Saturday, June 13, 2015

Chauncey's TIF

Written June 8, 2015, 7:00 p.m.; posted (with preface, and link to video of entire Council session), June 13, 2015, 5:15 p.m.

I know there's a lot of controversy about this. . . . These projects are simply not possible without [TIFs]. It's a political decision whether it's a good idea or not.

-- Marc Moen, Chauncey developer, City Council Hearing, June 8, 2015 [starting at 2:08:45 on City Channel 4's video, below]


This blog essay is a "for the record" preservation of the text of my remarks before the Iowa City Council on June 8, 2015. The business before the Council involved its approval of the zoning and financial details of a proposed 15-story building on land owned by the City on the eastern border of the downtown district. Public comments from the business community tended to support the project; comments from those associated with a church across the street, and those speaking for the poor and working poor of Iowa City tended to oppose the project. [The photo gives some sense of the contrast -- for good or for ill -- between the proposed building's height and that of the surrounding community.]

My remarks focused on the propriety of TIFs in general -- a subject I have written about in this blog on over 40 occasions. "TIFs: Links to Blog Essays." The Council meeting, with its opportunity for public comment, seemed an appropriate occasion to outline briefly some of the categories of reasons why TIFs are a bad idea -- something I had never before directly presented to the Council members.

Because that was my primary purpose, because even partial discussion of the TIF issues would have required a half-hour to hour, and because I had been informed public comments were limited to five minutes (and it turned out to be a four-minute limit), the remarks were limited to a quick itemization of a sampling of TIF topics with neither elaboration of the TIF issues nor even the barest mention of non-TIF issues.

Therefore, a fuller record requires revelation in this blog essay of some of my thinking about the Chauncey project generally.

There are a number of issues with regard to such a project. The TIF-related issues are such things as use of public money, taxpayers' money, to assist a for-profit, private venture -- especially one providing expensive condo housing for the wealthy in a booming downtown area. These are the issues as to which my position has been clear.

Other issues involve the project itself -- regardless of how it is going to be financed: (1) with exclusively private funds (capitalism), (2) a mix of public and private funds (corporatism), or (3) exclusively public funds (socialism). Those issues include such things as location, compatibility with the neighborhood and any city plan, its height, "green" construction, adequate parking, impact on traffic and safety, removal of historic structures to make way for the new, a pleasing aesthetic quality and artistic design, contribution to the city's great need for low income housing, and similar matters.

Some may assume I am opposed to all such downtown development. They would be wrong.

In 2009 there was local debate about where to locate a new Hancher auditorium to replace the one constructed on the Iowa River bank and destroyed by flood. The downtown area was one option. (Since then, large structures -- a student physical recreation facility, music building, art museum -- have been, or will be, located downtown. And the replacement Hancher is being built only a short distance up the river bank from where the former one flooded.)

In discussing the downtown Hancher option, I noted that downtown Iowa City was laid out in 1839 with the same spaces and streets it has today, and I wrote:
Iowa's 99 counties, and their "capitals," were located to serve an agricultural population -- with no farm more than a day's horse and buggy round trip ride along dirt roads to a county seat, with its markets, and entertainment for that weekly shopping "trip to town." . . .

We didn't have "malls" in the 1930s, but downtown Iowa City provided much the same function, with drug and hardware stores (for farm equipment and supplies), Sears, Wards, J.C. Penney, five movie theaters, barber shops for the weekly shave and haircut, grocery stores, and so forth. There were no parking meters or parking garages, and no need for them. There was still the occasional horse, and not that many automobiles.

Coralville's Coral Ridge Mall, and the Tanger Outlets west on I-80, provide those functions for most shoppers today. . . . The former was soon doing a $100 million dollar a year business. It offered free, easy access parking, and a cluster of stores, restaurants and entertainment (including a childrens' museum) to satisfy a variety of needs and desires in one place (not to mention the additional dozens of facilities nearby).

