Authorized by the legislature in 2007, a Transportation Reinvestment Zone (TRZ) is an innovative technique, financing transportation projects through an agreement between an RMA and a city or county contained therein.
The operative principle is this: the RMA issues bonds to fund new highway construction. This new infrastructure generates economic development, raising the ad valorem tax base of the defined zone. A percentage of the new tax growth - the increment - is then used to service the bonds backed by these additional tax dollars. Currently, TRZs are in use in El Paso (Camino Real RMA) and in Hidalgo County (Hidalgo RMA).
TRZs offer the greatest benefits in undeveloped areas where large real estate developments can occur if the infrastructure is built first. The primary drawback to TRZs is the lag time between the initial transportation investments and the tax revenue cash flows generated by the economic development spurred by the new roads.
In addition, it is often difficult to predict the incremental increases in ad valorem tax revenue that a new road may bring (and the road itself is not taxed, only the development that follows the road). It is also a challenge to connect road projects to specific local economic gains, especially when the impact may be negative in the short term initial phases of the project (as businesses may close or relocate during the construction phase as customers have more difficulty with site access or avoid general construction-related hassles).
As such, TRZs are an important additional financing tool, but the overall dollars generated and the timing of those funds may vary considerably and their impact likely will remain localized.