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Feasibility Analysis of Tax Increment Financing Applying to the Metropolitan River Restoration: Case

Absrtact	It is believed that metropolitan river restorations may create some external benefits. However, current relevant system lacks a mechanism to internalize external benefits. Thus, the purpose of this study is to evaluate the feasibility of applying tax increment financing recapture the benefits from the metropolitan river restoration. First, this study discusses the institution of tax increment financing and its related cases as a reference to conduct a financial analysis and to establish new TIF institution of Taiwan. Second, it chooses two cases in Taiwan, Zhonggang Drainage and Fengshan River, to investigate the population, land use, land tax, and transacted price, etc. It employs these data to establish the hedonic model and to analyze the influence and contribution of tax increment from river restoration. The empirical result is that there is 2% tax increment contribution from Zhonggang Drainage and the contribution of Fengshan River is not significant. Then it assess the tax increment amount of two selected cases and reveals that the tax revenue from metropolitan river restoration is too low to tell the significance so that it is difficult to make sure its financial feasibility. Accordingly, it is predicted that Zhonggang Drainage will create 28.86 million New Taiwan dollars tax increment, but Fengshan River will not create any tax increment because it could not show any significant contribution of tax increment from river restoration. And it indicates that the degree of contribution depends on the effect of river restoration and development around the river. Therefore, this study suggests that the river restoration plan should integrate with land develop along river which maybe calls “River Gallery redevelopment project.” It is hoped that the tax revenue will increase substantially. Finally, this study holds two staff education training workshops and establishes the TIF mechanism of river restoration and the process of raising TIF fund as a reference for local government staffs.
Keyword	metropolitan river restoration;tax increment financing;external benefit internalized

Absrtact

It is believed that metropolitan river restorations may create some external benefits. However, current relevant system lacks a mechanism to internalize external benefits. Thus, the purpose of this study is to evaluate the feasibility of applying tax increment financing recapture the benefits from the metropolitan river restoration. First, this study discusses the institution of tax increment financing and its related cases as a reference to conduct a financial analysis and to establish new TIF institution of Taiwan. Second, it chooses two cases in Taiwan, Zhonggang Drainage and Fengshan River, to investigate the population, land use, land tax, and transacted price, etc. It employs these data to establish the hedonic model and to analyze the influence and contribution of tax increment from river restoration. The empirical result is that there is 2% tax increment contribution from Zhonggang Drainage and the contribution of Fengshan River is not significant. Then it assess the tax increment amount of two selected cases and reveals that the tax revenue from metropolitan river restoration is too low to tell the significance so that it is difficult to make sure its financial feasibility. Accordingly, it is predicted that Zhonggang Drainage will create 28.86 million New Taiwan dollars tax increment, but Fengshan River will not create any tax increment because it could not show any significant contribution of tax increment from river restoration. And it indicates that the degree of contribution depends on the effect of river restoration and development around the river. Therefore, this study suggests that the river restoration plan should integrate with land develop along river which maybe calls “River Gallery redevelopment project.” It is hoped that the tax revenue will increase substantially. Finally, this study holds two staff education training workshops and establishes the TIF mechanism of river restoration and the process of raising TIF fund as a reference for local government staffs.

Keyword

metropolitan river restoration;tax increment financing;external benefit internalized