Mayor John Tory’s proposal to pay for the city’s share of his SmartTrack transit plan has received the qualified backing of a new report.

Tory is proposing the city use a relatively unknown revenue tool, called Tax Increment Financing, or TIF, to cover its one-third share of the yet-to-be settled surface railway plan.

The TIF model is based on the assumption that new infrastructure, such as a transit line, will boost building along the route, spurring new development and driving up the value of existing properties.

The city borrows the money up front, and pays it back with funds generated by the extra property tax revenue over a period of 30 years.

During the 2014 mayoral election campaign, Tory’s main challengers, Doug Ford and Olivia Chow, criticized the scheme and skeptics continue to question a plan that relies on so much uncertainty.

But a new report concludes the proposal to use TIF to fund SmartTrack has merit – as long certain conditions are met.

“Depending on SmartTrack’s impact on property values and the design of the TIF program, TIF can potentially finance a large share of the city’s investment cost,” writes the report’s author, Adam Found, a policy fellow with C.D. Howe Institute.

The report, called Tapping the Land: Tax Increment Financing of Infrastructure, notes Ontario is one of the few jurisdictions in North America that has yet to implement TIF, despite having TIF legislation for almost a decade.

Other cash-strapped municipalities, loath to raise property taxes to pay for infrastructure, will be watching with great interest, Found writes.

“The successful application of TIF to SmartTrack could pave the way for more extensive consideration and use of TIF throughout Ontario, and perhaps the rest of Canada.”

However, it is the provincial government “that ultimately will determine if and when the regulations required to activate the TIF Act are enacted, and whether and to what extent TIF will be used to finance SmartTrack.”

Enid Slack, who heads the Institute on Municipal Finance and Governance at the University of Toronto, said Monday she agrees TIF has potential but comes with a risk, since its success depends “on land values increasing.”

Councillor Paula Fletcher (Ward 30, Toronto-Danforth) remains unconvinced.

“I’m skeptical because it’s never been used in Ontario before. Introducing TIF at the same moment as SmartTrack and RER (Regional Express Railway), which is very cloudy to start with, simply may cloud the waters even more.”

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She has, however, seen first-hand TIF work: In Chicago where it was used to help pay for a massive overhaul of social housing areas. In that case, future redevelopment was almost guaranteed.

Fletcher doesn’t see the same opportunity along the proposed SmartTrack line, except for the old Unilever site at the elbow of the Don Valley Parkway and Gardiner Expressway.

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