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Preliminary public discussion of tax increment financing underway

Tuesday, June 26, 2012 | 10:56 p.m. CDT; updated 11:03 p.m. CDT, Tuesday, June 26, 2012

COLUMBIA – Downtown Columbia Leadership Council member Randy Gray and City Manager Mike Matthes emphasized community input at a panel discussion on tax-increment financing, or TIF, districts on Tuesday night.

Though no decisions were made at the meeting, community members were given the chance to ask a panel of city officials and experts questions about the TIF process and provide input on it.

“There’s no deadlines, there’s no race to any outcome,” Matthes said. “It’s not the last public meeting we’ll have.”

Gray said the council is interested in getting public input and support early in the process “because if we don’t it will be screwed up like the EEZ thing.”

Two TIF projects are already underway in Columbia. The Columbia City Council approved the use of TIF for The Tiger Hotel project in 2009 and the 2011 Regency Hotel redevelopment.

The use of TIF means a business' property tax is frozen at the baseline value before any redevelopment takes place. Any additional assessed value the properties gain as they are developed can be reinvested into the project, and a portion of the new sales tax revenue generated can also be used to offset the cost to the developer.

What is tax-increment financing? This short animated video will help explain it.

One requirement for an area to become a TIF district is for the city to declare it a blight or conservation area. A blight area, generally, is one that is a liability or a threat to the public's health or safety. A conservation area is defined as having 50 percent or more of the buildings in the area 35 years or older.

Another requirement for projects within a TIF district is a “but for” test. It requires the developer to certify that, if not for support from the TIF, the project could not take place.

Establishing a TIF district is different from approving individual projects for the program. Laura Radcliff, a senior vice president at Stifel Nicolaus and panel member, said districts are more useful for funding widespread public infrastructure projects. Incremental TIF revenues gained from a TIF district can be used anywhere within the district for public improvements or infrastructure.

TIF districts can capture up to 100 percent of any property tax revenue increase beyond the baseline as well as up to 50 percent of additional economic activity taxes such as sales and utility taxes.

Ken Christian, a consultant who worked on the development of Grand Center, a TIF district in St. Louis, said the TIF district was used to control pressure in the area for the development of student housing. He said using TIF allowed for the development of an arts and entertainment district instead.

“You’re going to grow organically if you don’t plan,” Christian said. “That’s really the core of this – trying to control your own destiny.”

Gray recapped some of the work done by the Downtown Columbia Leadership Council and showed images from the Charrette Report. The report identified the area around Broadway and Providence Road and the North Village Eco-Arts District as two priority areas for redevelopment.

Gray said those areas were also in need of public infrastructure improvements because of stormwater problems.

“I can’t sit here and say today that if you do a TIF district you’re going to have ample funds to solve those problems,” Gray said. “But you could get a start.”

Two county officials attended the meeting and expressed concerns about the loss of tax revenue for schools and other public services that depend on property taxes if a TIF district were approved. Boone County Clerk Wendy Noren said while she thought development planning for Columbia was a good idea, she didn’t support using a TIF to shift money around to pay for public infrastructure projects. 

Boone County Assessor Tom Schauwecker said a TIF district would take money away from schools and that he did not support shifting the burdens and risks of development from businesses and lenders to taxpayers.

Matthes said a TIF does not take away any tax dollars from schools because it only supports projects that would not have happened otherwise.

“You’re making a straw man argument,” Matthes said. “To say we’re taking money away from children – who would do that?”

Some questions from the public concerned what a TIF district would cost the city. Mark Flakne, president of Keep Columbia Free, cited a Wall Street Journal article which called the Power and Light District in Kansas City a “budget hole.”

Matthes said such budgetary problems for cities usually occur when a city borrows against future gains from a TIF district.

“It’s a complex tool and it’s pretty easy to misunderstand,” Matthes said. “In my experience, I’ve been blessed to work in cities where it’s worked well.”

Another public discussion of TIF has not been announced, but Gray said the issue would probably come up at the next Downtown Columbia Leadership Council meeting on July 24.

Supervising editor is Ann Elise Taylor.


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Comments

linda green June 27, 2012 | 12:36 p.m.

Here's what Greg LeRoy has to say about the "but for" claim frequently touted by Columbia city manager: (Greg LeRoy is Executive Director of www.goodjobsfirst.org, & author of "The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation". Read entire book free online at www.greatamericanjobsscam.com. See also 2 videos on You Tube of Greg LeRoy webcam with about 90 Columbians. Put into google or You Tube's search: "webcam Greg LeRoy".)

