UK - The British Property Federation (BPF) is backing developers' calls for UK trials of a scheme for infrastructure funding, modelled on a strategy in the United States which borrows against future tax revenue.

UK property developers and planning consultants want tax increment financing (TIF) pilots to run across the UK to encourage local authorities to fund infrastructure and regeneration projects.

TIF schemes work by borrowing against future increases in property taxes to fund real estate developments, which then generate additional tax revenue that can be used to repay the cost of the development projects.

Liz Peace, chief executive of the BPF, said: "Tax increment financing is a flexible tool that could be used to help a wide range of regeneration schemes that do not currently stack up because of the upfront infrastructure spending needed."

"At a time when development is at such a low ebb the Government should be paving the way for TIFs and other vehicles which could kick-start the regeneration sector as soon as the recession eases," she added.

TIFs are based on the principal that new or improved infrastructure usually generates new development and increases the value of surrounding property, which in turn increases property taxes in the area.

The BPF's principal members believe TIF pilots would help provide a stimulus for the UK construction and development sector and generate more jobs.

Jonathan Seager, assistant director for planning at BPF, said: "The idea of the pilot schemes would be to rigorously assess schemes that are appropriate for a TIF and see how they work and learn from our mistakes. We wouldn't want to see TIFs being used to help fund developments that would happen anyway.  

The BPF is hoping to generate a discussion at the Marche International des Professionnels de l'Immobilier (MIPIM) in Cannes this week about the possibility of introducing pilot TIF schemes in the UK.

It has already held talks with the Government to gage interest for introducing TIF pilots.

Commenting on how TIFs could be introduced in the UK, Seager, said: "The retention of some element of business rates to be used to pay off this debt is something that people are looking at closely."

Financing debt issued to pay for infrastructure projects by using increased tax revenues can take up to 20-25 years.

TIF schemes are abundant in the US, particularly in the state of Illinois, which has over 900 TIF districts.

The BPF represents the interests of the property investment and ownership industry and its members include major developers the likes of Land Securities and Treasury Holdings.

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