March 16, 2012Local counties are asking the state legislature to give voters a say in who gets Tax Increment Financing (TIF).
TIF has been a development tool now for decades. It was originally purported as an incentive for economic development in blighted urban areas. A TIF enables developers to delay paying taxes on new assessments for up to 23 years and to use what would have been tax allocations to offset project infrastructure costs.
Suddenly "blight" became popular in the suburbs. Any parcel of land that didn't yield what developers and city officials judged to be its full economic potential, was a "blight" designation target.
Nearly every new big box store and shopping center development has come about with an expectation of Tax Increment Financing. Since 2008, TIF commissions have been able to make judgments about whether or not a development meets TIF standards. But local city councils and boards of aldermen have been able to ignore and override those recommendations. Developers have used this to play municipalities against one another for new stores and centers.
Municipalities and school districts lose out on what would have been new revenue. Most often, they continue to receive the taxes those properties generated prior to new development.
"I generally oppose TIFs because the biggest losers in TIF projects are the local school districts," said Kirkwood state Rep. Rick Stream in an email. "This is due to the fact that 100 percent of the property tax revenues from the new development are used to pay off the bonds. The payoff could take up to 23 years."
Stream went on to cite some local examples, such as Kirkwood Commons, where he thinks the use of TIF was justified.
Webster Groves state Rep. Jeanne Kirkton said that House Bill 1693 regarding TIF is worthy of debate.
"TIF has strayed a long way from the original intent of redeveloping truly blighted areas and reducing poverty," said Kirkton in an email. "The 'but for' litmus test has been weakened to the point of irrelevancy with TIF being granted to projects that could or would happen regardless. Having 91 municipalities in St. Louis County doesn't lend an easy answer to the competitive conundrum (of) luring retail from one municipality to the other."
Kirkton cited HB1832I filed by Rep. Cloria Brown and the Good Jobs First Act filed by Rep. Jeanette Mott Oxford as additional proposed legislation addressing TIF abuses.
Kirkton believes HB 1693 does raise questions that need answers:
"Do voters elect their municipal council/board members to make decisions on their behalf? Since the taxpayers fund these projects, should they have a more direct say in these matters? Would low voter-turnout elections result in good public policy?"
I take the position that it would be a wonderful thing if voters could choose between new school district revenue and subsidizing another Walmart. I think developers should have to "sell" the need for public subsidies to the affected public.
Tax Increment Financing makes sense if it brings living-wage manufacturing jobs to the site of the former Chrysler plants in Fenton. It makes no sense as a shenanigan to help Wal-Mart Inc. build yet another store with a bunch of low-paying retail jobs.
If the state legislature can pull this one off without being "thwonked" by lobbyists for greedy interests, there will be cause for celebration of good legislation.