"Jobs Scam", page 123: "'Free Growth'? Just Ask South Carolina--
Finally, a common argument made in favor of abatements and TIF is that they are actually cost-free because the project would not occur 'but for' the subsidy. Therefore, any tax revenue the project creates (aside from its unpaid property taxes) is a plus.

"This argument has several fatal flaws. First, as I discuss in chapter 2, for the vast majority of companies, subsidies don’t actually determine where they will expand or relocate, so the basic 'but for' assumption is rarely valid. Second, there is no such thing as free growth. If a company does arrive and the community gains jobs, workers with their families are going to move to the area. That means local governments are going to have to build more classrooms, hire more teachers, widen some roads, hire more police and fire department personnel, pick up more trash, and so on. All of those things cost money. If the newly arriving companies are not paying their fair share of the costs for those services, government must either (1) raise everyone else’s tax rates and fees, (2) reduce the quality of public services (increase classroom size, allow roads to stay congested, or the like); or (3) some of both."

LeRoy adds that South Carolina "has been very aggressive in offering multiple subsidies to new companies, including property tax breaks, corporate income tax credits, and other subsidies. As a result, many of the shiny, outsider-owned facilities that dot the I-85 corridor are contributing very little directly to public services."--including their schools which lose over $120 million a year in corporate subsidies.

"Instead of good new jobs, workers are getting low wages and taxpayers are getting poor public services. The South Carolina Department of Commerce brags, on its website, that the state has the lowest rate of unionization and that its manufacturing wages are almost 10 percent below the national average. But as jobs and population grow, public systems get strained and services suffer. With overcrowded roads, South Carolina has the nation’s sixth highest rate of auto fatalities. With poorly funded public healthcare systems, its infants are the sixth most likely to die. With low school funding, its children fare poorly on SAT scores: lowest among the states in verbal and second lowest in math."

As tax scholars said, "'Property tax incentives no doubt were put in place with the best of intentions. But so was kudzu.'"

(Report Comment)
Jeremy Calton June 27, 2012 | 5:21 p.m.

If a project won't happen "but for" us giving them money (or agreeing to let them operate tax-free, which is the same thing) then the market has already spoken.

A TIF was used to (partially) build a boutique/luxury hotel in downtown Columbia...if rich people are demanding that, then it should be a viable project with or without TIF. If they're not demanding use of such a facility (and they're not) then either way it's still not viable.

(Report Comment)
Jeremy Calton June 27, 2012 | 5:44 p.m.

Matthes said a TIF does not take away any tax dollars from schools because it only supports projects that would not have happened otherwise.

“You’re making a straw man argument,” Matthes said. “To say we’re taking money away from children – who would do that?”
-----------------------------------------------------------
Let's say your kids are away at school and you have exactly enough money to pay their tuition--not one penny more. But since they are gone, you feel sad that the room is going to waste and decide to let it out to a tenant. But since that room wasn't earning you anything, you take Mike Matthes' advice and decide to let him stay for free.

This zero-cost tenant uses the lights, the fridge, the internet, the washer and dryer, the cable TV, the driveway and garage, the dishwasher, the yard (he doesn't mow), the shower, and so forth.

But don't worry: in the Matthes' household, this freeloader doesn't cost him a dime...his kids' tuition is safe.

When you let someone live rent-free and use all of your services (in our case police, fire, water, light, sewer, parks, roads, snowplows, etc.) they create a net deficit of resource contribution/consumption. That is EXACTLY the same thing as taking money from something else to pay for the TIF.

That's not a straw man: that's accounting. A city manager who doesn't see that should be fired. It's HIS JOB to understand this.

(Report Comment)
Carol Greenspan June 28, 2012 | 1:28 p.m.

This was a pro-TIF campaign event. It is evident in the first two paragraphs of the article: "Downtown Columbia Leadership Council member Randy Gray and City Manager Mike Matthes emphasized community input at a panel discussion on tax-increment financing, or TIF, districts on Tuesday night.

"Though no decisions were made at the meeting, community members were given the chance to ask a panel of city officials and experts questions about the TIF process and provide input on it."

Community members and experts, who were not TIF advocates, were not given the chance to answer questions from the audience. The only "experts" on this panel were pro-TIF. The only responses to questions raised were given by these pro-TIF people.

IF TIF cannot survive open discussion, with both sides represented, then there is something wrong with TIF. That is the key message I heard from this "forum." The truth about the serious problems that TIFs have caused for Kansas City and St. Louis, for California, which has now banned them, were not aired here. What protections are there to prevent such problems if this transfer of tax funds to private business interests expands here - to assure that the public and not just the business owners benefit? A real discussion of TIF would need to address this and other questions.
A media expert decades ago said "the media is the message." Here, "the media" was the format of the discussion with total control maintained over "the message."

(Report Comment)

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