- In Kansas City, a study by a university economist found that, far from curing blight, TIFs there were mainly used to subsidize development in affluent areas.
- Aberdeen South Dakota voters have demanded the right to approve a TIF subsidy being offered to a meat-packing plant. The argument for the TIF is not that the area is blighted but that Aberdeen has to offer subsidies to compete with other cities that want to subsidize a new plant.
- The school district in a St. Louis suburb is opposing TIF subsidies for a new residential area because the development “would put more children in district schools without a corresponding increase in tax revenues.”
Archive for December 31st, 2008
31st December
2008
Tax Subsidies to New and Old Urbanists - From Antiplanner.com
posted in News commentary, Regional planning |
The subsidies mentioned in yesterday’s post about Denver were in the form of tax-increment financing (TIF). For those unfamiliar with the term, tax-increment financing is the principal method of funding urban renewal. An urban-renewal agency draws a line around an area to be renewed, and for the next twenty or so years all property taxes collected on any new improvements in that district — the “incremental” taxes — are used to subsidize the renewal program.
Usually, the agency estimates future tax revenues and then sells bonds to be repaid by those revenues. The bond revenues might be used for infrastructure such as streets, improvements such as parking garages and parks, or they might simply be given to the developer as seed money for the project.
There are all sorts of variations. In Colorado, a property-improvement fee (PIF) is a sales-tax version of TIF: some or all sales taxes from a retail development are diverted to subsidize the development. Some states use EAT, which allows new businesses to avoid sales, income, and other economic activity taxes. Texas has tax-increment reinvestment zones in which developers are simply rebated the property taxes paid on the new development.
Some planners are arrogant, or ignorant, enough to claim that TIF is not a subsidy because the development pays for itself. Yes, and if I got to keep twenty years’ worth of property taxes on my home, I could build a bigger house and claim it paid for itself. But someone else would have to pay for the sewer, fire, police, schools, and other services that my family uses. Make no mistake about it: TIF is a subsidy.
Like so many other questionable ideas, TIF originated in California in the 1950s. Today, every state but Arizona allows cities to use TIF. Go to Google news and search for tax increment and you will find TIF controversies all over the country.
In many, if not all, of these cases, the reason for the TIF is not that the neighborhood in question is blighted but that the city wants to see some new development that may eventually add tax revenues to its coffers. In some cases, the city would collect sales taxes on retail, thus covering its costs, while schools, fire, and other programs that rely on property taxes would suffer.
Many of the opinion columns I read about TIF say something like, “When properly used, TIFs can do good things.” Then they go on to say that a particular TIF that they find objectionable is not proper. Perhaps they don’t want to see TIF money going to Wal-Mart but wouldn’t mind TIF being used to attract a Trader Joes. Or perhaps they want TIF to redevelop someone else’s neighborhood but not their own. Often they debate about whether a particular area is really “blighted.”
But the problem with TIF is not that it is sometimes abused but that it is an open invitation for abuse. Even if you believe that government can and should do something about blighted areas, you cannot define blight narrowly enough to prevent government agencies from defining just about anything they want as blighted. In one famous case, San Jose declared a neighborhood blighted partly because the homeowners, one of whom was the local U.S. representative in Congress, failed to rake the leaves in their backyard tennis courts.
When you give cities the power to divert taxes from their usual recipients and into special slush funds for developers, you create a whole cascading series of moral hazards.
- The redevelopment agencies that manage TIF have little incentive to consider the impact on other programs. Screw the schools! We need TIF to enhance our budgets and justify our existence.
- Instead of simply curing blight, urban planners are tempted to use TIF to subsidize their visions of New Urbanism or whatever. Hey, we don’t have to worry about market feasibility anymore — we’ll just use TIF to bribe developers into building what we want.
- Corporations seeking to locate facilities being to shop for TIFs and other subsidies. If every city offers such subsidies, then the corporations simply locate where they want, and the taxpayers lose.
- Once local developers get a taste of TIF, they lose interest in doing any developments that are not subsidized. Why build an unsubsidized shopping mall or residential area that has to compete against others that are subsidized?
As one Kansas City mayoral candidate observed, cities and developers get addicted to TIF the same way that medical patients get addicted to painkilling drugs. “In economic development, we’ve come to completely rely on drugs,” he noted.
Moreover, there is growing evidence that TIF actually reduces long-run economic development and, in turn, tax revenues. One recent study found “evidence that cities that adopt TIF grow more slowly than those that do not.”
This could happen because, to the extent that TIF-subsidized projects compete against other businesses, they may harm those businesses and reduce the incentive for them to expand. As a recent study of TIF in New Orleans observes, “To the extent that other areas and businesses are negatively impacted, the existing revenue base of the local government is reduced.” For this reason, says the study, “it is exceedingly dangerous to view TIF as free money.”
Judged against all of these problems, the potential benefits of using TIF to recover blighted areas seem miniscule. Frankly, I don’t believe subsidies are needed to recover blighted areas. We’ve seen enough gentrification without subsidies to know that urban areas are dynamic and any blight is only temporary.