Today that 1839 county seat of Iowa City, originally designed for less than 1000 people, has an 2008 estimated population of about 68,000 -- and is the principal city in its own Standard Metropolitan Statistical Area (SMSA) of nearly 150,000.
Hancher - Part I," September 14, 2009.

So what did I then think we should do with Iowa City's downtown?
Let me say at the outset that I tend to agree with what I gather is the vision of downtown business persons such as Mark Moen and restaurant genius Jim Mondanaro. That is, Iowa City as laid out in 1839 cannot be turned into a 21st Century Coral Ridge Mall and it's self-defeating to try. . . . What it should aspire to be is a small, very livable, quasi-residential, quaint, walkable, center of entertainment and restaurants (along with the minimal number of banks, grocery stores, and other businesses to sustain that resident population). We may differ about the value of the number of scofflaw bar owners encouraging undergraduates' illegal binge drinking, I don't know. Frankly, I think that phenomenon detracts from, rather than supports, their vision. But we basically agree about the rest of it. And putting Hancher downtown is consistent with that vision -- it's just 170 years too late.

Aesthetically I prefer natural settings for entertainment venues. . . . But it would be a much closer case for me if it were 170 years ago, and we were just now laying out Iowa City.
Hancher - Part V," September 18, 2009.

Oh, if I was doing it I might put the Chauncey building elsewhere -- say, in the area the Council wants to redevelop south of Burlington.

I might have fewer floors. Marc Moen, quoted at the top of this blog essay, may or may not be right in saying that, "These projects are simply not possible without [TIFs]." But whatever these projects require financially, there are certainly other, somewhat more modest, but equally aesthetically pleasing, green projects that would be "possible without [TIFs]."

My downtown vision involves not just "affordable," $200,000 condos (five are planned for the Chauncey), but a much greater availability of low income housing mixed with the proposed (and already existing condo units selling for multiples of that price). I'd even be willing to support the idea of City-owned housing for the poor and working poor in the downtown area. After all, that goal, along with redevelopment of blighted urban areas (which the downtown definitely is not) was the original idea and purpose of TIF funding.

And I would not have demolished the Civil War homes, and the Unitarian Church (which is coming). Because when I propose, above, a "quasi-residential, quaint" downtown I'm thinking of the charm that attracts Americans to some European communities (think Bruges, Belgium, pictured here). Even Manhattan has its Nineteenth Century buildings among its skyscrapers. If we really want to attract residents and visitors to Iowa City's downtown, we too need to preserve among the glass and steel what little charming history we still have left, while also building vertically. [Bruges photo credit:]

But those are the details if I was doing it; and I'm not doing it. Moen and the City Council are. I just wanted to make clear that I have for some time shared the general vision of Mark Moen -- whom I greatly admire and appreciate for his patience, aesthetic creativity' and civic commitment -- the City Council, and their staff.

Marc Moen put it right about TIFs in his characteristically soft spoken presentation to the Council, as I've quoted at the top of this blog essay: "It's a political decision whether it's a good idea or not." It is a political decision. I admire capitalists who reject Congressional earmarks and tax breaks, and city councils' TIFs. (As another developer from another city put his attitude about TIFs to me, "I pay my taxes.") But so long as the City Council has made the political decision to give away taxpayers' money to developers, as they have, I would no more fault Marc Moen for accepting it than I would fault him for taking a perfectly legal tax deduction that Congress has unwisely made available to him in the Internal Revenue Code.

My primary argument is with the politicians, rather than the recipients of government largess, for all the reasons an I have repeatedly laid out over the past decade, and are severely truncated in the brief summary below.

Iowa City City Council meetings are cablecast, videotaped, and available for streaming from the City's cable channel on the Mediacom cable system, "City Channel 4." The Chauncey discussion during the June 8, 2015, meeting is available for streaming in its entirety: 2 hours 52 minutes. Video of the statement, below, appears from 01:09:58 to 01:14:42. Special City Council Meeting, Item 2, Development Agreement [Chauncey]," City Channel 4, June 8, 2015.

