Tuesday, November 29, 2011

TIF Impact Statements

November 29,, 2011, 9:50 a.m.

The Questions We Should Insist Officials Ask First

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Making a 'Prudent TIF' More Than an Oxymoron
Nicholas Johnson
Iowa City Press-Citizen
November 29, 2011, p. A7

Our recently elected Iowa City Council members have said that TIFs should be used “prudently.”

TIFs, you’ll recall, are one of the many shell-and-pea games available to elected officials for transferring taxpayers’ money to the bottom line of for-profit businesses.

Telling officials always to TIF “prudently” has proved as effective as liquor companies’ TV commercials, urging University of Iowa binge-drinking students always to “drink responsibly.”

TIFs, like alcohol, are addictive. TIFs, also like alcohol, are unlikely to go away.

They’ve received attention recently in these pages and elsewhere. Abuses are acknowledged. The Iowa Legislature may plug some loopholes.

Meanwhile, what can we do to minimize the increase in property taxes and decrease in public services that result from our officials’ TIF habit?

My very modest suggestion is that we at least start with TIF Impact Statements. Think environmental impact statements, or the Powell Doctrine for going to war.

The reason I support “military control of the civilians” (almost seriously) is because it is the civilians in government who respond to foreign challenges with chants of “USA! USA!” and “Nuke ’em!” Military leaders thankfully take a much more measured approach.

When he was chairman of the Joint Chiefs of Staff, Gen. Colin Powell, asked questions such as:

Is a vital national security interest threatened?

Do we have a clear attainable objective?

Have the risks and costs been fully and frankly analyzed?

Have all other non-violent policy means been fully exhausted?

Is there a plausible exit strategy?

We could have saved a couple trillion dollars of debt had the civilians done as much.

Recent attention has focused on the adverse impact of one town’s TIFs on the county, adjacent school districts and cities. (See, http://iowafiscal.org.) Those are serious harms. But they’re only one of a baker’s dozen categories of TIFs’ potential calamitous consequences. (See “The True Price of TIFs,” http://fromdc2iowa.blogspot.com/2011/10/true-price-of-tifs.html.)

What questions should officials ask (and answer) before giving away our tax money with subsidies, bailouts or TIFs to for-profit private ventures? Here are mine:

What for-profit projects have been funded by this government over the past 10 years, and how did the return (or loss) to the public from each comport with its promised benefits? What is budgeted for the next five years? How are projects’ results monitored and reported?

Why is this project needed at all?

Why does that need exceed all conventional needs for public funds? What is its opportunity cost? What will other government units lose? How much more will taxpayers pay?

Among all for-profit applicants for funds, pending and future, why is this project top priority?

Will the project potentially benefit all citizens (The Englert Theatre, for example), a small segment or primarily the recipient?

How much money is involved?

Are all other ways of funding this project with or without taxpayers’ money identified and explored? What are they? If found wanting, why?

How convincing is evidence this for-profit venture requires public funding? Why are entrepreneurs, their family and friends, venture capitalists and bankers — those who will profit from it — unwilling to invest everything needed? Is their reluctance equally applicable to public investment?

Why is it reasonable to consider the project’s business plan a virtual guarantee of financial success?

What is the “exit strategy” when it fails — the recipient doesn’t do what’s promised, skips town, there are delays in construction or bankruptcy?

What business, financial, political, social or campaign contribution relationships are there between the potential recipient of public funds and the officials dispensing them?

How much harm will befall the (unfunded) private competitors of this project from the recipient’s advantages (for example, decline in competing hotels’ occupancy)?

Even if a “prudent TIF” is not an oxymoron, the least a government can do is give us answers to these questions before giving away our money.
Nicholas Johnson, a former Iowa City Community School Board member and FCC commissioner, teaches at the University of Iowa College of Law, and maintains http://nicholasjohnson.org.

Press-Citizen online version: www.press-citizen.com/article/20111129/OPINION02/311290028/Making-prudent-TIF-more-than-an-oxymoron
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