Friday, September 07, 2007

TIF Warfare

September 7, 2007, 11:30 a.m.

I wasn't going to write this morning. Other things to do. The "let's bring weapons to campus" discussion went about the way I predicted yesterday anyway.

But just came upon an entry from my brother in arms in the "War on TIFs," State29, that should be required reading for any TIF supporters in the Iowa City City Council race -- as well as for anyone who's paying property taxes under the illusion that the money is going for public purposes.

The headline tells the tale, but the blog entry text just gets even better and better. Check it out:

State29, "eServe Gets Corporate Welfare and a Property Tax Break for Moving 11 Miles," September 7, 2007.

Unbelievable!

And don't tell me, "Oh, that's an exception. We wouldn't do anything like that in Iowa City."

Baloney! TIFs are fatally flawed. All of them. Any where, any time, for any purpose. For lots, and lots, and lots of reasons I don't have time to repeat here once again.

Just read State29's take on this one and come join the rational forces for sensible economic development. We call it the free private enterprise marketplace. A radical idea, I know, but it works -- and at a small fraction of the cost to citizen taxpayers of watching their property tax dollars drop to the bottom line of some for-profit corporation of the wealthy.

# # #

4 comments:

Alden Knipe said...

It would be helpful that when you have criticism of a topic, say TIF, that you have an actual understanding of how it works. No one's dollars they pay goes towards TIF and to developers. It is the incremement that is captured. The "I" in TIF.

Novel idea I know.

Sure lets just drop TIF and other incentives unilaterally. Come on.

Anonymous said...

Can you help a business idiot understand TIFs?

It seems TIFs take value added from a public project improvement, in terms of increased tax dollars, then applies them to other public works such as blighted urban areas, parks etc. It looks like TIFs increase public funding through local mechanisms.

Is the Davenport project a TIF? It seems Davenport is stealing a business away from Rock Island, by offering this business breaks on tax bills, direct aid, and other amenities.

This new building will not be built in a blighted area (as best I know Davenport) but be next to Merell Lynch.

The article says Davenport will reimburse up to 80% of the business property taxes paid by this company. The company will also receive a million bucks from the state.

Is this a TIF? Seems like it is more tax reimbursement or tax favoritism. (just asking)

Is this such a bad idea to give a company a tax break to entice more jobs to an area?

I ask that because it does seem that one city steals business from another city. And what goes around comes around.

Further, despite all the screaming about capitalism and a free market, how does this represent a free market? This seems to be Gov't handing over dollars to private business owners, who will then trumpet the success of private enterprise.

Does Gov't ever give a private citizen a tax break to move to a city? Say if someone relocates from Moline to Davenport is there a program for that person's property taxes on his house to be rebated to him?

I don't understand 2 things: 1.) is this a TIF; and 2) Why do people think giving breaks to business promotes the hallowed free market, and is even fair to taxpayers in general?

Bill Glassgow said...

Look, There is no such thing as a totally free market. If you look at the basic conditions of a totally free market in basic macro-economics the following conditions would be in place:

1. All firms sell an identical product.
2. All firms are price-takers.
3. All firms have a relatively small market share.
4. Buyers know the nature of the product being sold and the prices
charged by each firm.
5. The industry is characterized by freedom of entry and exit.

We all know that there is no market for any product or service for which those conditions exist. We all live under modified capitalism. The modification is dependent upon the particular market. Sometimes its government, sometimes its like OPEC with a limited amount of producers who can control price to a great extent. Or the DeBeers group with diamonds.

Now, with that as a background, realize that every locality is competing for jobs and quality of life and quality of government services. Its not as simple as Davenport vs. Rock Island....Its Davenport vs. basically the rest of the world. Cities in Iowa have a difficult time competing vs other cities in the US. Iowa City is blessed by having the UI and two major interstate routes, same with Des Moines. We need to use whatever competitive advantages we have. We can not compete on a labor cost advantage for manufacturing. Heck, most areas of Iowa don't have adequate workforce resources.

Now, a TIF is based on the increased value of a particular area of property, not taking the tax value of the property already there. So, if your TIF area has properties A,B and C the only part diverted to TIF is the increase in value. The base amount stays. So, the TIF bond pays for a street upgrade that brings in business property C, but also captures the increment of existing businesses A&B to help pay for the bond. So, the general fund of local government does not get the increase until the end of the TIF. However, any type of debt financing such as a general obligation bond for a road upgrade or a fire truck or police cars are still able to gather tax from a TIF area. You can also make an argument that TIF can drive ancillary growth beyond the TIF area itself. The Coral Ridge Mall is a good example. It makes the area more desirable to live in or own a business in. It is difficult to quantify that, but it certainly exists. Now, there are some criticisms of some TIF's that are certainly valid. However, lets not throw out the baby with the bathwater.

It's easy for someone like State 29, who loves Iowa so much that he lives in Kansas to gripe from the peanut gallery. Some of us actually get into the ring and work for a better state. I am a 5th generation Iowan, I love this state and in my capacity I will do whatever I can to improve it. Including using TIFs.

Gark said...

TIF is a useful tool, for sure and, if it actually produces the outcomes a community wants, e.g., increased tax-base, economic diversification, urban renewal, then go for it.

However in splendid places like Iowa City, where TIF is awarded for upscale high-rise housing units, it just doesn't pass the smell test as it meets one of the criteria, but fails two others.

Also, we have a warped sense of what "progress" is. More stuff that depletes our county coffers in the long-run isn't progress. Anyone who drives by the old telephone building on Burlington St. can see what happens when the rug is pulled out.