TIF often goes hand-in-hand with eminent domain, which is much more controversial partly because it is so much easier to understand. In most states, when an urban-renewal agency declares a neighborhood blighted, it can use eminent domain to force the sale of properties in the neighborhood. When it buys such properties, it probably uses TIF to finance the purchases.
Since the Supreme Court decision on Kelo v. New London, at least thirty states have passed laws restricting the use of eminent domain. But if we really want to stop urban-renewal abuses, we also need to repeal TIF laws.
Tucson Region
Rare funding method sets Rio Nuevo tax area apart
Contact reporter Rob O’Dell at 573-4240 or rodell@azstarnet.com.
Tucson officials want the Legislature to extend the special Rio Nuevo taxing district from 10 years to 40 to be like other tax-increment-financing districts around the country.What city leaders don’t tell lawmakers is, the Rio Nuevo district is unlike virtually any other district in the country.While the vast majority of tax-increment-financing (TIF) districts live off the increased property taxes from new development, Rio Nuevo is funded from sales taxes.Also, Tucson is one of the rare cases where state sales taxes are used. Those state taxes must be matched by the city with money or public projects.The district’s shape, with its Downtown core, where the money will be spent, and a tentacle stretching out to El Con and Park Place malls, where most of the money will be collected, is also a significant departure from other districts.“That’s very unique,” said Toby Rittner, the executive director of the Council of Development Finance Agencies. “Most are a single piece of property or are contiguous properties.”Rittner said it’s rare to attach tax-increment financing to an existing retail use that isn’t directly involved in the redevelopment project.Lifespan of tax districtsThe central argument behind the city’s push to extend the life of the Rio Nuevo district is most such districts last between 30 and 50 years, and the 10-year lifespan pitched to voters in 1999 is inadequate.Extending the district another 30 years will capture another $1.2 billion in state sales-tax money, the city estimates.But some experts on TIF districts said a 30- to 50-year life-span is stretching the truth. Most last in the range of 15 to 25 years, they said.Alex Iams, director of research and technical assistance for the Council of Development and Finance Agencies, said, “The typical length is 23 to 25 years” for TIF districts funded by property taxes.He said 25-year districts are typically for millions in TIF money, while 15-year districts are more for projects in the hundreds of thousands of dollars. Tucson’s sales-tax district is projected to bring in $124 million over 10 years.Professor Norman Tyler, director of the Urban and Regional Planning Program at Eastern Michigan University, said most districts start out in the 15- to 20-year range.He said many get extended because they are doing well, but he added that 30 to 50 years is an unusual length of time for a TIF commitment because the districts divert money from other parts of local governments into the redevelopment area.Sales-tax districts rareTIF districts funded by sales taxes are relatively rare, Iams said, noting they are allowed in only eight states and the District of Columbia. Of those, “only a handful allow for the diversion of state sales taxes.”Tucson was forced by state statute to create a sales-tax and not a property-tax district.“The reason a lot of states have shied away is because sales tax is a less reliable source of revenue” than property taxes, Iams said.He said a sales-tax TIF district that has been successful is in Denver, where a mix of sales and property taxes have been used to redevelop the former Stapleton International Airport site into retail and housing.A city fact sheet distributed to state lawmakers touts successes in Denver; San Diego; Fort Worth, Texas; and Memphis, Tenn., as areas with longer-life districts Tucson should emulate. But the fact sheet fails to mention those districts use property taxes heavily.Mary Okoye, the city’s lobbyist, said she didn’t see a problem with comparing Tucson to those other cities, despite the sales-tax-versus-property-tax differential.“I think it’s fair. It’s the same concept and the same mechanism. It’s just the funding that’s different,” Okoye said.City Manager Mike Hein said the city is bound by the state law to use sales taxes. If it were legal the city would have used property taxes for the TIF district, he said.Tyler said he understands why a city would want to expand the district into sales-tax-rich areas like El Con and Park Place, to capture the extra sales-tax increment, but said that’s not the intent of the TIF law.Rittner, who is also the head of the pro-TIF Tax Increment Finance Coalition, agreed it’s extremely rare to use the tax-increment financing from an existing retail use, instead of from the area that’s being developed by TIF money — especially if those malls lie miles away from the main improvement district.City officials don’t see the shape of the district as an issue.Okoye said Downtown Tucson doesn’t have a mass of retail from which to draw funding.“There’s no point in having a TIF district if you don’t get any TIF,” Okoye said.Rio Nuevo Director Greg Shelko said the malls were included by design so the city could capture as much sales tax as possible. If it was just Downtown, “there wouldn’t be a whole lot to capture,” he said.
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31st December
2008
Downtownan Rio Nuevo has taken a lot of flack recently, much of it deserved. But let’s start 2009 on a positive Rio Nuevo foot. Downtown Tucson Partnership is putting on a family friendly New Years Eve celebration with events all over downtown. USA Today picked up the story - HERE. First Night is an event we’ve borrowed from other downtown’s including Boston.
Join my family and me downtown tonight. Support the local businesses down there, see for yourself what is there and get a sense of what could be.
HERE is the link to the official web site and below is the schedule of events:
COST
Tickets for FIRST NIGHT are colorful event buttons that are to be worn during the festival.
