American Institute of Certified Planners (AICP) Practice Exam

Which option is considered an innovative source of funding for redevelopment projects?

1. Tax allocation bonds

2. General obligation bonds

3. Revenue bonds

4. Tax increment financing

The correct answer is: Tax allocation bonds

Tax allocation bonds are considered an innovative source of funding for redevelopment projects due to their ability to directly support revitalization efforts within specific districts. These bonds are linked to the future tax revenues generated by the increased property values resulting from redevelopment projects. As properties within the designated area are improved and reassessed, the rising tax income can be used to pay back the bonds issued for the initial redevelopment. This approach provides a mechanism for financing by potentially increasing the available budget for urban renewal without immediately burdening taxpayers. By tying funding directly to the projected economic benefits of the development, tax allocation bonds encourage investment in areas that need revitalization while ensuring that the financial risks are managed through anticipated revenue increases. This innovative model contrasts with traditional financing methods that may rely heavily on upfront contributions or general taxation, allowing for a more dynamic and responsive approach to funding urban development projects.