Here is KGAN-TV's report of the hearing on their June 8, 2015, 10:00 p.m. news, which includes a brief clip from the statement, below:

Statement of Nicholas Johnson
Regarding TIF Funding of the Chauncey Building

City of Iowa City City Council
Iowa City, Iowa
June 8, 2015

Mr. Mayor, and Members of the Iowa City City Council:

Are there benefits to a given TIF? One would certainly hope so.

But benefit-cost analysis requires we examine the harms as well.

Consider an organization of teenage drug dealers. It provides them experience working in teams, providing customer service, the math challenges in weighing drugs, calculating prices, and making change, designing a business plan.

But no one here this evening would say, “Gee, I guess drug rings really are good for kids.” And certainly no one would propose we support their business with taxpayers’ money.

TIFs, like teenage drug rings, are a really bad idea.

Here’s a summary; some of the reasons why.

Corporatism. Putting taxpayers’ money into private, for-profit enterprises is seldom a good idea regardless of how it’s done. In Italy during WW II it was called fascism. In Washington it involves billions of dollars, in Des Moines hundreds of millions, in Iowa City it’s called TIFs.

Ideological hypocrisy. How can those supporting free private enterprise, capitalism, and marketplace forces, who think “government is the problem” and want it “off their back,” justify taking money from the public collection plate?

Anti-democratic. We’ve got it backwards. There are legitimate, traditional government expenditures for things like roads and bridges, parks, public schools and libraries, or jails. Democracy dictates that governments often need voters’ approval of bonds for these legitimate government projects. Yet City Councils can give our money to their friends’ private projects on a whim – even over the opposition of taxpayers. Shouldn’t it be the other way around?

Opportunity costs. Spending money on one thing costs the lost opportunity to spend it elsewhere. Johnson County Supervisor Rod Sullivan once found a diversion of $700 million of property off the tax rolls. As a result, either we pay more taxes or schools and neighboring communities have to cut needed programs.

Unfairness to competitors. TIFs tilt the playing field. They unfairly upset a free market, punishing honest competitors and benefitting no one except the TIF recipient.

Risky business. Money’s always available for good deals. If an entrepreneur, family, friends, investors, venture capitalists, and banks aren’t willing to fund a project, maybe taxpayers shouldn’t either.

TIFs are unnecessary. The Corridor is one of the fastest growing, lowest unemployment areas of Iowa. We already have what businesses want: skilled labor, transportation and communication infrastructure, quality education, cultural attractions and outdoor recreation. If that’s not enough we don’t need them.

The subsidy-grantors' record is not great. Elected officials are more skilled at keeping contributors and constituents happy than at evaluating taxpayer-funded business proposals. TIFed projects have gone belly up, missed deadlines, and new jobs goals. And TIFs in Iowa have more lenient provisions, and less oversight, than in most other states.

“Need” is unknowable. Many projects will go ahead without subsidy. If tax breaks are available, of course developers will say they need them. Maybe this is blackmail. Maybe they need to look harder for funding. Maybe they need to cut back on the project. There’s no way to know.

There’s more. But that’s all I have time for.

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1 comment:

Mary Murphy said...

Thanks for writing this. I find the lack of transparency with TIFS unfortunate. First, the city uses a third party, the National Development Council (NDC), to run TIF project financials through, and we don't know who funds the NDC, and it is likely not subject to Iowa's open meetings or records law. Second, the reports and correspondence the city receives from the NDC don't seem to appear with any regularity (or perhaps not at all) on the city's website--at most, we see summaries by city staff and those may be difficult to locate and incomplete so the public can't vet these deals. Third, the rate of return on the TIF deals seems generous especially when a developer's fee is thrown in. Fourth, Iowa City seems to be headed toward waiving part of the future hotel/motel taxes--this creates unfair competition with those engaged in similar businesses. The list goes on. Again, thanks.