$12 for adults, $6 for children 6-12 and free for little ones 5 and younger. Paid admission allows entry into all venues. Purchase your button at Bookmans, Food City, TCC Box Office, Fox Theatre Box Office or purchase your button online now.
FESTIVAL LOWDOWN
FIRST NIGHT is alcohol-free to maintain a family-friendly atmosphere. Hot and cold beverages and food will be for sale in the lobby of the Leo Rich Theatre and at La Placita.
FREE party favors courtesy of Cox Communications, while supplies last.
Need assistance at the festival? Volunteers will be stationed throughout downtown to answer questions and offer directions. Look for them in FIRST NIGHT t-shirts with blinking lighted pins.
PARKING
Parking is available in the La Placita parking garage and the TCC parking lots. Also, FREE on-street parking starts at 3pm, courtesy of ParkWise.
SCHEDULE
TCC LEO RICH THEATER
260 S. Church Ave. Sponsored by Cox Communications. Featuring a program of Hispanic Roots entertainment.
4-4:45pm: Tucson Symphony Orchestra’s String Quartet – Josefina the Javelina (a musical adventure)
5-5:45pm: Mariachi Aguilitas de Davis
6-6:45pm:Nelly y Javier (Las canciones del amor)
7-7:45pm: Ballet Folklorico Tapatio (traditional Mexican dance)
8-8:45pm:Los Cuatros Vientos (mariachi quartet)
9-9:45pm: La Mezcla (Latin salsa & fusion)
10-10:45pm & 11-11:45pm: Santa Cruz River Band (Southwestern folk music)
LEO RICH THEATRE PLAZA
(FREE STAGE)
260 S. Church Ave. Sponsored by Tucson Pima Arts Council.
Ongoing: Art installation by Mat Bevel
3:30-6pm: The Physics Factory
3:30-5:30pm:Amber Norgaard
5:30-6:30pm:Serpe
6:30-7:30pm: The Mission Creeps
7:30-8:30pm: Beatnik Dream Vacation
8:30-9:30pm:Namoli Brennet
9:30-11:30pm:El Camino Royales
12-midnight: GRAND FINALE
SCOTTISH RITE CATHEDRAL
Sponsored by Ward VI City Council Member Nina Trasoff.
160 S. Scott Ave.
4-4:45pm & 5-5:30pm: Rodney Housley Children’s Magic Show
6-6:45pm: Mirror Image (twin sister jazz duo)
7-7:45pm:Degrazia Spanish Band (Spanish guitar)
8-8:45pm: Silver Thread Trio (folk/jazz/world music)
9-9:45pm: Leila Lopez (folk fusion)
10-10:45pm & 11-11:45 pm:Tim Wiedenkeller (bluegrass)
TUCSON CHILDREN’S MUSEUM
200 S. Sixth Ave. Sponsored by Tucson Mayor Bob Walkup. All outside entertainment is FREE. A festival badge gets you inside to enjoy the hands-on activities.
4-4:45pm:Thorton Willoughby, the Southwestern Wizard (magic)
5-5:45pm: Human Project New Era (hip hop dance)
6-6:45pm: Sticks and Fingers (percussion group)
7-7:45pm:Puppet Muzik (puppet show)
BEOWULF ALLEY THEATRE
11 S. Sixth Ave. Sponsored by Tucson Newspapers, Inc.,
4-4:45pm: Stories that Soar!
5-5:45pm:Lisa Otey and Diane Van Deurzen (singalong)
6-6:45pm: Stories that Soar!
7-7:45pm:Lisa Otey and Diane Van Deurzen (blues)
8-8:45pm:LaughingStock Comedy Company (improv)
9-9:45pm: Angel and the Blues Disciples
10-10:45pm:LaughingStock Comedy Company
11-11:45pm: Angels and the Blues Disciples
LA PLACITA VILLAGE COURTYARD
(FREE STAGE)
110 S. Church Ave. Sponsored by Tucson Pima Arts Council. Free children’s programming early in the festival moving on to family-friendly singers and bands later in the evening.
4pm-4:45pm: The Dusty Buskers
5pm-5:45pm:The Rosano Bros
6pm-6:45pm: Beatnik Dream Vacation
7pm-7:45pm: Kate Becker Project
8pm-8:45pm: Stefan George
9pm-9:45pm: The Tryst
10pm-10:45pm: The Evolution
11pm-11:45pm: The Dusty Buskers
FOX THEATRE
17 W. Congress St.
4-5:30pm & 6-7:30pm: Spongebob Squarepants: The Movie
8-11:30pm: Family Guy episodes
GRAND FINALE
LEO RICH THEATRE PLAZA
260 S. Church Ave. Sponsored by the Downtown Tucson Development Company. Don’t miss the spectacular Leo Rich Plaza grand finale at midnight, including the energetic sounds of music and dance ensemble Batucaxé and a thrilling countdown laser show.
JUST ADDED: FIREWORKS AT MIDNIGHT!
Download and Print Your Own Schedule
First Night Festival Program (584KB, pdf)
Questions?
Call us at 520.547.3338
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