherlands from an institutional perspective. Research about TIF in the Netherlands generally focuses on four themes: firstly, identification of generic technical features; secondly, the degree to which the mechanism is a sufficient incentive to draw private investment, given the public-sector driven nature of land development in the Netherlands (Heurkens, 2012); thirdly, the inherent risks involved in relying on projected market growth (Janssen-Jansen, 2012); and, fourthly, more broad criticisms related to the purpose of property taxes, e. …

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